KUALA LUMPUR (July 29): Ranhill SAJ Sdn Bhd, Johor’s sole water operator, has received approval from the National Water Services Commission (SPAN) to explore the possibility of owning water assets, according to BIMB Securities.

The approval would give Ranhill SAJ greater flexibility to invest in water infrastructure to meet rising treated water demand in Johor, the research house said in a note on Wednesday.

Ownership of the assets, however, would be subject to Ranhill SAJ obtaining the necessary facility licences.

Ranhill SAJ is a subsidiary of Ranhill Utilities Bhd (KL:RANHILL). Currently, water assets in Johor are owned by Pengurusan Aset Air Bhd (PAAB), an entity under the Minister of Finance Inc.

Johor’s treated water demand is projected to increase by about 300 million litres per day (MLD) by 2029, driven by rapid industrialisation and the continued expansion of data centres, BIMB Securities said.

The research house said Ranhill SAJ is evaluating various options to meet the anticipated demand, including expanding treatment capacity, rezoning supply areas, transferring water between regions, developing smaller treatment facilities and undertaking selected self-funded capital expenditure where PAAB allocations are insufficient.

BIMB Securities also noted that Ranhill SAJ and SPAN are working on measures such as minimum take-or-pay arrangements, developer contributions and formal demand commitments to reduce the risk of overbuilding new treatment capacity.

It noted that the framework remains under review, with further clarity expected following the approval of the water industry’s Operating Period 7 (OP7) regulatory framework, expected by November this year.

Ranhill SAJ’s current operating period, OP6, is nearing the end of its tenure and is expected to expire by the end of this year.

Meanwhile, the next water tariff adjustment could take place around January 2029, with rates likely to increase by 10% to 15%, subject to regulatory approval and prevailing cost pressures, BIMB Securities said.

As such, the research house maintained its “hold” recommendation on Ranhill Utilities, with an unchanged target price of RM1.94.