Penang has secured a second major water source after signing a Bulk Water Supply Agreement with Perak on 15 July, committing to pay an annual capacity charge of RM210 million for treated water over 40 years.
Penang Water Supply Corporation (PBAPP) signed the conditional agreement with Prasarana Air dan Irigasi Perak Sdn Bhd (PAIP Perak) under the Perak-Penang Water Project (P-PWP), which will supply between 300 and 500 million litres per day (MLD) of treated water to Penang from 2032 to 2072.
Penang Chief Minister Chow Kon Yeow, who chairs both PBAPP and its parent company PBA Holdings Bhd, described the agreement as the most significant water pact in Penang’s history since the commissioning of the Muda River Water Scheme in 1973.
“Penang is a small state with no major in-state raw water resources left to tap in the 2030s,” Chow said. “Buying treated water from Perak may not be as cheap as producing treated water in Penang but there is no cheaper option.”
Under the deal, Penang will pay RM1.70 per cubic metre of treated water, subject to review every three years, in addition to the annual capacity charge of RM210 million. The capacity charge will gradually amortise the RM8.4 billion in capital expenditure required to build the infrastructure in Perak, which includes a new 500 MLD water treatment plant, pumping stations, reservoirs and transmission pipelines.
PBAPP will not have to invest in the capital expenditure for the project. The infrastructure will be financed, built, operated and maintained entirely by PAIP Perak, a wholly-owned subsidiary of Khazanah Air Perak Sdn Bhd. Penang will also not incur raw water fees, land acquisition costs or operational expenditure to employ personnel to operate the infrastructure in Perak.
The agreement comes as Penang’s water consumption reached 865 MLD in 2025 and is projected to rise to at least 1,162 MLD by 2032, driven by factory expansion and property development projects already in the pipeline. Chow said the P-PWP agreement allows Penang to tap a second major water resource for the future.
“It is the most significant water agreement in Penang’s water supply history since the commissioning of the Muda River Water Scheme in 1973, about 53 years ago,” he said. The additional treated water will primarily support growing demand in Seberang Perai Selatan and Seberang Perai Tengah.
PAIP Perak is a 50:50 joint venture between Gamuda Bhd and Perbadanan Kemajuan Negeri Perak (PKNPk). The agreement remains subject to several conditions, including regulatory approval from the National Water Services Commission (SPAN) and shareholder approval from PBA Holdings.
The supply is targeted to commence from the first quarter of 2032, with the operating period running for 40 years until 2072. Penang is also exploring seawater desalination as a complementary long-term water source, though Chow noted that no Malaysian water operator is currently able to operate a large-scale desalination plant delivering 100 MLD or more.
Source: Malay Mail
