Ayala Corp. boosts stake in Manila Water

MANILA, Philippines—Conglomerate Ayala Corp. has raised its stake in water concessionaire Manila Water Co. to 48.8 percent from 43.1 percent by buying most of the shares held by strategic partner Mitsubishi Corp.

The 5.7 percent sold by Mitsubishi, which will be left with a marginal 1.2 percent stake in MWC, was valued at P2.8 billion and executed via a special block sale through the Philippine Stock Exchange, Ayala said in a press statement.

Conglomerate Ayala said it was pleased to have this opportunity to boost its stake in the water utility.

“Manila Water has consistently shown its ability to deliver world-class water and wastewater services, which brings countless benefits to the local and international communities in which it operates. We believe in the long-term growth potential of Manila Water as it continues to expand outside the East Zone of Metro Manila into other areas here and abroad that are in critical need of reliable water and wastewater services,” Ayala president and chief operating officer Fernando Zobel de Ayala said.

Mitsubishi has been a long-time partner of Ayala since 1974 and a shareholder of MWC since 1997. The reason for selling most of its shares to Ayala was not disclosed.

MWC is in the thick of arbitration proceedings against regulator Metropolitan Waterworks and Sewerage System (MWSS) which rejected the petition by water concessionaires MWC and Maynilad Water Services to raise water tariffs. The regulator instead ordered a rate cut for the next five years.

Since MWSS’ order in mid-September, MWC’s share price has plunged by over 30 percent from P31 per share to around P21.35 per share as of Monday’s close. Ayala’s announcement of its purchase of Mitsubishi’s 140 million shares – which indicated strong shareholder support for MWC despite its current regulatory woes – boosted the water utility’s share price by about 4 percent in early morning trade.

The arbitration process with MWSS is seen taking about six to 12 months to be resolved. Many investors are hoping that concessionaires will get favorable results from arbitration on certain items such as removal of tax income recovery, disallowance of substantial capital expenditure over the past five years and calculation of the appropriate discount rate.