Friday, November 04, 2011

Another Bailout for Puncak Niaga

The Government of Malaysia has continued to place the interest of UMNO cronies above that of ordinary Malaysians as it continues to bail out privatized water companies by taking over their debts and granting them additional loans.

Puncak Niaga Holdings Bhd has announced on 1st November 2011 that the Government, via the wholly owned subsidiary of Pengurusan Aset Air Bhd (PAAB) – Acqua SPV Bhd, has agreed to acquire all Redeemable Unsecured Notes (RUNs) with an outstanding value of RM328.12 million. The RUNs are essentially debt instruments issued by Puncak Niaga in 2001.

As part of the bailout exercise, Puncak Niaga gets to defer its annual installment repayment by 5 years to the debtors, now the Government of Malaysia, from the original date of 18 November 2011. There is no other private company in Malaysia, except for known cronies of Barisan Nasional (BN), which can enjoy such preferential treatment.

This is on top of a 20-year RM110 million loan recently granted by the Federal Government to Syarikat Bekalan Air Selangor Bhd (SYABAS) on 17th October. SYABAS is a 70% subsidiary of Puncak Niaga and the loan is meant for a pipe replacement project which is supposed to be within the scope of SYABAS’s concession agreement. In the SYABAS loan agreement, the company is not only given a preferential 3% interest, it is only required to commence repayment of the principal installments in the 3rd year of the loan. On top of that the interest accrued on the loan shall only be payable in 10 equal installments commencing 2022 or 10 years after the loan is granted!

The above loan is on top of the “back-loaded interest free unsecured RM320.8 million loan” granted by the Federal Government to SYABAS less than 2 years ago in December 2009. For this loan, SYABAS is only required to commence repayment with amounts less than RM5 million until 2025, with the overwhelming remainder payable only from 2026 onwards! And as the statement implies, the loan is completely interest-free and requires absolutely no collateral from Syabas.

That’s not all – Acqua SPV Bhd had acquired all bonds issued by the Selangor state water concessionaires for the amount of RM6.5 billion in May this year. According to the Financial Daily, a market source had confirmed that “in terms of price, the buying back is at 94.49 against mark to market value of only 54.54 at the end of last month”. It is bad enough that the Federal Government has decided to bail out the Selangor water concessionaires, but for it to pay a whopping 73.2% higher than the market value of these bonds borders on being outrageous and an abuse of taxpayers’ money.

The persistent need to bailout the privatised water companies in Selangor proved the unmitigating disaster of BN’s privatisation exercise which only served to profit its cronies and impoverish the rakyat. When these companies were profitable, none of their dividends were accrued to the Government, but when they are unable to repay their mountain of debt it is the BN Federal Government who will come to their rescue with tax-payers’ money.

What is worse is the fact that the Selangor State Government had offered both the Federal Government and the water concessionaires a way out with its restructuring proposal where the ownership of the latter returns to the state government in exchange for a resolution of their debt burden. Instead the Federal Government had chosen to back its cronies in the privatised water industry by bailing out these companies without any commitment at all from the latter for a restructuring exercise in the spirit of the Water Services Industry Act 2006.

Now that these companies have been granted reprieve from their debt obligations, there will be no urgency on their part to resolve the restructuring imbroglio. As a result the losers will be the rakyat who will not only suffer from the risk of higher water tariffs in the future from these private water companies, but also having to bear the burden of paying for the very expensive bailout of the very same companies.

The reckless abuse of tax-payers’ funds must stop or the risk of Malaysia’s “bankruptcy” as warned by Datuk Idris Jala as a result of unsustainable debt and deficit will only become a certainty.


Rakyat said...

If the govt wants to pump in money(our money),why don't de-privatise the company and let the govt do it.
The privatised company can do things at their vimps and fancy(like the case of the CEO being alleged to purchase the water pipes from his own factory in Indonesia instead of source it locally).

Anonymous said...

It is senseless to give out such loan when the Puncak Niaga accountability is questionable - am referring to recent news Non-Revenue-Water may hit 40% due to SYABAS incompetence.

Anonymous said...

Agree with u. Hav to remember that the rakyat r the investors ie bondholders too:)

Anonymous said...

The investors and bondholder are the rakyat too:)The "whopping" 73.2% is based on a theoretical pricing, none of which is being executed eversince the tussle Damage is too big in the capital market, if the respective party intend to realise their losses!