Business

Tuesday October 27, 2009

PAAB seeks amicable understanding with Selangor water concessionaires

By YEOW POOI LING


PUTRAJAYA: Pengurusan Aset Air Bhd (PAAB) expects to secure an “amicable understanding” with the parties involved in Selangor’s water restructuring by year-end, said chief executive officer Ahmad Faizal Abdul Rahman.

“We commenced due diligence on all the concessions (in Selangor) last week, and the process will take 21 business days.

“The auditor’s report is expected to be completed by middle of next month and, hopefully, by year-end we can have some amicable understanding to move forward,” he said after yesterday’s signing ceremony between PAAB and CIMB Investment Bank for the former’s Islamic medium-term notes programme and Islamic commercial papers programme of up to RM20bil.

Selangor’s water sector consolidation reached a stalemate in August when the remaining two water concessionaires, Puncak Niaga (M) Sdn Bhd and Syarikat Bekalan Air Selangor Sdn Bhd, rejected the state government’s offers to take over their assets and liabilities.

Selangor had hoped to consolidate the water sector before handling over the assets to PAAB, which is tasked by the Federal Government to lead the nationwide water restructuring by taking over the water assets and funding for capital expenditure, hence allowing state water operators to focus on providing services.

PAAB has so far completed the acquisitions in Negri Sembilan, Malacca and Johor, and is expected to reach a certain level of salient agreement with the other states in the country.

It was anticipated to close the next water deals with Perlis, Kelantan, Perak and Pahang, Faizal said, adding that the cost of acquiring the water assets of these states would amount to RM10bil to RM15bil.

The company would need to raise the second tranche of bonds in three to six months to finance those acquisitions, he said.

Its first tranche of RM2.5bil was priced at 2.7% for first-year, 4.4% for five-year and 5.05% for 10-year tenures. The order book was oversubscribed two times to RM4.15bil, with orders from a diversified base of investors.

Meanwhile, CIMB Group chief executive Datuk Seri Nazir Razak said the demand for PAAB’s Islamic debt papers represented the strong appetite from investors for high-grade papers.

RAM Rating Services Bhd has placed a long-term rating of triple-A and short-term rating of P1 for the medium-term notes and commercial papers programmes respectively.

Nazir said debt paper programmes launched this year totalled about RM79bil, of which RM40.5bil had been raised so far.

Funds raised from the bonds market were likely to reach RM50bil by year-end versus last year’s RM48bil, he said, adding that next year’s fund size could be bigger since there were several new fund-raising programmes already in the pipeline.

He, however, appealed to market participants to “protect and preserve” the bonds market as a national treasure instead of seeking short-term gains and taking it for granted.

“I’m particularly concerned over the market’s standards of transparency and corporate governance,” he said.

  • E-mail this story
  • Print this story