KUALA LUMPUR – Perbadanan Aset Air Bhd (PAAB) accumulated RM821.3 million in losses in 2019, according to the second series of the 2019 Auditor-General’s Report today.
Additional findings from PAAB’s audit further reveals that the Finance Ministry-owned company will experience further deficits in the years 2025 to 2037.
This is due to the fact that loan agreements between PAAB and the federal government are for a period of 25 years, while lease payments between state water operators and PAAB are for a period of 45 years.
The 45-year period only comes into force when water assets are developed, upgraded or repaired for water operators by PAAB itself.
“Collection for the lease payments is the main income for PAAB.
“Audit analysis revealed PAAB’s income via lease payments contributes 53.8% to 65.7% to the company’s income for the periods of 2017 to 2019.
“PAAB uses these lease payments to repay loans to the federal government. Until December 2020, RM236.4 million (4.2%) from RM5.696 billion has been paid to Putrajaya,” the Auditor-General’s Report read.
This results in a mismatch, as the repayment period to the federal government is shorter than the lease collection period.
Also, PAAB’s financial projection based on lease payment collections to repay loans to the federal government for 2019 to 2065 will see the company in deficit for 12 years.
“The deficit would be valued at RM13.25 million to RM235 million for 2025 to 2037 if this business model continues,” the report said.
No fair evaluation by PAAB before asset takeover
PAAB operates by taking over water supply-related loans from state governments. In return, state governments transfer water assets and land to PAAB.
The company then leases the land and assets to state water operators and is also responsible for developing and managing these assets.
However, the PAAB audit reveals the company took over 157 (7.4%) assets categorised as neglected, unauthorised and expired valued at RM41.98 million.
“Audits revealed PAAB took over 24 non-water related assets, which do not comply with the main agreement between the company and state governments valued at RM656.6 million,” the report read.
The Auditor-General’s Report, which was presented to Parliament today, recommends PAAB’s board of directors take proactive steps to combat weaknesses revealed in the company’s audit.
Among the recommendations include fair assessments by PAAB before taking over water assets from state governments.
Also, the report states PAAB should consult with the Finance Ministry to solve issues related to the mismatch between loan repayments to the federal government and lease payment collections from water operators.
The Auditor-General’s Report was supposed to be tabled in Parliament last year but was postponed due to the Covid-19 pandemic. – The Vibes, September 28, 2021
With RM821.3 mil in 2019 losses, PAAB to see further deficits in 2025-2037
Mismatch in repayment period to federal govt and lease collection time frame also a problem, Auditor-General’s Report finds
Updated 5 years ago · Published on 28 Sep 2021 6:18PM
