SELANGOR TAKEOVER OF SYABAS - The Financial Game Plan 1. The news that both FG and SSG will sit together and resolve the Syabas/PN ownership issue bring good news for the people of Selangor. SSG has offered RM9.6bill. Where is the money coming from? 2. I suspect the game plan is to use of SSG GLC like KDEB to take over the assets and operations of Syabas and PN. KDEB will take over with a cost of RM9.6bill and then sell the assets on a lease back scheme over a 50 years period for a sum of about RM10.5 bill. They will also inject assets that is currently owned by SSG but not handed over to Syabas for another few hundred millions. I believe the total amount would be in the circa of RM12 billion and KDEB will manage water operations in Selangor using a SPV. The impact of the exercise is that SSG will have extra cash in hand in the circa of RM2.4 bill. 3. The RM12 billion will paid back to PAAB by spreading it over the next 50 years. The cost will be borne by consumers. This will cause that the water rates will go up by 0.001% on the assumption that all industrial, residential consumers are charged on consumer rates. If appropriate rate is applied than the actual house hold water rates will go up a lot less than 0.001 %. 4. What will SSG do with the RM2.4billion that they earned from this deal? This is yet to be known but knowing how stingy Khalid is, the money will probably sits in the state coffers and earning interest. Once the SPV has assumed control, I suspect that the state plan to list the entity on Malaysian Bursa so that the SPV would have the necessary funds to operates. I would not be surprised if Khalid will use the SPV to start buying other water business in the neighboring states. 5. I guess at the end of the day, it is business as usual.
Posted on: Sun, 14 Jul 2013 02:43:42 +0000