Water tariff hike to boost infrastructure, offset rising costs

New Straits Times

13 hours ago

KUALA LUMPUR: The recent water tariff revision offers water operators greater flexibility to improve infrastructure, speed up the replacement of old pipes, and address non-revenue water (NRW) issues.
CIMB Securities said the tariff adjustments also helped offset significant increases in electricity costs and other operational expenses faced by water treatment plant (WTP) operators.
"For instance, the Negeri Sembilan government has seen the monthly water pumping expenses, especially for commercial and industrial sectors in the state, rising by RM700,000 since July 2024," it said in a note.
The research house noted that several states have already detailed their plans for utilising the additional revenue from the revised water tariff structure.
It added that the Penang Water Supply Corporation (PBAPP) anticipates generating an additional RM20 million in revenue in the second half of 2026 from the new tariffs, which it plans to reinvest in enhancing Penang's water supply infrastructure.
"The projects in the pipeline include the construction of the Mengkuang Park Water Treatment Plant, the new Sg. Kerian WTP, and the construction of a new treated water pipeline from the Macallum area to Bukit Dumbar," it said.
CIMB Securities said there is an urgent need to upgrade and rehabilitate ageing water infrastructure, noting that 98 out of 350 WTP nationwide are operating beyond their intended capacity, while another 120 WTP are grappling with operational issues.
The firm emphasised that addressing these challenges is vital to securing the long-term sustainability of the country's water services.
It also stated that the recent water tariff adjustments mark a significant step forward in enhancing water service quality under Malaysia's Water Sector Transformation Plan 2040 (AIR 2040).
"This is crucial to support the country's water demand, which is growing at an average rate of 2 to 6 per cent per annum," it said.
CIMB Securities noted that while water tariff increases are a step forward, the sector still needs alternative financing models involving private sector participation.
This would help ease the federal government's financial burden in supporting the significant investments needed under the AIR 2040 plan.
"For exposure to water-related plays, we reiterate our view that licensed water operators under Suruhanjaya Perkhidmatan Air Negara (SPAN) would be the immediate beneficiaries of the water tariff revisions.
"Apart from Ranhill Utilities Bhd, PBA Holdings Bhd is the only other licensed water operator in the country that is listed on Bursa Malaysia.
"Pending further updates on the private sector's role in Malaysia's water sector transformation, we maintain Gamuda Bhd as our preferred play for water-related infrastructure construction," it added.
The firm said Gamuda is well-placed to win construction contracts valued at RM4 billion under the Ulu Padas and Northern Perak water supply projects.
It noted that the Northern Perak scheme will be implemented through a privatisation model with a minimum concession period of 40 years.
"As the main WTP contractor for Phase 1 of the Rasau Water Supply Scheme worth nearly RM2 billion, we also expect Gamuda to be in the running for more jobs under the second phase," CIMB Securities said.