The Federal Government has agreed to invoke Section 114 of the Water Services Industry Act 2006 (Wasia), which allows it to assume control of all four water concession companies and a water licensee in Selangor.

This is to ensure the security and sustainability of water supply to the people of Selangor, Kuala Lumpur and Putrajaya.

At the same time, the federal government has requested that the state government speed up the pending approvals for the Langat 2 water treatment plant project, and other mitigation projects. It is learnt that the state has thus far issued seven development orders out of the 80 that is required by the federal government to kickstart the project.

Energy, Green Technology and Water Minister Datuk Seri Dr Maximus Ongkili said the Cabinet had made the decision at last Friday’s weekly meeting.

“The federal government does not wish to allow the protracted negotiation on the restructuring of the water industry between the Selangor government and the concessionaires, as well as the ongoing water supply crisis plaguing the three regions, to cause the people and the national economy to suffer,” he said in a statement.

According to the National Water Services Commission, or SPAN, a total of 821 project applications in Selangor, Putrajaya and Kuala Lumpur as at March 31, 2014 had to be put on hold because adequate water supply could not be guaranteed.

The Cabinet has mandated Ongkili to decide when the invocation would commence.

Ongkili added that the invocation of Section 114 of the Wasia was conditional on both the federal and Selangor governments signing a heads of agreement in respect of the water industry restructuring, financial facilitation and completion of the Langat 2 project, as set out in the memorandum of understanding (MoU) signed by both parties on Feb 26, 2014.

In a separate statement, Selangor Mentri Besar Tan Sri Khalid Ibrahim said Ongkili had briefed him that the process of gazetting Section 114 had been committed.

Khalid added that he had provided the draft agreement between the federal government and the state government in respect of the MoU signed on Feb 26 to complete the restructuring of the water sector.

“The state government will examine in detail the draft agreement before agreeing to sign it and put the interest of the people and the state as a priority,” he said.

He added that the state government was confident that the partnership with the federal government would lead to a successful restructuring of the water industry.

The four Selangor water concessionaires are Puncak Niaga Holdings Bhd, Syarikat Bekalan Air Selangor Sdn Bhd (Syabas), Syarikat Pengeluar Air Sungai Selangor Sdn Bhd (Splash) and Konsortium ABASS Sdn Bhd.

Puncak Niaga has a 70% stake in Syabas, while Splash is 40% controlled by Gamuda Bhd, with the rest of the equity evenly split between Kumpulan Perangsang Selangor Bhd and Sweetwater Alliance Sdn Bhd.

The development of Langat 2 has been delayed because the state could not restructure the water sector despite attempts to buy over the companies.

The four concessionaires currently supply some 70% of treated water to Selangor. With the Langat 2 treatment plant in the picture, which will bring another 1.2 million litres of treated water into the state, the contribution from the four concessionaires will no longer be material.

The state’s last offer of RM9.65bil was made at the end of February, after the federal and state governments signed an MoU to break the five-year impasse. However, only Konsortium ABASS accepted the offer.

Two weeks ago, Khalid said that since the Government had elected to forcibly acquire the state’s water assets, the price would be lower by about RM2bil from its original RM9.65bil offer.