Manila Water secures $150-million guaranteed loan from 4 banks

MANILA, Philippines - Ayala-led utility firm Manila Water Co. Inc. has secured a $150-million loan from four major Japanese banks guaranteed by Nippon Export & Investment Insurance (NEXI).

The guarantee is the first of its kind to be issued for a water project — a good sign of NEXI’s support for Manila Water’s financial capability and initiatives towards enabling the sustainable delivery of world-class water services to its customers. 

The four international banks are ING Bank N.V. Tokyo branch, Bank of Tokyo Mitsubishi UFJ, Mizuho Corporate Bank, and Sumitomo Mitsui Banking Corp.

The NEXI guarantee allows for the stretching of the tenor to 10 years, which is unusual for commercial loan transactions of this nature.

NEXI was particularly impressed with how Manila Water was able to transform what was once an inefficient network to one that now delivers a 24/7 potable water service with sufficient pressure. This, in turn, has resulted in savings to customers who no longer need to use water pumps, as well as buy treated water by the gallons for drinking. Moreover, the improvements in operational performance have resulted in continued financial growth for over more than a decade of operations.

NEXI vice-chairman Fumihiko Kato said: “Manila Water has achieved remarkable success since its privatization, and it is indeed a great honor for NEXI to be able to contribute to the company’s further growth and development. Today, Manila Water has a reputation of being one of the most successful private water suppliers in Asia.”

Manila Water president and chief executive officer Gerardo C. Ablaza Jr., for his part, said “We highly appreciate this partnership between Manila Water and NEXI, as this allows us to rehabilitate more pipelines and make our water network even more efficient. This loan will ensure continuously high quality water services to our over 6.1 million customers in Manila’s East Zone and will help us significantly contribute to the provision of universal access to water and sanitation to more Filipinos.”

Manila Water intends to use the money to support the continued improvement of the water network in Metro Manila’s East Zone, which includes the laying of additional primary mains measuring as much as 1.8 meters in diameter, and the construction and rehabilitation of facilities such as pumping stations and storage infrastructure.

These projects will increase the coverage and reliability of Manila Water’s network. The benefits from the improvements in reliability were recently seen when the company was able to immediately restore water services to areas devastated by the floods brought by tropical storm ‘Ondoy.’   

Manila Water’s concession agreement was extended by the government until 2037, giving the water utility firm a longer time within which to recover the significant amount of capital investments made.

The company continues to show sustained profit performance and a strong liquidity position. Last year, its net income grew to P3.3 billion from P2.8 billion in 2008 while total revenues rose 6.7 percent to P9.5 billion.

The company’s ability to generate significant amounts of cash on an annual basis have led to a healthy cash balance of about P7.7 billion as of end-2009, compared to current debt of P1 billion.