The federal government is slated to pay RM6.5 billion to bond holders for the water debts in Selangor, the Business Times said today.

"The ultimate aim is for the government to own the assets and debts of the water companies in Selangor in an effort to consolidate the water industry," the Business Times quoted an industry source as saying.

NONE The major owners of water assets in Selangor include subsidiaries controlled by Puncak Niaga and Gamuda.

Officials in those companies and the government could not be immediately reached for comment.

In an immediate reaction, Petaling Jaya Utara parliamentarian expressed his disappointment that Putrajaya has decided to bail out Selangor’s private water companies' debt amounting to billions of ringgit.

Business Times

said the Selangor offer was the first phase of water industry consolidation and the government was expected to buy the assets in Penang for RM3 billion.

Relieve the burden

The government wants to restructure water assets and relieve the burden of funding water infrastructure development that has been usually taken up by water companies and the state

governments.

The Selangor offer, which is likely to be made today by the government's water asset management firm PAAB, is at a RM200 million discount to the value of the outstanding water bonds at RM6.7 billion, the newspaper said.

"The federal government is stepping in to buy over the bonds with a slight discount to what the lenders want. The lenders will have to mark the losses in their book," the newspaper cited

the industry source as saying.

Lenders such as investment banking arm of Maybank and CIMB Group hold about RM1 billion of the outstanding debt. Insurance firms and pension funds hold about RM2 billion each while local fund managers hold the rest.

- Reuters