Manila Water to expand operations in 15 cities despite lower income prospect

Ayala-led Manila Water Company is planning to expand its operations in around 15 cities in the country, though its net income prospects this year may not be as good as in 2012. Manila Water president Gerardo Ablaza Jr. in a press briefing Monday said the company does not expect this year's income to be as robust as last year's due to a higher base set and the delayed implementation of rate rebasing for 2013. In 2012, the tariff rate was implemented a day ahead of schedule at January 1, 2012. "As you know this year, the implementation has been delayed because the rate rebasing process encountered a setback in the Metropolitan Waterworks and Sewerage System [MWSS]. Already there is a portion of our revenue that will not be replicated because of the delay,” Ablaza said after the 2013 annual stockholders’ meeting held in Makati City. “The number of factors put together lead me to conclude that perhaps this year, in terms of net income growth, it will not be as robust as it was last year,” he added. In 2012 Manila Water's net income jumped 28 percent year-on-year to P5.44 billion on the back of higher billed volume in its East Zone concession and the strong performance of its new subsidiaries Laguna Water, Boracay Water and Clark Water. Ablaza refused to identify the cities for expansion, saying he prefers “not to get ahead of our developments.” He noted though they are eyeing 15 cities with a population concentration of at least half a million, which would provide the company the critical mass for providing efficient water service. “Without naming any one in particular for reasons that we're not prepared to disclose at this time, our broad target is to look at metropolitan areas with a population concentration of half a million. Below that scale, we believe that we would not get the critical mass that is necessary in providing efficient and operationally effective undertaking,” he said. Manila Water hopes to complete the expansion this year, Ablaza said, noting that they intend to prioritize expansion plans in the Philippines before abroad. “Our strategic priorities are what we call the VIP countries: Vietnam, Indonesia, and Philippines. In terms of prioritization, my desire is to first see more opportunities in the Philippines before going abroad. After all, there are still many areas outside Metro Manila that do not get quality and consistent water supply. So our first priority is really other Philippine areas,” he said. Contributing to the company's billed volumes are subsidiaries Laguna Water Co., Boracay Island Water Co. and Clark Water Corp., as well as Vietnam-based Thu Duc Water Boo Corp., which Manila Water acquired a 49-percent stake in two years ago. In October last year, the company announced it intends to purchase half of Jakarta-based water company PT PAM Lyonnaise Jaya (PALYJA). It has already acquired a 51-percent equity in PALYJA through a share purchase agreement with Suez Environment. “Hopefully, there will also be other opportunities that will open outside of Jakarta. But we are being very careful and selective because there is only so much human resource that we can deploy,” Ablaza said of the acquisitions abroad. The PALYJA acquisition is still subject to certain government and regulatory approvals in Indonesia. A disclosure to the Philippine Stock Exchange shows that Manila Water revenues grew 21 percent to P14.55 billion while its core income climbed 27 percent to P5.72 billion. Earnings before interest, taxes, depreciation and amortization, on the other hand, expanded by 29 percent to P10.54 billion for an EBITDA margin of 72 percent. Total billed volume stood at 579.4 million cubic meters, up 39 percent. The east zone concession contributed the bulk of Manila Water's billed volume at 427.3 million cubic meters, up 4 percent. The MWSS lowered water rates effective April 1, 2013, which will recompute income projections for this year, Ablaza said. The next rate rebasing will be July this year. — BM, GMA News