PENANG’s interests are well protected under the conditional Bulk Water Supply Agreement (BWSA) signed with Perak, which aims to strengthen the state’s long-term water security through an additional supply of up to 500 million litres of treated water daily.
State executive councillor Zairil Khir Johari said the agreement between the Penang Water Supply Corporation (PBAPP) and Prasarana Air dan Irigasi Perak Sdn Bhd (PAIP) is designed to secure a sustainable water source for Penang over the next 40 years and beyond.
“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,” said Zairil, who oversees the infrastructure portfolio.
“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,” the Tanjung Bungah assemblyman said in a statement.
He explained that the RM8.4 billion capacity charge over 40 years was essentially a deferred payment for a water treatment plant built exclusively to supply Penang.
Perak would bear the construction and financing risks, as well as responsibility for maintenance and upgrading throughout the agreement period.
“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,” he said.
Zairil said PBAPP would only pay supply charges for water actually delivered and meeting the agreed quality standards.
According to him, the total cost of RM8.4 billion, including financing and refurbishment over 40 years, had undergone scrutiny by financial consultants appointed to conduct due diligence.
On concerns surrounding the agreement’s provisions, particularly Perak’s state interest clause and prolonged supply interruptions, Zairil said several safeguards and exit mechanisms were in place to protect Penang.
He explained that PBAPP could terminate the agreement and claim damages if PAIP breached its obligations and failed to remedy the breach within 90 days.
PBAPP could also terminate the agreement if PAIP became insolvent. - November 12, 2026.
