The Selangor and the federal governments have reached agreement on the state’s takeover of all four water companies, which will receive compensation of RM9.65 billion.

Putrajaya will also inject RM2 billion into the deal to help the Selangor government to acquire the shares of the companies.

In return, Selangor will allow the federal government to proceed with construction of the Langat 2 water treatment plant.

The plant must be approved by Selangor within the next 30 days and will be supplied with raw water from Pahang under two state-to-state agreements signed in 2001 and 2007. This will solve water shortages in Selangor, Kuala Lumpur, and Putrajaya.

The project had been stalled by absence of local council approval, which the state government had used to leverage its negotiations to take over the water companies, toward cost-efficient management.

Today's agreement brings to a close a near five-year tussle between the two governments for control of Selangor’s water supply services.

Star Online reported that the memorandum of understanding (MOU) was signed by Energy, Water and Green Technology Minister Maximus Ongkili and Selangor Menteri Besar Abdul Khalid Ibrahim at the Perdana Putra building in Putrajaya today.

Prime Minister Najib Abdul Razak and Deputy Prime Minister Muhyiddin Yassin witnessed the signing, it said.

Malaysiakini was barred from covering the event and the press conference held afterwards by Ongkili, with Khalid alongside him.

However, information was obtained from an official from Khalid's office, who attended the press conference.

Bernama reported that the MoU allows the state government to bid on the water companies - Puncak Niaga Sdn Bhd, Syarikat Bekalan Air Selangor Sdn Bhd (Syabas), Syarikat Pengeluar Air Selangor Sdn Bhd  and Konsortium ABASS Sdn Bhd.

It also spells out that the federal government will become a facilitator for the state government in implementing the restructuring exercise through the Water Services Industry Act 2006 and other applicable laws.

Ongkili said the federal government agreed to set up a committee made up of state government representatives for the implementation of the Langat 2 project. 

"The federal and Selangor governments hope the water concessionaires will give full cooperation to ensure the success of the restructuring of the ... industry for the well-being of the people of Selangor, Kuala Lumpur and Putrajaya," he said.

Describing the signing of the MoU as timely, Khalid said: "We have agreed to implement the restructuring of the water industry which we consider to be timely in light of the current situation, to ensure that consumers in Selangor, Kuala Lumpur and Putrajaya enjoy the best service," he said.

The state government expects to complete the takeover process within three months, including share acquisition and retention of non-management employees.

It is understood that the companies will be managed as a consortium under the state-owned Kumpulan Darul Ehsan Bhd.

The Selangor government had run into a brick wall in dealing with the water-supply distributor - Syabas - appointed during the BN-led administration prior to 2008.

The Pakatan Rakyat-led administration was therefore left frustrated in its attempts to bring about cost-efficient management of water services, reduction of non-revenue water and replacement of old pipes.