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By Likha Cuevas-Miel, Reporter
Manila Water Co., a unit of the Ayala group,
will incorporate two subsidiaries that will handle its domestic and
foreign expansion and allow fund-raising activities independent of
its parent.
In a briefing, Antonio Aquino, Manila Water
president, said the new units to be incorporated locally would
handle expansion outside of the eastern concession of the
Metropolitan Waterworks and Sewerage System (MWSS).
Further, Manila Water has been eyeing businesses
in other local areas such as Bulacan and Cebu. Outside the country,
it plans to expand in the Southeast Asian region, mainland China and
India.
Forming subsidiaries is meant to separate the
eastern Metro Manila business from the others, which will also allow
fund-raising activities separate from the parent. This would also
allow investors to clearly see where the disposable retained
earnings of the parent would go, Aquino said.
Manila Water is one of two pre-qualified bidders
for the non-revenue water (NRW) reduction project in Ho Chi Minh,
Vietnam. “We are encouraged by these developments in the Ho Chi
Minh bid that we have submitted and we are anxious [as] that will be
the second project that we will be having internationally,” he
said.
Manila Water’s bid for the water project in
Haldia, West Bangal, India, on the other hand, has not been
competitive enough but Aquino said there are six other opportunities
that may open up for the company in the said country. In China,
there is one project in the “preliminary stage of discussion” to
assess the best entry position for Manila Water—through an
operations and maintenance arrangement or through equity infusion in
existing companies.
As for local prospects, the Manila Water
president said the company has yet to secure approvals from the
local governments of Carmen, Cebu.
The subsidiary’s local projects will focus on
the environmental aspect of the water business such as water reuse,
which involves waste water treatment, application of bio-solids as
fertilizers and the conversion of waste to energy.
For the next 15 years, Manila Water has
earmarked P187 billion for investments, P100 billion of which would
go to capital spending while the balance would go to operations or
the normal expenses that the utility company would incur for the
period. Of the total, Aquino estimated that P37 billion would be
spent in the next five years.
“As a result of the very good internal
operations, we are able to internally generate most of the cash that
will be required for these investments that will be the principal
source of the capital expenditure program,” he said.
To augment the internally generated funds for
capital expenditure, Sherisa P. Nuesa, Manila Water chief finance
officer, said that the company would need to raise around $150
million from next year until 2010 through various means that are
still being studied. She said the company’s debt-to-equity ratio
stands at 45-percent debt and 55-percent equity, “which is
considered quite low for an infrastructure company” and leaves
enough elbow room to borrow.
How it can raise the money would depend,
however, on the interest rate movements vis-a-vis inflation and
currency risks.
This year, Manila Water has allocated about P7.7
billion for capital expenditures and concession fees. Among its
projects are the P1.5-billion construction of a water treatment
plant that would increase its current production by at least 100
million liters per day. This would also complement the P4-billion
network expansion and service sustainability projects slated for
this year.
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