Under the deal between Penang and Perak, water is to be drawn from Sungai Perak, treated at a new plant in northern Perak and then piped into Penang. (PBAPP pic)PETALING JAYA: At about RM400 million a year, Penang’s new water deal with Perak may look expensive but, an expert says, it is likely the best option available now.Water Watch Penang president Chan Ngai Weng said that with the arrangement, Penang will secure an additional water source besides Sungai Muda, on which it has relied for decades, without having to spend billions upfront to build and operate its own treatment plant, pipelines and other infrastructure.He said the issue was not simply about buying the cheapest water, but about ensuring Penang has sufficient supply to support its people and economy in the coming decades.Penang urgently needs another major water source because Sungai Muda, which currently supplies about 80% of its raw water, is shared with Kedah and has become increasingly vulnerable during dry periods.How the deal worksUnder the new deal, Perak will build and operate a new water treatment plant and delivery system, while Penang will pay for the water that will be supplied over a 40-year period.The water will be drawn from Sungai Perak, treated at a new plant in northern Perak and piped into Penang. The exact route and the cost of any infrastructure required on the Penang side have yet to be disclosed.At the minimum supply level of 300 million litres a day, Penang’s commitment works out to about RM400 million a year.
The payment comprises a fixed annual capacity charge of RM210 million to secure the infrastructure, plus RM1.70 for every cubic metre, or 1,000 litres, of treated water purchased.At the minimum purchase level, the water charge alone would amount to about RM186 million a year. Combined with the capacity charge, Penang’s total annual payment would come to about RM396 million.If Penang purchases the maximum 500 million litres a day, the effective cost falls from RM3.62 to about RM2.85 per 1,000 litres because the fixed capacity charge is spread over a larger volume.Safeguarding the dealUSM economist See Kok Fong said the RM210 million annual capacity charge was a common mechanism for financing major infrastructure projects.Under the agreement, Perak will finance, build and operate the facilities, assuming the borrowing and construction risks, while Penang secures a l…
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