INTERNATIONAL FINANCE CORP INVESTS $15M IN MANILA WATER CO.

MANILA
, June 2 , 2004
 (MALAYA)
By RACHELLE FRIGINAL  -  Water ahead of IPO

The International Finance Corp., is investing $15 million (P837 million) for a 9.2 percent stake in Ayala unit, Manila Water Co.

The $15 million is on top of $30 million (P1.7 billion) it will lend the company.

MWC president Antonino T. Aquino said the company is finalizing plans to go public early next year, selling another 20 to 25 percent for both local and foreign buyers. ING Bank and BPI Capital Corp. were earlier named as financial advisors.

Aquino said the company needs P19 billion within the next five years to finance projects including finding new water sources, and for expansion both in the country and in the Asian region.

Aquino explained that MWC would need P3 to P4 billion every year, P1 billion of which is payable to Metropolitan Waterworks and Sewerage System (MWSS), under its concession agreement with the government firm.

The investment in MWC is the first for IFC, the private sector arm of the World Bank in the water sector in East Asia.

The firm's investment in MWC totaled $75 million to date, including the $30 million equivalent yen loan closed earlier last year.

After the equity infusion, IFC becomes MWC's fifth major stockholder, with 9.2 percent share.

Ayala Corp. meanwhile reduced its 48 percent share to 43.6 percent and other major stockholders: UK-based water and power company United Utilities now has 16.9 percent share, from over 18 percent and Japanese firm Mitsubishi Corp. and BPI Capital each as 9.7 percent stake, from the previous 10.65 percent.

The remaining 6.1 percent and 4.8 percent, were owned by the employees of MWC under a stock option plan and MWC Holdings, respectively.

MWC currently services more than four million households belonging to the east side of Metro Manila.

Part of the firm's expansion plan is to lay out a minimum 885 kilometers of new pipeline in the next few years, replacing the current 50-to-100-year old pipeline system in the capital.

The company is eyeing expansion outside its concession area, beginning with a project in Cebu. Aquino said that they are also currently looking at opportunities to provide consulting and management contracts in Asia.

Company officials said Manila Water has already started talks over partnerships in Thailand and India.

The Ayala-led consortium has been posting aggressive growth rates since winning the bid to operate the East Concession of the privatized MWSS in 1997, unlike its counterpart May-nilad Water Services Inc., which has earlier decided to return the concession to the government.

From a consortium that inherited seemingly insurmountable network losses, which is up to 63 percent, MWC, managed to turn the company around to become one of the country's fastest growing organizations.

Its capital investments (totaling more than P9 billion to date) allowed the company to achieve significant improvements in billed volume and operating efficiencies.

Aquino said, "The timing of this investment by IFC is very significant. While most foreign companies prefer to remain in the sidelines until they see the final results of the May 10 national elections, IFC chose to immediately affirm its confidence in the country's business climate, and in Manila Water as a highly viable company."

MWC reported net income of P309 million during the first quarter, an improvement of 13 percent from the previous year. Revenues surged 16 percent to P930 million versus year-ago's P802 million.

Each day, MWC delivers 1,600 million liters of potable water to over 4.7 million residents and thousands of industries and businesses in the East Zone.

The East Zone is a 1,400 square kilometer area that covers 24 cities and municipalities in Metro Manila and Rizal. These include Mandaluyong, Marikina, Pasig, Pateros, San Juan, Taguig, Makati and parts of Quezon City and Manila.

The towns of Angono, Antipolo, Baras, Binangonan, Cainta, Cardona, Jala-Jala, Morong, Pililla, Rodriguez and San Mateo in the province of Rizal are also part of the East Zone.


Reported by: Sol Jose Vanzi

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