Chief Minister Lim Guan Eng announced the terms of the water restructuring deal in a statement today.
Penang will sign a water restructuring deal with Putrajaya tomorrow that will see the state relieved of its financial burden in developing water assets while at the same time, retaining control over water tariffs.
Chief Minister Lim Guan Eng announced the agreement terms in a statement today, adding that the deal demonstrates the Penang Pakatan Rakyat (PR) government’s willingness to foster a mature working relationship with the Barisan Nasional (BN) federal government.
Lim said under the deal, Penang would agree to the migration of its core assets in Perbadanan Bekalan Air Pulau Pinang (PBAPP), in exchange for a complete restructuring exercise of the outstanding federal loans owed by the state.
The terms of the agreement are as follows:
* Penang’s outstanding loan of RM655.24 million to the federal government will be interest-free and further rationalised;
* Penang will be given a grant allocation of RM1.2 billion for the expansion project of Mengkuang Dam;
* The federal government will be fully responsible for the source work of water supply projects;
* The state government will be relieved of the financial burden to develop and upgrade water supply assets;
* PBAPP can focus solely on providing water treatment and distribution services and concentrate on achieving operational efficiencies, good quality water and services;
* PBAPP can work towards full cost recovery and financial independence in the long term;
* Any revision or variation in water tariffs must obtain the approval and consent of the Penang state government.
Lim explained that under Penang’s previous agreement with Putrajaya, the state’s outstanding loan of RM665.24 million was to be charged at a three per cent interest rate.
“At the same time, the loan will be rationalised by alienating state land-related water assets to the Finance Ministry’s Pengurusan Aset Air Berhad (PAAB) for a period 45 years and PAAB will then lease back the water assets to PBAPP for 45 years.
“PBAPP shall pay PAAB a yearly lease rental of RM14.56 million and upon settlement of the lease at the end of 45 years, the state land will automatically revert back to the state,” he explained.
On the project to expand the Mengkuang dam, Lim said the dam’s capacity of 23 million cubic meters would be increased to 78 million cubic meters and will help the state meet its water needs by 2020.
Lim said that with the agreement, the state would be relying heavily on Putrajaya’s pledge that both the state government at PBAPP would not have to depend on funding or loans from financial institutions to develop water assets in the near future.
