The fact that the Federal Government is contemplating a multi-billion ringgit bail out of the privatised water industry in Selangor is repulsive and a sheer abuse of tax-payers' funds
In a November 4 report by the Malaysian Insider, the Minister of Energy, Green Technology and Water, Datuk Seri Peter disclosed that “the federal government may come to the rescue of Selangor water bondholders by undertaking a bond swap if no headway is made soon in stalled water consolidation talks”. He revealed that “swapping existing bonds with triple-A government-backed ones was one option on the table to buy stakeholders more time as state and federal governments try to break the current impasse.”
The multi-billion ringgit move to bail out the Selangor water companies, Puncak Niaga (PNSB) and its subsidiary Syarikat Bekalan Air Selangor (Syabas), Syarikat Pengeluar Air Sungai Selangor (SPLASH) and Konsortium Abass is shocking and repulsive for the Federal Government is once again attempting to use tax-payers' money to rescue its Barisan Nasional cronies who have profited tremendously from the Government's privatisation exercise.
As of today, PNSB, SYABAS, SPLASH and ABASS have net debts of RM1.3 billion, RM2.9 billion, RM1.6 billion and RM640 million respectively, translating into a combined net debt of RM6.4 billion. The move, if carried out will become the clearest example yet of a Barisan Nasional government who will privatise profits to its favourite businessmen, and when the latter face dificulties, socialize their losses to the rakyat.
It should be noted that most of these private water companies, despite their huge liabilities, have been rewarding their shareholders most lucratively by prioritising the payment of dividends over the repayment of their debts. PNSB in 2008 alone made dividend payments of RM500 million while SPLASH paid out a whopping RM578.6 million to their shareholders.
And now, after paying out their substantial cash holdings to enrich the shareholders, much of which were raised from the debt markets, they now want the want the Government to bail them out of their debt and liabilities. What is worse is that the Government is appearing more than willing to participate in this scheme to victimise the man-on-the-street.
Instead, the Government should utilise this opportunity to tell the recalcitrant water concessionaires like PNSB and Syabas who are holding the Selangor water industry to ransom by refusing to cooperate over the industry's consolidation exercise under the state government, in no uncertain terms that there will be no bail out and that they need to play ball in the industry's restructuring exercise.
In addition, the National Water Services Commission (SPAN) has powers under the Water Services Industry Act (WSIA) 2006 Sections 113 and 114 to intervene when a licensee is facing financial difficulty. SPAN has to date refused to intervene particularly in Syabas who has threatened to stop the maintenance of water pipes in the state due to the lack of funds.
And should these companies refuse to “play ball”, then let the bondholders declare an event of default and take over the assets and management of these companies as provided for under the bond agreements.
The Federal Government's admission on the likelihood of a bailout of the water concessionaires smacks of a collusion with BN which clearly prioritises the interest of its cronies over that of the rakyat. Datuk Seri Peter Chin must declare in no uncertain terms that there will be no bail outs of the financially troubled water companies and instead direct them to reach a settlement with the state government over the water industry restructuring exercise.
Should the Federal Government proceed with the mega-bailout at the end of the year by undertaking the existing bonds with triple-A government-backed ones without first resolving the restructuring issue, Pakatan Rakyat will immediately organise a nationwide roadshow to protest against the action and let the rakyat know how the government privatises all the profits, but socialises all the liabilities and losses.