(STAR) By Zinnia B. Dela PeŮa - The consortium of DMCI Holdings Inc.-Metro Pacific Investments Corp. (MPIC) has drawn up a two-stage rehabilitation plan for the water concession in the western part of Metro Manila aimed at providing better and uninterrupted water supply to customers.

DMCI-MPIC topped the auction for the governmentís 83.97- percent stake in debt-strapped Maynilad Water Services Inc. whose concession covers 10 cities and eight municipalities, serving six million customers.

It will take over and continue the operations of the west zone for the remaining duration of the 25-year concession, which was first awarded to the Lopez led Benpres Holdings Corp. in 1997 until financial difficulties led it to give up and return the concession to the government last year.

In a press statement, DMCI-MPIC said the first stage of the recovery plan will include a system-wide water audit, improving water supply and pressure management, and enhancing reservoir management and pump station efficiencies. It will also involve the upgrading of the systemís software and information technology facilities.

The second stage, on the other hand, will provide for physically replacing old water mains, conducting extensive post-rehabilitation network maintenance and improving overall service repairs and connections, with a goal of providing safe, reliable 24-hour water supplies to the tens of thousands of businesses and households in the concession area.

Mayniladís network facilities include two water treatment plants and 4,100 kilometers of pipes and aquaducts.

DMCI-MPIC has formed a 50-50 percent joint venture company, DMCI-MPIC Water Co. Inc., to serve as corporate vehicle for the project.

DMCI-MPIC has committed to pay a total of $503.9 million for the 84-percent stake, consisting of a minimum cash bid of $56.7 million and a financial supplement of $447.2 million. The minimum cash bid comprises $22.7 million worth of common shares in Maynilad plus $3 million in interest and $31 million in financial assistance for past advances made by the Metropolitan Waterworks and Sewerage System (MWSS) to Maynilad.

The $447.2 million offer will be represented by standby letters of credit to be presented on Jan. 10, the expected transaction completion date. It will be infused as new equity into DMCI-MPIC over a three-year period, to be used to fund new capital expenditures or pay off debt.

Maynilad currently has approximately $256.8 million of debt that is subject to various restructuring agreements. Under the mandatory requirements of the bidding process, DMCI-MPIC will also be required to establish a performance bond in the amount of $12 million in respect of Mayniladís obligations under the concession and required to undertake payment of transaction fees and expenses of approximately $19.6 million.

DMCI-MPIC said there is significant opportunity for long-term value creation in its investment in Maynilad due to water distribution being a critical and essential public service and from the potential of stable operating cashflows resulting from an expected turnaround of Mayniladís operations under its management.

There is further opportunity for DMCI-MPIC to achieve substantial improvements in revenue, for while Maynilad presently supplies over 2,100 million liters of water per day to approximately six million customers in its concession areas, approximately 67.6 percent of that is non-revenue due to antiquated infrastructure delivery, leakage and pilferage.

"We are delighted that DMCI-MPIC has been successful with a prudent bid that could provide a more safe and reliable source of water for millions of consumers. Our experience in transforming organizations such as PLDT and reducing debts at companies such as Metro Pacific will provide considerable assistance to this effort," said MPIC chairman Manuel V. Pangilinan.

For his part, DMCI president and chief executive officer Isidro Consunji said: "Our consortium won because we submitted a winning bid, and detailed a realizable, achievable plan to hasten Mayniladís rehabilitation in a shorter timeframe than others had proposed. The DMCI-MPIC team brings much to the table a long history of creating turnarounds and returning value to our shareholders. Our goal will be to improve Mayniladís long term profitability and provide real customer service and value."

MPIC is an investment holding company recently Spun off from Metro Pacific Corp., the local flagship of the First Pacific Co. Ltd. of Hong Kong, as part of the groupís reorganization.

DMCI, on the other hand, is among the Philippinesí largest construction firms, with a core competency in providing water utility services through its investment and management of Subic Water and Sewerage Co. Inc., the primary water and sewerage and sanitation provider for the Subic Bay Freeport, a special economic zone located east of Metro Manila.

DMCI also has significant interests in real estate and in mining.

Chief News Editor: Sol Jose Vanzi

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