Sunday, April 21, 2013

MANILA, Philippines – Manila Water Corp.'s planned investment in Indonesian utility firm PT PAM Lyonnaise Jaya (PALYJA) is seen as a major driver of growth, potentially accounting for 40 percent revenues of the Ayala-led water concessionaire.

MWC is in the process of acquiring a 51 percent interest in PALJYA, which has been operating the water supply concession contract of Western Jakarta since 1997 under a 25-year deal.

According to a study by stock brokerage firm COL Financial, the acquisition is expected to become a leading source of new revenue for MWC.

"The growth potential of PALJYA is very attractive given that the population of West Jakarta is equivalent to 73 percent of the population of the East Zone in Metro Manila," COL said.

PALJYA only serves 63 percent of the population of West Jakarta while non-revenue water (NRW) remains very high at 37.9 percent. The company has a total water supply of more than 700 million liters (185 million gallons) a day and 5,300 kilometers of pipe network.

"If MWC succeeds in bringing NRW levels down in West Jakarta and improve water concession, PALJYA could potentially account for 40 percent of MWC's total revenues," COL said.

COL pointed out that the growth potential in the East Zone is limited as NRW is already low at 11.1 percent while 99 percent of the population is already being served.

MWC has made headway in its investment outside the East Zone, where the bulk of its revenues come from since it started operations in 1997. As of end-December last year, it already had operations in Clark, Laguna, Boracay and Vietnam yielding combined revenues of P734 million or double the amount in 2011.

For this year, COL expects MWC's revenues from outside the East Zone to hit P1 billion, 37 percent more than the year earlier figure.

Revenues from Boracay operations are forecast to grow 23 percent to P275 million, mainly driven by a 10.1 percent rate hike effective the beginning of the year and the continuous increase in tourist arrivals, COL said.

COL also sees MWC's revenues from Laguna operations rising 29 percent to P244 million owing to an increase in the number of collections as 75 percent of households still source water from more expensive deep well.

MWC's venture in Vietnam, through 49 percent-owned Thu Duc Water and 47.35 owned Kenh Dong, is also seen to grow 48 percent to P196 million this year.

"The two subsidiaries currently supply 45 percent of the water needs of Ho Chi Minh City although there is a potential to supply the entire need of the concession area," COL said.

By Zinnia B. Dela Peña, The Philippine Star