Ayala controlled Manila Water Co. (Manila Water) is considering a bond issue to raise funds for its capital expenditures and retirement of existing loans.
Sherisa P. Nuesa, the water utility firm’s chief finance officer, said they have already been classified among the most stable Philippine corporations as supported by very high ratings by leading domestic rating agency Philippine Ratings Inc. (Philratings).
“We are qualified to issue bonds to raise capital if required for operational expenditures and retirement of existing or new debts,” Nuesa said during the formal signing of an cash management agreement with the Bank of the Philippine Islands (BPI) yesterday.
But issuing a bond this year depends on the direction domestic interest rates will take and the movement of the peso.
Domestic interest rates have been going up, which has held down new borrowings in the domestic market, while, volatility in the international market as well as a weakening dollar have kept Manila Water in the sidelines for new loans.
Manila Water, the concessionnaire in the East Zone of the Metropolitan Waterworks and Sewerage System (MWSS), has already set a 2008 capital expenditure program worth P7 billion. Majority of the funding will come from internally-generated funds, with another P1 billion from loans.
“We will need $150 million for expenditures in the next two years,” Nuesa added.
Manila Water, however, has three existing loans that have been partially drawn down from. These are the $50-million loan from the European Investment Bank, the $64-million loan from the World Bank and the $50-million loan from the International Finance Corp. (IFC).
Meanwhile, Manila Water president president Antonino T. Aquino said their operations will continue to require raising funds “as these is a reality in the water and sewerage distribution system in greater Metro Manila, especially the East Zone.”
Aquino explained that there are still huge areas that require repair and upgrading in both the water distribution and the sewerage systems.
Thus, he said there is a need to constantly raise funds from the debt market hand-in-hand with the judicious management and allocation of earnings.
Manila Water deals with nearly 15 collecting banks aside from a host of retail outlets and payment centers. To simplify the system, all the collecting banks and other outlets will report daily transactions to BPI’s cash management system. Daily transactions from the collecting entities average P30 million.
BPI will centralize, systematize and simplify all data allowing Manila Water real time, daily and systematized records and reports.
“We want to be updated daily and the electronic systems of BPI under its cash management program will allow us to do so,” Nuesa added.
Likewise, the system will allow Manila Water to determine on a daily basis its investment options.
Sales last year amounted to P7.8 billion, resulting in net income of P2.4 billion. But things are expected to change this year as its income tax holiday has already lapsed.
“We are still hopeful of positive gains this year if first quarter results are any indication,” Nuesa said. Volumes grew five percent from January to March this year, resulting in a 16-percent increase in revenues.