The contract, awarded to a consortium in which North West has a 25 per cent stake, will involve capital spending of pounds 1.25bn over the first 18 years. The project is to be funded through debt finance and a soft loan from the Malaysian government.
North West said much of the capital equipment needed for the venture would be supplied by its operating businesses. It will also receive a fee for operating the country's waste water system under a long-term pricing formula under negotiation with the local government.
Work will initially focus on the country's 43 cities and towns where less than half the population is connected to the main sewage network. The existing sewers will be modernised and new facilities brought to areas not yet connected to the waste system.
The company's partners in the venture include Malaysia's two biggest pension funds and two big local conglomerates - Berjaya Industrial and Aims Worldwide.
A full agreement concerning the privatisation is expected to be completed by the end of the year. North West's shares closed 7p higher at 498p yesterday.