Government spent RM1.2b keeping IWK afloat

By Shannon Teoh

Malaysian Insider, 5 October, 2011

 

KUALA LUMPUR, Oct 5 — Putrajaya said today it had spent RM1.2 billion to sustain Indah Water Konsortium’s (IWK) operations since nationalising the national sewerage company in 2000.

The finance ministry said in a reply to a parliamentary question from Anthony Loke (DAP-Rasah) that IWK has liabilities amounting to RM2 billion, while its assets were valued at about RM1.2 billion.

“The government has spent about RM1.2 billion to cover IWK’s operational deficit due to low sewerage tariffs as compared to the true cost of operations.

“IWK’s total liability up to June 2011, most of which are government support loans, is RM1.98 billion,” it said in a written reply.

The finance ministry also said that there are no plans to privatise IWK but the Energy, Green Technology and Water Ministry would be restructuring the sewerage industry, reviewing sewerage tariffs and guaranteeing future capital expenditure.

Second Finance Minister Datuk Seri Ahmad Husni Hanadzlah had said on September 10 that IWK would be merged with a government unit, confirming a report by The Malaysian Insider.

Ahmad Husni said that the merger process was already underway but declined to disclose the name of the government subsidiary, except to say that IWK would continue to be government-owned after the merger.

The Malaysian Insider reported on September 8 that IWK would be privatised into a consortium led by strategic investment agency 1MDB, some 11 years after the government was forced to bail out the national sewerage company from financial difficulties under its previous owners.

Finance Ministry sources told The Malaysian Insider that the 1MDB-led consortium will include water distribution company Puncak Niaga, and that the deal has been given the nod by the Economic Council chaired by Prime Minister Datuk Seri Najib Razak.

However, it is understood that some ministry officials are still scrutinising the deal amid concerns about its feasibility and worries over whether the government could once again be forced to bail out the company if the latest plan fails.

Under the proposed deal, the 1MDB consortium will acquire IWK for RM1 and take over its debts which include more than RM1.5 billion in loans still owed to the ministry.

The consortium is seeking a 60-year concession from the government and will only pay back the principal amount and interest on the loan over the long term.