Ayala Corp. invests in infrastructure, water firms in Vietnam

MANILA, Philippines — The Ayala group has strengthened its foothold in Vietnam, one of Southeast Asia’s rising stars, with the acquisition of a significant minority interest in a leading infrastructure company and a bulk water supply company both based in Ho Chi Minh City.

In a press statement late Wednesday, Ayala Corp. and its subsidiary Manila Water Co. announced that they had won the right to buy a 10-percent stake in Ho Chi Minh City Infrastructure Investment Joint Stock Co. (CII) and a 49 percent stake in Kenh Dong Water Supply Joint Stock Co. (Kenh Dong).

“This investment primarily supports and complements the expansion of Manila Water Co. as it gradually builds its presence in Vietnam. At the same time, this also provides strategic access to other related infrastructure opportunities which may be of value to the group,” Ayala president and Manila Water chair Fernando Zobel de Ayala said.

“We recognize Vietnam is a high growth area in the region and there is strong demand for infrastructure investments. This may potentially present opportunities for the Ayala group to establish presence across several sectors.”

Ayala had offered to purchase a 10 percent stake in CII, which is listed on the Ho Chi Minh Stock Exchange, concurrent with MWC’s offer to acquire a 49 percent stake in Kenh Dong.

Established in 2001, CII is a leading player in the infrastructure sector in Vietnam with a solid track record in sourcing, implementing and operating infrastructure assets.

The company has a portfolio of strategic infrastructure assets, including water treatment plants and toll roads serving Ho Chi Minh City and surrounding areas. This water company also holds a stake in Thu Duc Water BOO Corp., a water treatment company which is now 49-percent-owned by Manila Water.

In addition to water infrastructure, CII holds toll road concession agreements such as the 15.7-kilometer expansion of the existing Ha Noi Highway which connects the northeastern part of Ho Chi Minh City to Bien Hoa, an industrial center located in the southern part of Vietnam. CII wants to invest further in new water infrastructure initiatives and is considering expansion into other types of infrastructure projects such as public transportation terminals.

Kenh Dong was established in 2003 to build, own, and operate major water infrastructure in Ho Chi Minh City. Its water treatment plant is expected to start commercial operations by the second semester of 2012 with a capacity of 200 million liters per day (mld).

This is expected to benefit the suburban districts of District 12, Tan Phu and Binh Tan, where water coverage is very low, averaging at about 50 percent of the population.

Currently, Kenh Dong has a bulk water supply contract with Saigon Water Corp. (SAWACO) for a guaranteed volume of 150 mld. SAWACO is the state-owned enterprise managing the water supply system in Ho Chi Minh City.

Meanwhile, Ayala has obtained an approval from the Securities and Exchange Commission to offer up to P10 billion in 15-year bonds building up fresh funds for expansion particularly in its new growth areas of power generation and infrastructure-building. The offer will run from April 30 to May 7. The indicative rate is about 6 percent per annum, based on documents from the SEC.

These proposed fixed rate bonds of due in 2027 obtained the highest local issue credit rating of triple-A from Philippine Rating Services Corp.

The bonds will be redeemable (in full but not in parts) by the Ayala via call options starting on the 10th year and every year thereafter until the 14th year.

The bonds are rated “PRS Aaa” by Philippine Ratings Corp., which means these are deemed of the “highest quality with minimal credit risk” and that the obligor’s capacity to meet its financial commitment is “extremely strong.”