Manila Water’s Indonesian bid hits a snag

Jakarta officials said to consider nationalizing distribution utility

A+
A
A-

The planned takeover by Manila Water Co. (MWC) of a majority interest in a water concession in Jakarta has hit a snag as officials of Indonesia’s capital city are reportedly considering an option to nationalize water utility operation.

According to media reports coming out of Indonesia, Jakarta Governor Joko Widodo is said to be setting up a city-owned company to buy out the 51 percent stake held by French-controlled Suez Environment in PAM Lyonnase Jaya (Palyja), one of the two water utility operators in Jakarta.

This is reportedly the same stake that Suez has committed to sell to Manila Water under a share purchase agreement signed in October 2012.

Previously, the Jakarta administration appeared to have no problem about the sale of Suez’s stake to Manila Water. But when critics started to rail against the privatization of the water utility, Jakarta reportedly started to consider nationalizing the concession.

Asked about this development, MWC president Gerardo Ablaza Jr. said in a telephone interview on Saturday that the company is still awaiting Jakarta’s official word on the matter.

“We’ll just have to wait and see what the [Jakarta] government has to say,” Ablaza said, adding that MWC has yet to hear solid news about Jakarta’s reported change of heart.

The Jakarta Post reported on June 12 that the city’s plan to acquire a majority stake in Palyja is “likely to be realized soon.”

Citing an unnamed source, the newspaper said Widodo had “signed a disposition letter ordering an official to prepare a city-owned company to buy the shares.”

Since the start of the year, there have been reports in Jakarta about the city’s intention to award the water distribution concession to a city-owned enterprise such as PD Pembangunan Jaya, which will effectively prevent Suez Environment from selling its stake to MWC, a unit of the Ayala group.

But Ablaza said MWC is still in talks with the leaders of Jakarta.

Industry sources said Widodo—a potential presidential candidate for Indonesia’s national election in 2014—may take a populist stance and decide to support the takeover of the concession instead of allowing the Philippine company to come in. Indonesian companies believe that vital concessions must be run by Indonesians, sources said.

Other industry sources familiar with the matter said MWC’s takeover bid is “hard” and “tricky” at this point.

The agreement signed by MWC with Suez late last year was subject to two closing conditions: Multilateral lender Asian Development Bank must first approve the deal; and, and an imprimatur from the Jakarta administration is needed. While MWC has obtained the consent of ADB, political developments in the Indonesian capital now stand in the way of Manila Water as it tries to secure city approval of the transaction.

Given the recent tone of Jakarta’s leaders, industry sources said that MWC might not be able to pull off the deal.

The remaining 49-percent stake in Palyja, which has been managing the 25-year water concession west of Jakarta since 1998, is owned by PT Astratel Nusantara, a unit of automotive giant PT Astra International.

Based on MWC’s earlier disclosure, Palyja can supply more than 700 million liters of water a day, and has a pipe network that spans 5,300 kilometers.

The Jakarta Post reported that Jakarta has been facing a water crisis and is heavily dependent on other provinces for raw water. The water utility system is also reportedly struggling to reduce the water leaks caused by illegal connections and aging pipes.

MWC of the Ayala group recently made inroads in Vietnam, and is looking at other prospects across the region.

Disclaimer: The comments uploaded on this site do not necessarily represent or reflect the views of management and owner of INQUIRER.net. We reserve the right to exclude comments that we deem to be inconsistent with our editorial standards.

  • raoul villegas

    The CFO of this company is navigating some material issues. Find out how to be more effective as a CFO.

    http://mycfojob.blogspot.com/2013/06/getting-things-done-achieving-results.html

  • http://www.manila-voice.com/ 대성공

    Well, sa tingin ko tama lang, Salim Family of Indonesia through MVP, now owns majority of Philippines utilities (Telecoms, Electricity, Water, Highways, Hospital, Universities, Media and others) Kaya sabi ni Ayala, sge, kunin nyo Pilipinas, kukunin rin namin Indonesia…kumikita kayo sa peso namin, dapat kumita naman tayo sa rupiah nila..

    At sana hindi naging gahaman gobyerno natin..tama ginawa ng Jakarta Government.Protect the interest of the people..Tayo, Protect the interest of the pocket.:)

  • upupperclassman

    Indonesia is doing the right thing to nationalize water utility operation. Look at what is happening to us, our water bills have gone up 20 times and still going up.

  • tugas

    15 years ago, most of us had to fetch water from deep wells or pay an “aguador” to get it for us. a bucket of water cost us 3-5 pesos each. Now we get water from tap at a cost much cheaper than what the aguador charges. For those who never experienced this, you better know your facts.

    • lanceads

      YUP THAT’S ABSOLUTELY CORRECT! iba diyan putak lang ng putak….

  • disqus_ZrxaGjUzMQ

    PROTEST AGAINST AYALA GREEDINESS

  • disqus_ZrxaGjUzMQ

    MANILA WATER AYALA WILL INCREASE WATER RATE TO INDONESIAN FOR SURE

  • sigena

    mabuti naman. manila water poor performer. ngayon bago lang ang las pinas na customer nila mahina na tubig

    • dencio120608

      Maynilad ang water company sa las pinas. bago magbintang alamin muna kung totoo.

  • eight_log

    Yan ang mga officials na nagreresearch … alam na alam na nila siguro kung ano ang pangyayari sa Pinas kaya instead na ipahawak sa Manila Water ay inationalize nalang nila!!!!!!!!! WAY TO GO MY INDONESIAN FRIENDS!!!!!!!

    • HoyGago

      Basahin ang article.

      • eight_log

        Citing an unnamed source, the newspaper said Widodo had “signed a disposition letter ordering an official to prepare a city-owned company to buy the shares.”

        Siguro ay tinatry parin ng Manila Water ang backdoor or under the table door …. hahahahaha!!!!!

      • HoyGago

        Ay basahin ang article ulit, at galingan pa lalo ang reading comprehension.

      • eight_log

        I don’t have billions at stake … just a simple life with hope that water will not cost like gold …. kaya yan lang ang nakikita ko!!!!

        Kung ang nakikita ay never ending profits in billions … one will see thru a 5 micron hole … kaya Manila Water is doing a reverse osmosis with their contacts in Jakarta!!!!!!

      • HoyGago

        Ay hindi na binasa ang article. Sayang, lost opportunity to educate your simple mind.

      • eight_log

        Now … do I need to complicate my mind??? The latest news suggests you need to simplify your mind … don’t be blinded by billions of profit … yan naging bato tuloy!!!!! Hahahaha

To subscribe to the Philippine Daily Inquirer newspaper in the Philippines, call +63 2 896-6000 for Metro Manila and Metro Cebu or email your subscription request here.

Factual errors? Contact the Philippine Daily Inquirer's day desk. Believe this article violates journalistic ethics? Contact the Inquirer's Reader's Advocate. Or write The Readers' Advocate:

c/o Philippine Daily Inquirer Chino Roces Avenue corner Yague and Mascardo Streets, Makati City,Metro Manila, Philippines Or fax nos. +63 2 8974793 to 94

editors' picks

advertisement
advertisement