Date : 07 October 2003

PUNCAK NIAGA HOLDINGS BERHAD (416087 U) ('PNHB') - ACQUISITION OF 70% EQUITY INTEREST IN SYARIKAT BEKALAN AIR SELANGOR SDN BHD

PUNCAK NIAGA HOLDINGS BERHAD

Type

Reply to query
Reply to Query Letter by KLSE reference IDHY-031001-40892
SubjectPUNCAK NIAGA HOLDINGS BERHAD (416087 U) ('PNHB')
- ACQUISITION OF 70% EQUITY INTEREST IN SYARIKAT BEKALAN AIR SELANGOR SDN BHD

Contents :

We refer to the Exchange's letter dated 3rd October 2003 and to our earlier announcement released to the Exchange on 25th September 2003. We are pleased to furnish the Exchange with the following additional information for public release: -


1. Costs incurred in securing the Privatisation since 1996

The purchase consideration of RM38,009,837.00 for the acquisition of 699,997 shares in SYABAS representing 69.9997% equity interest in SYABAS by PNHB from Central Plus (M) Sdn Bhd ('CPSB') was arrived at after taking into consideration all costs incurred by CPSB since 1996 in securing the privatisation of the water supply services in the State of Selangor and the Federal Territories of Kuala Lumpur and Putrajaya ('the Privatisation') .

The above costs comprise consultancy fees and costs paid to carry out financial analysis and evaluation to determine the viability and feasibility of the Privatisation, consultancy fees paid for systems reviews conducted on Jabatan Bekalan Air Selangor ('JBAS') and Perbadanan Urus Air Selangor Berhad ('PUAS'), costs incurred for planning and evaluation of SYABAS's capital and operating expenditure programmes and overall business plan, legal costs for drafting and negotiations on the agreements for the Privatisation, administrative costs and holding cost incurred by CPSB since 1996.

2. Salient features of the Share Sale Agreement ('the Agreement')

The salient features of the Agreement are as follows: -

    (a) PNHB will acquire the shares of SYABAS from the Vendors as follows: -

    No. of shares held/ Purchase Price
    Percentage (%) (RM)

    CPSB 699,997 (69.9997%) 38,009,837.00
    YBhg. Tan Sri Rozali Bin Ismail 2 (0.0002%) 2.00
En. Mat Hairi Bin Ismail 1 (0.0001%) 1.00

    700,000 (70.000%) 38,009,840.00
    =============== ===========

    (b) The Agreement is conditional upon the fulfillment of the following conditions: -

    (i) PNHB to obtain the approval of the Foreign Investment Committee ('FIC') for the sale and purchase of SYABAS shares;

    (ii) The Board of Directors of PNHB to approve the acquisition of SYABAS shares from the Vendors;

    (iii) CPSB to obtain the approval of its shareholders for the sale of its entire shareholding in SYABAS to PNHB; and

    (iv) Signing of the Concession Agreement for the Privatisation.
(c) Completion of the acquisition of 70% equity interest in SYABAS shall take place within fourteen (14) business days of the fulfillment of the last conditions precedent stipulated in the Agreement ('the Completion Date').

(d) Upon the fulfillment of the last conditions precedent stipulated in the Agreement, the Vendors namely, CPSB, YBhg. Tan Sri Rozali Bin Ismail and En. Mat Hairi Bin Ismail respectively, shall within seven (7) business days, execute and deliver to PNHB's solicitors, all necessary documents as set out in the Agreement for purposes of submitting the transfer form to the Collector of Stamp Duty for adjudication of the ad valorem stamp duty payable.

(e) Upon receipt of the necessary documents from the Vendors on the Completion Date, PNHB shall then pay to the Vendors directly the purchase price totalling RM38,009,840.00 only.

3. Prospects and risk factors of the business to be acquired

(a) Prospects: -

SYABAS's proposal for the Privatisation ('the proposal') will provide a solution for the repayment of current trade receivables owing by the Selangor State Government to PNHB's wholly owned subsidiary, Puncak Niaga (M) Sdn Bhd ('PNSB') which as at 30th June 2003 totalled RM940.0 million. Going forward, all future payments shall be made by SYABAS once the Concession Agreement for the Privatisation is signed.

The proposal is also expected to enhance the valuation of PNHB. Furthermore, subject to compliance with the relevant authorities' approvals and requirements, PNHB can participate in some of SYABAS's capital expenditure works which is estimated at approximately RM10.0 billion, spread over the duration of the Privatisation of 30 years.

With this Privatisation, PNHB's position as the leader in the water industry in the country and in the region will be further strengthened.

(b) Risk factors: -

The risks anticipated from the Privatisation are as follows: -

(i) the ability of SYABAS to supply the designated quantity and quality of water to the consumers, due to factors beyond the control of SYABAS and the water treatment operators, such as raw water pollution, interruption to power supply, etc;

(ii) SYABAS falling short of its target to reduce substantially the non-revenue water losses which is currently estimated at approximately 40%;

(iii) the ability of SYABAS to meet the consumers' expectations in terms of the level of service;

(iv) the ability of SYABAS to raise financing for the Privatisation;

(v) SYABAS's exposure to fluctuating interest rates for its commercial borrowings; and

(vi) the ability of SYABAS to meet its projected revenue over the duration of the Privatisation.

To mitigate the operational risks factors as mentioned in (i) to (iii) above, SYABAS will work very closely with the water treatment operators to minimise the possibility of interruption of water supply, will undertake a programme of works which will reduce the non-revenue water losses to meet its projected target and will also put in place an efficient business structure with emphasis on consumers' satisfaction.

On the financial risks factors as mentioned in (iv) to (vi) above, based on the viability of the Privatisation, SYABAS is confident of raising the required financing and it will mitigate its exposure to fluctuating interest rates by structuring its commercial borrowings to ensure substantial amounts of it are of fixed interest rates. To meet its projected revenue, SYABAS will put in place an effective revenue collection system. SYABAS has also proposed a tariff review formula to be incorporated in the Concession Agreement for the Privatisation, such review to be undertaken once every 5 years.


This announcement is dated 7th October 2003.

Query Letter Contents :

We refer to your announcement dated 25 September 2003 in respect of the
aforesaid matter.
In this connection, kindly furnish the Exchange with the following additional
information for public release:

Costs incurred in securing the Privatisation since 1996.
Salient features of the agreement.
Prospects and risk factors of the business to be acquired.
Please furnish the Exchange with your reply within two (2) market days from the
date hereof.
Yours faithfully
INDERJIT SINGH
Sector Head
Issues & Listing
THY



Announcement Info

Company NamePUNCAK NIAGA HOLDINGS BERHAD  
Stock Name PUNCAK    
Date Announced7 Oct 2003  
CategoryGeneral Announcement
Reference NoCU-031003-69382