Razon acquires 25% stake in Manila Water

Ports tycoon invests P10.7 billion

MANILA, Philippines — Ayala-led Manila Water Co. Inc. has found an ally in ports magnate Enrique Razon Jr. who invested P10.7 billion for a 25-percent stake in the east zone water concessionaire.

In a regulatory filing, Manila Water said Razon-led Prime Metroline Holdings Inc. acquired 820 million common shares, representing a 25 percent stake in the utility firm, for P13 per share.  Ayala Corp., the parent company of Manila Water, will remain a major shareholder with a 38.6 percent stake.

The fresh capital amounting to P10.7 billion is expected to strengthen the firm’s balance sheet and allow it to be more agile to pursue its long-term strategic initiatives.

The STAR reported over the weekend that there were “ongoing discussions” between Manila Water and Razon which began late last year amid President Duterte’s relentless attacks against the two water concessionaires.

Another industry source also said Manila Water was having problems in paying its maturing loans.

Manila Water chairman Fernando Zobel de Ayala said the partnership with the Razon Group would result in clear synergies to achieve the company’s  long-term goal of providing sustainable water and wastewater services to its customers.

“Our partnership combines our respective technical and management expertise. Looking beyond our domestic businesses, the extensive global experience of Razon through his port operations opens more opportunities for Manila Water to serve new markets,” he said.

Prime’s entry is expected to bolster Manila Water’s ability to provide reliable, efficient and sustainable water and wastewater services in the east zone and at the same time pursue growth initiatives both domestically and globally.

The partnership with Prime Water adds enormous value to Manila Water as it executes on its long-term strategic direction, said Ayala chairman and chief executive officer Jaime Augusto Zobel de Ayala. 

“We expect this partnership to likewise help accelerate Manila Water’s regional aspirations given Mr. Razon’s solid experience in penetrating overseas markets,” Ayala president and chief operating officer Fernando Zobel de Ayala added.

Over the past decade, Manila Water has been establishing itself as a major water infrastructure player in Southeast Asia with investments in various platforms across Vietnam, Thailand, and Indonesia and is constantly on the lookout for opportunities in the region. 

Razon who has successfully expanded his port operations across the globe said the partnership would strengthen Manila Water’s presence here and abroad.

“We are excited to enter into this partnership with the Ayala Group. We will dedicate our efforts to further develop this unique business both here in the Philippines and abroad. We are confident that our collective experience, technical capabilities, and corporate synergies will be of great benefit to Manila Water, the people it serves, and its other stakeholders,” Razon said.

Razon, who owns International Container Terminal Services Inc. and Solaire Resort & Casino, has consistently established good relations with different administrations.

He forayed into the water business last year through a bulk water project with Manila Water. The deal will be

  for a term of 30 years and will involve the supply of raw water from the Wawa and Tayabasan rivers.

The first phase will involve the supply of 80 million liters per day (MLD) of raw water by Dec. 31, 2021 while the second phase will involve the supply of an additional 438 MLD of raw water by Dec. 31, 2025.

Sought for comment, Nicky Franco of Abacus Securities said: Razon’s entry at P13 is  a “steal” because it’s about 5x times 2020 earnings.

“However, once the new contract terms are imposed by the government in 2022, will it still be cheap then? Moreover, will the revised contract allow Manila Water to recoup all of the P100 billion in unrecovered capex since 1997,” Franco said.

The surprise sale of a stake in Manila Water comes amid Duterte’s tough stance against Manila Water and west zone provider Maynilad Water Services Inc, the company led by tycoon Manuel V. Pangilinan and the Consunji group.

Last December, the Singapore tribunal ordered the government to pay Manila Water P7.4 billion and Maynilad P3.4 billion in indemnification supposedly for lost revenue from an unenforced rate hike.

Duterte said he would not honor the Singapore ruling and also moved to cancel the extension of the contract. – With Iris Gonzales