KUALA LUMPUR (June 15): Puncak Niaga Holdings Bhd announced today that it has decided to extend the disposal of its water assets to Pengurusan Air Selangor Sdn Bhd (Air Selangor) — the sixth extension to date — by another month to July 13, 2015.
In a filing today, Puncak Niaga (fundamental: 1.9; valuation: 2.1) said it has, together with Pengurusan Air Selangor Sdn Bhd (Air Selangor), mutually agreed on the further extension for the fulfilment of the conditions precedent stated in the conditional sale and purchase agreement (SPA) dated Nov 11, 2014, that was signed between Puncak and Air Selangor.
Last Thursday (June 11), Puncak Niaga's executive chairman and managing director Tan Sri Rozali Ismail had threatened to rescind the SPA with Air Selangor, if the impasse between the state government and the federal government over the restructuring of Selangor’s water industry remains unresolved after Ramadhan.
Rozali had also said then that Air Selangor was still not able to fulfill the conditions precedent in the SPA, and that there might be a further extension (sixth extension) of the stop date before the proposed disposals can be completed to facilitate the consolidation/restructuring of the Selangor water industry.
Puncak Niaga had on Nov 11 last year, signed the SPA with Air Selangor to dispose of its entire equity interest in Puncak Niaga (M) Sdn Bhd, together with a 70% stake in Syarikat Bekalan Air Selangor Sdn Bhd (Syabas) to the latter, for a cash consideration of RM1.55 billion.
Under the terms and conditions of the SPA, all conditions precedent were supposed to be fulfilled on Jan 12, 2015.
This deadline was however first extended to Feb 9, 2015, and subsequently to March 9, as the sale of its stake in Syabas was still awaiting consent from the Prime Minister’s Department.
The SPA was meant to fulfil the Selangor government’s intention to consolidate and restructure the water industry in Selangor, Kuala Lumpur and Putrajaya, while expediting the construction of the Langat 2 water treatment plant and the distribution system.
However, talks on restructuring of the water services industry in Selangor hit a snag, when Selangor Menteri Besar Mohamed Azmin Ali had said the state government declined to give a third extension to the master water agreement, which lapsed on March 9.
Azmin had said the state government had nixed the deal signed on Sept 12, 2014, as the federal government was attempting to take over 26,000km of state assets in the form of water pipes and land, which contravened the master agreement.
The master water agreement was signed between former Selangor Menteri Besar Tan Sri Abdul Khalid Ibrahim and Energy, Green Technology and Water Minister Datuk Seri Dr Maximus Ongkili.
Mohamed Azmin had reportedly said last week that he was confident the state's water restructuring exercise will be resolved in two weeks time, after a fruitful meeting with Ongkili last Thursday (June 11).
He had said both Selangor and Putrajaya managed to reach a consensus over issues pertaining to the agreement, which included the takeover of land and asset.
He had said the deadlock over the ownership of the 26,000km-long network was also discussed, and the state government will give its approval once the developer had fulfilled the terms and conditions set.
Mohamed Azmin had also said Puncak Niaga's threat was an issue to be dealt between the water concessionaire and the federal government.
Puncak Niaga's shares closed 10 sen or 3.73% lower at RM2.58 today, giving it a market capitalisation of RM1.12 billion.
(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)