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.

Husni now says IWK to merge with government unit

Malaysian Insider, 10 September 2011

IPOH, Sept 10 — Putrajaya will merge national sewerage company, Indah Water Konsortium, (IWK) with a government unit, Second Finance Minister Datuk Seri Ahmad Husni Hanadzlah said today, confirming a report by The Malaysian Insider.

Ahmad Husni said the decision was made recently by the National Economic Council.

“The move is an effort to strengthen both entities which are owned by the government. The biggest asset owned by IWK can be redeveloped to benefit the merged entity,” he told reporters after distributing Jalur Gemilang flags to Chemor residents here.

Saying that the merger process had begun, Ahmad Husni, however, declined to disclose the name of the government subsidiary, except to say that IWK would continue to be government-owned after the merger.
IWK is currently wholly-owned by the Ministry of Finance Incorporated.

The Malaysian Insider reported on Thursday 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 amidst 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.

IWK to be privatised to 1MDB

By Leslie Lau
Malaysian Insider, 8 September 2011

 

KUALA LUMPUR, Sept 8 — Indah Water Konsortium (IWK) is expected to be privatised soon to 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, according to sources in the Finance Ministry.
The 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 because of concerns about its feasibility and worries that 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.

It also has plans to link sewerage charges to water usage.

The plan could spark a new round of controversy because of the lack of transparency surrounding negotiations, with consumers still wary about deals involving IWK.

From Day One, IWK has had problems convincing a sceptical public to pay for separate sewerage charges which had previously been part of the water bill.

In 2000, Tun Dr Mahathir Mohamad’s administration paid nearly RM200 million to nationalise IWK to “safeguard public interest and to avoid service disruptions.”

The nationalisation of IWK was to tackle the company’s debt then of nearly RM700 million.

IWK’s bailout in 2000 exemplified the pitfalls of Dr Mahathir’s privatisation policy in which government-owned assets or resources were allocated or sold to private investors in the hopes of generating profits.

The IWK story began in 1993 when businessman Tan Sri Vincent Tan convinced the government to let a consortium of private interests led by him to take over the ownership, operation and maintenance of more than 2,800 state-owned sewage-treatment plants nationwide.

But IWK subsequently found that many of the treatment plants it inherited from the government were not functioning and costs began escalating.

A nationwide furore also ensued, with many consumers and businesses complaining bitterly about IWK.
Maintaining the plants and staying profitable proved impossible for IWK.

Under pressure, the government also forced the company to reduce its charges.


By 2000 Dr Mahathir’s government then decided to nationalise IWK.

The Najib government’s new plan could attract similar criticisms because it involves 1MDB and Puncak Niaga, a company that is seen as politically connected to Putrajaya.