Penang shareholders have approved a 40-year water supply deal with Perak, clearing a hurdle for receiving treated water by March 31, 2032.
PBA Holdings and PBAPP chairman Chow Kon Yeow said the approval satisfies a condition precedent in the Bulk Water Supply Agreement signed with Prasarana Air dan Irigasi Perak Sdn Bhd.
The meeting drew 161 shareholders.
Financing the Perak Water Supply Scheme
The Perak supplier is a joint venture between Perak State Development Corporation and Gamuda Bhd.
The venture is responsible for construction, operation, and maintenance of the scheme, including land acquisition.
PBAPP does not shoulder upfront capital costs.
State infrastructure, transport and digital committee chairman Zairil Khir Johari said the capacity charge acts as a deferred payment for a dedicated water treatment facility built for Penang.
PBAPP will pay supply charges for water that is delivered and meets quality standards.
PBAPP makes no upfront payment or capital contribution to PAIP. Instead, the plant cost is repaid through an annual capacity charge of RM210 million, beginning from the Supply Start Date and spread over 40 years to make it more affordable for PBAPP.
Zairil Khir Johari, State executive councillor
Zairil defended the financial structure.
Surface water resources inside Penang are expected to be exhausted after 2030, once works to maximise surface water are completed.
State demand is projected to exceed 1,162 million litres a day by 2032, necessitating the Northern Perak Water Supply Scheme (NPWSS) to secure stability.
The agreement would ensure an additional water source alongside Penang’s existing surface water resources, which were expected to be maximised within the next 10 years. Under the agreement, the interests of both sides are warranted.
Zairil Khir Johari, State infrastructure, transport and digital committee chairman
SPAN Tariff Approval Determines Agreement Progress
The agreement remains conditional upon formal approval from the National Water Services Commission (SPAN) regarding tariffs.
Chow said Perak’s supplier holds a deadline until 2035 to secure this regulatory clearance.
If these charges are not authorized, the agreement will not proceed.
“If they cannot achieve that, we can say that we will walk away,” PBA Holdings and PBAPP chairman Chow Kon Yeow said Penang can walk away without penalty or compensation.
He said that if the initial tariff is rejected, the supplier would need to return to SPAN to propose new rates until an acceptable proposal is reached.
Lim argued that the contract does not provide for compensation to PBAPP in the event of supply failures.
Lim said the contract lacks compensation if Perak prioritizes its own domestic, industrial, and agricultural needs over Penang’s supply.
PBAPP has the right to terminate the agreement and claim damages if the supplier breaches its obligations and fails to remedy the breach within 90 days.
The agreement allows for termination if the supplier becomes insolvent.
The BWSA is a complex, long-term agreement, and individual clauses read in isolation may make it appear one-sided. However, when read as a whole, its terms allocate risks fairly between both parties.
Zairil Khir Johari, Tanjung Bungah assemblyman
Beyond that border, it remains the responsibility of PBA to distribute the treated water throughout Penang.
