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Jakarta Post

Negotiations hit impasse because of legal challenge

  • Sita W. Dewi

    The Jakarta Post

Jakarta   /   Sat, October 11, 2014   /  10:44 am

Business negotiations over a plan for the city administration to take over private water company PT PAM Lyonnaise Jaya (Palyja) have been put on hold pending the conclusion of a class action suit initiated by members of the public.

Deputy Governor Basuki '€œAhok'€ Tjahaja Purnama met with executives, including senior advisor Anne- Marie Idrac, of France-based utility company Suez Environnement SA, which controls the majority of shares in Palyja, on Thursday, but without achieving any significant progress.

Idrac declined to comment when approached by The Jakarta Post after the meeting.

Ahok acknowledged that the majority shareholder had pushed the city administration to make progress during the negotiations.

'€œWe have agreed to take over the company in an acquisition process, but we can'€™t proceed with the deal as we have to wait for the ongoing legal challenge in front of the Central Jakarta District Court to be settled. If I acquired the company now, that would be considered a violation. [Suez Environment] has been asking for clarity as they can'€™t make decisions regarding investment because of this matter. It'€™s kind of a deadlock situation as we can'€™t make progress,'€ Ahok told reporters after the meeting.

According to Ahok, Suez Environnement preferred that Palyja be acquired by a private company.

'€œThey were fine with a business-to-business scheme, but they prefer a private company. I told them I guaranteed there would not be a nationalization of assets,'€ he said.

The deputy governor acknowledged the city is considering another option.

'€œWe are thinking about [city water operator] PAM Jaya acquiring the company, but we have to check whether or not this option is against the ongoing class action. If it'€™s all right, we would proceed the acquisition,'€ he said.

The city administration has looked into buying shares of Palyja from shareholders PT Astratel and Suez Environnement to improve water operation services in the city.

After 16 years of operation, Palyja, which manages the western part of the city, and PT Aetra Air Jakarta, which operates the eastern part, are thought of as having failed to provide adequate services to the city and are alleged to have caused losses of Rp 590 billion (US$51.64 million) to the state.

A coalition of experts and activists, called the Coalition of Jakarta Residents Opposed to Water Privatization (KMMSAJ), filed a lawsuit, demanding the court annul the contract in November 2012.

Meanwhile, the city administration has decided to buy the shares through its city-owned enterprises: property developer PT Jakarta Propertindo (Jakpro) and Pembangunan Jaya. Jakpro recently received a capital injection of Rp 600 billion, which will be used to complete the acquisition.

Ahok expressed his main concerns over water services in the capital: '€œIt doesn'€™t matter who operates the water services. I just want to reduce the current 40 percent water leakage. I also want to expand the piping to the houses of the poor.'€

PAM Jaya president director Sri Kaderi Widayanto said that his company continued to prepare for the acquisition while awaiting the results of the legal proceedings. '€œSo when everything is set we can proceed with the acquisition,'€ he said, adding that the company was currently conducting a due diligence process.