Manila Water terminates P8-B concession arrangement with Pangasinan provincial gov't

Manila Water [MWC 18.68, up 2.2%; 19% avgVol] [link], Enrique Razon’s water concessionaire, announced that the P8 billion bulk water concession agreement that it signed a year ago with the Provincial Government of Pangasinan (PGP) was effectively terminated on Dec. 31, 2023, due to PGP’s failure to fulfill certain conditions of the agreement. The project was meant to source water from the Agno River using “Riverbank Filtration technology” to increase the water supply in the province.

 

MB bottom-line: Deals of this size can be very complicated. If you consider a 25-year concession agreement like this to be something akin to a marriage (as I do), then the phases of a complicated deal are structured to allow the parties to become more and more “married” over time as information is shared and certain actions are taken in the furtherance of the marriage. In this case, the deal was signed with several “conditions precedent” that PGP needed to satisfy before the end of 2023, and for some reason or another, PGP failed to satisfy one or more of those conditions. We can’t know just from this result whether PGP’s failure was true (where it wanted to comply but couldn’t) or if its failure was more strategic (where it didn’t want to comply so it just didn’t to let the deal timer naturally expire). All I know is that Enrique Razon is not afraid to “flip the table” on a deal at this stage as we saw when he aborted Bloomberry’s [BLOOM 10.06 unch; 10% avgVol] acquisition of Dennis Uy’s failed PH Resorts [PHR 0.88 unch; 4% avgVol] company last year. My feeling is that if PGP wanted to comply, and MWC wanted to do the deal, they’d probably have come to some kind of quiet extension. These things are just negotiated contracts. It’s not like MWC is forced to watch the deal die if PGP had a genuine interest in completing it.

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