Puncak Niaga (M) Sdn Bhd’s (“PNSB”) RM1.02 billion Bai Bithaman Ajil Islamic Debt Securities (“BaIDS”) and RM350 million Murabahah Commercial Papers/ Medium Term Notes ratings have been reaffirmed at AAID and MARC-1ID/AAID respectively. The reaffirmation of the ratings is due to PNSB’s improved liquidity profile underpinned by the settlement of the long outstanding receivables. Furthermore, the completion of the privatisation of the Selangor water supply services is in our opinion a step forward for the water industry. More importantly it has had a positive impact on PNSB in terms of the prompt payments received by the company for the sale of treated water.

PNSB currently holds three concessions awarded by the Selangor State Government covering a total of 28 water treatment plants (“WTP”). The first concession, the Privatization Cum Concession Agreement, requires PNSB to rehabilitate, operate, maintain and manage 26 WTPs scattered around Selangor and Kuala Lumpur; while the other two concessions requires PNSB to design, construct, operate, maintain and manage the Sungai Selangor Water Supply Scheme Phase 2 WTP and the Wangsa Maju WTP respectively.

On 15 December 2004, Syarikat Bekalan Air Selangor Sdn Bhd (“SYABAS”), the Federal Government and the Selangor State Government entered into a Concession Agreement for the privatisation of the water supply services in the State of Selangor and the Federal Territories of Kuala Lumpur and Putrajaya. Under the agreement, SYABAS took over the responsibilities of Perbadanan Urus Air Selangor Berhad (“PUAS”) in supplying treated water beginning 1 January 2005. Since the privatisation took place, PNSB has not faced any collection problems from SYABAS and this has helped to improve PNSB’s cash flow. Furthermore, the improvement in PNSB’s liquidity profile was also assisted by the resolution of the old outstanding receivables owed by PUAS. To-date, PNSB has received a total of RM699.6 million and an additional RM518.6 million will be repaid by SYABAS in 10 annual instalments beginning 2006.

On 19 October 2005, the BaIDS holders gave their consent to PNSB to extend the tenures of the BaIDS. The proposal to vary the existing principal terms and conditions allows the holders the opportunity to call for an early repayment under the Put Option granted to the holders of the BaIDS by PNSB.

Looking ahead, PNSB’s cash flow from operations is projected to be strong with the average Debt Service Coverage Ratio (“DSCR”) to be comfortably above 1.25x with the minimum DSCR expected to occur in FY2016. The exercise of the Put Options on Series 3, 4, 5 and 6 of the BaIDS in FY2007, FY2008, FY2009 and FY2010 respectively; is not expected to severely impact PNSB’s DSCR. The repayment of these series will also coincide with the exercise period of the Put Option for the RM546.9 million A Notes.