Penang can walk away from its RM24.6 billion deal to buy treated water from Perak without paying compensation if the agreed charges are not approved by federal regulators, chief minister Chow Kon Yeow said. His assurance came after shareholders of PBA Holdings Bhd (PBAHB), the state’s listed water company, voted 97.9% in favour of the 40-year agreement at an extraordinary general meeting on 12 Nov, Free Malaysia Today reported.
Chow, who chairs PBAHB, said the agreement was still subject to approval of the charges by the National Water Services Commission (SPAN). Perak’s supplier, a joint venture between Perak State Development Corporation and Gamuda Bhd, has until 2035 to secure that approval. “If they cannot achieve that, we can say that we will walk away,” he said after the meeting.
The vote fulfils one of two conditions needed for the project to proceed, with the other being SPAN’s approval of the tariff. The agreement, The Star noted, runs from 2032 to 2072 and commits Penang to at least 300 million litres of treated water a day, drawn from a plant built to treat 500 million litres daily.
PBAHB chief executive K Pathmanathan said the company would not have to pay compensation if the approval did not come through, and the joint venture would carry the cost of building the treatment plant. “If the tariff is not approved, there will be no payment to Perak. That is why there is no risk at all to PBA,” he said.
Five of the board’s 12 directors had raised concerns about the financial burden and the risks of the deal, including the fixed capacity charges and potential termination liabilities. Chow said he acknowledged their concerns, adding that the board spent about a year discussing the terms.
Penang pays an annual capacity charge of RM210 million to keep the Perak facilities running, plus RM1.70 per cubic metre of treated water, a rate reviewed every three years. At the minimum 300 million litres a day, that comes to about RM396 million a year. Over four decades the deal is estimated at RM24.6 billion, made up of RM8.4 billion in capacity charges and RM16.2 billion in water supply charges.
Treated water is due at the Perak-Penang border by 31 March 2032, with PBAHB responsible for distributing it inside the state. The company expects to spend about RM400 million on pipelines and other facilities.
Penang draws about 80% of its raw water from Sungai Muda, which it shares with Kedah, leaving it exposed during long dry spells. Pathmanathan said the state had exhausted the options in its Water Contingency Plan 2030, which made the Perak supply necessary.
