Japanese firm seen getting 20% of Maynilad

The Metro Pacific-Consunji consortium has reached an advance stage of negotiations to sell a 20-percent stake in Maynilad Water Services Inc. to Japanese trading giant Marubeni.

The deal is expected to bring in cheap financing and new technology to the water concession.

In a Euromoney workshop on infrastructure financing Tuesday, Metro Pacific Investment Corp. president Jose Lim said the discussions with Marubeni had not been finalized but was now at an “advance” stage.

DMCI Holdings president Isidro Consunji said during the forum that one incentive for Maynilad to get Marubeni was an offer from the Japan International Cooperation Agency (JICA) to provide Maynilad with cheap long-term money—for instance, a facility with tenor of 40 years with a 10-year grace period—at an interest rate of less than 1 percent per year. But under the loan terms, a Japanese firm must own 20 percent of the enterprise, he said.

After the workshop hosted by Banco de Oro Unibank, Consunji told reporters that the financing would be used by Maynilad for its waste-water management initiatives.

To allow Marubeni to get 20 percent of Maynilad, Consunji said the shares of both DMCI and MPIC would be diluted. He, however, confirmed DMCI would sell a bigger stake than MPIC.

Consunji said DMCI was willing to sell 12 percent while MPIC would be giving up about 8 percent in favor of Marubeni. He said an “agreement in principle” could be drawn up as early as next week.

Consunji said Marubeni would bring in new technology to help with Maynilad’s waste-water management initiatives.

MPIC reportedly wanted to retain majority control of Maynilad.

DMCI-MPIC Water Co., the consortium between the MVP and Consunji groups, has a 92-percent stake in Maynilad, with MPIC owning the majority bloc.

The Inquirer earlier reported that the consortium was willing to share control to a third party like Marubeni at a valuation of $2.2 billion (P94.5 billion) for 100 percent of Maynilad. This “asking” price is 15.5 times the P6.01 billion core net profit in 2011. If Marubeni would agree to this estimate, a 20-percent stake could be worth more than P18 billion.

Although the consortium has unlocked a lot of operating efficiencies since taking over Maynilad from the Lopezes in 2007, it wants to boost its financial muscle to fast-track the reduction of its nonrevenue water (NRW) ratio resulting from leakage and theft. The NRW ratio has gone down from 68 percent since the takeover to 42.2 percent as of last year. The rate, however, is still high relative to peer Manila Water’s NRW ratio of 11.2 percent.

Maynilad covers the west zone of Metro Manila and a large part of Cavite province. The number of billed customers rose by 11 percent to more than one million as of the end of 2011 from 903,682 a year earlier.

Total revenue last year grew by 14.3 percent to P13.77 billion from the year before due to the combined effects of an 8.3 percent increase in billed volume and an average effective tariff increase of 5.7 percent. Its core net income increased by 24.2 percent to P6.01 billion.

Marubeni has been operating in the Philippines for the last 100 years through wholly owned subsidiary Marubeni Philippines Corp. It is into domestic trade, importation, exportation, turn-key project management, risk management, finance, logistics and build-operate-transfer projects. It has investments in various industries, including telecommunications, information technology, power, agriculture, transportation and construction.