Manila Water to raise P6.2B for expansion

The Manila Water Co. Inc. (MWC) is raising a total of $117 million (approximately P6.2 billion) to fund its non-revenue water operations, waste water and sewerage system, and other expansion projects.

Of the total, $65 million will come from local financial institutions, $20 million from the German Investment and Development Co. (DEG), $2 million from the Danish International Development Agency (Danida) and $30 million from the International Finance Corp. (IFC), the investment arm of the World Bank.

The IFC loan requires a loan plan, which has been submitted to the Bangko Sentral ng Pilipinas (BSP) for approval.

"We have finalized it, and it will be sent to the BSP for approval," MWC president Antonino T. Aquino said, adding that it is the first official development assistance-type (ODA) financing for a non-government institution.

The $65-million loan was entered into last year between MWC and six local banks under a seven-year term loan available in either US dollars or Japanese yen.

"That would probably be enough to cover all our expected expenditures for the next two years," Aquino said.

Future payments of dollar-denominated loans are $10.98 million this year, $10.8 million next year, $10.6 million in 2005 and $130.8 million spread out from 2006 to 2022.

Peso-denominated loans will be settled via P164-million payments spread out from 2003-2022.

The company started this year declaring cash dividends to its shareholders, the first time since taking over the east zone from the Metropolitan Waterworks and Sewerage System (MWSS) in a celebrated privatization of the country’s water distribution system.

"Since 1997, our poor shareholders have not received any dividends. We just paid the preferred shareholders, which carried a coupon. We started only this 2003 although it was declared out of 2002 retained earnings," MWC chief financial officer and treasurer Sherisa P. Nuesa said in a separate interview.

Dividends for preferred shareholders reached approximately P40 million while common shareholder dividends reached P55 million (or roughly P0.027 per share). She added that there is a possibility that the customers can avail of a stock option arrangement.

MWC has two billion common shares with more than 1.6 billion already issued. Company employees have also been paying for their stock option plan, which was embodied in the concession agreement but on a voluntary basis.

"In the future, the company will develop formal dividend policy that we intend to carry through in preparation for the initial public offering (IPO)," Nuesa added. "The IPO will disperse the ownership of the company and it will give the customers the opportunity to own part of Manila Water. That is something that is very much part of our long-term plan."

The Ayala-led concessionaire declared recently that it was planning to go public in late 2004 or early 2005. In fact, it is already is earnest discussion with a prospective financial advisor for the IPO.

They had wanted to initiate a process of the public offering earlier but the capital market remained sluggish especially with the anxiety over the US-initiated war in Iraq.

"But it is starting to look good with the eventual conclusion of the war, and that is a positive sign for our offering," Aquino added.