Ayala’s Manila Water buys into Vietnamese water firm

Ayala-led Manila Water Co. Inc. said Friday that is has acquired 47.35 percent of Vietnam’s Kenh Dong Water Supply Joint Stock Co., which has a bulk water supply contract with Saigon Water Corp. (Sawaco) and a water treatment plant set to open later this year. The acquisition expands Manila Water’s presence in Vietnam, which the Ayala group has identified as a “high growth area” for infrastructure investments.

In a disclosure to the Philippine Stock Exchange, Manila Water said it acquired shares in the bulk water supplier through Kenh Dong Water Holdings Pte. Ltd. (KDH). KDH is a subsidiary of Manila Water Asia Pacific, which is Manila Water’s unit in Singapore.

Manila Water said it signed an addendum to the sale and purchase agreement with Ho Chi Minh Infrastructure Investment Joint Stock Company (CII) with KDH as the designated purchaser of the shares pursuant to the sale and purchase agreement.

Kenh Dong is a Vietnamese company established in 2003 to build, own and operate major water infrastructure facilities in Ho Chi Minh City. Its water treatment plant located in the Cu Chi District is expected to start commercial operations by the second semester of 2012 with a capacity of 200 million liters of water per day (mld). Kenh Dong has a bulk water supply contract with Sawaco for a guaranteed volume of 150 mld.

Sawaco is a state-owned company that manages the water supply system in Ho Chi Minh City.

Manila Water said the cost to purchase CII’s interests in Kenh Dong is not more than 10 percent of the total book value of Manila Water and there are no material relationships between the directors or officers of KDH, Kenh Dong, and CII at the time of the acquisition of the shares.

The purchase of Kenh Dong shares comes more than six months after Manila Water’s acquisition of a 49-percent stake in Thu Duc Water BOO, another Vietnamese company with a bulk water supply agreement with Sawaco.

Manila Water East Zone business operations director Ferdinand Dela Cruz said earlier that Manila Water invested $50 million in Kenh Dong.

In April, Manila Water’s parent firm, Ayala Corp., announced having obtained the right to purchase a 10 percent stake in CII along with Manila Water having been given the right to get a 49 percent stake in Kenh Dong.

Ayala Corp. president and Manila Water chair Fernando Zobel de Ayala said then that the Ayala group considers Vietnam a “high growth area” in Asia with strong demand for infrastructure investments.

In December 2011, Manila Water acquired a 49-percent interest in Thu Duc Water, which is the bulk water supplier to several key districts in Ho Chi Minh City. Thu Duc’s bulk water supply contract with Sawaco is for a minimum billed volume of 300 mld.

In 2008, Manila Water entered into a five-year performance-based leakage reduction contract with Sawaco. Manila Water also signed an agreement with Vietnam’s REE Corp. and Mitsubishi Corp. to develop water, wastewater and other environmentally related projects in Vietnam.

Manila Water said in its unaudited first quarter report to the PSE that its net income surged 64 percent to P1.34 billion in the first quarter of 2012 from P816 million in the comparable period last year. Revenue grew 28 percent to P3.42 billion from P2.67 billion. Of the total, its concession in the East Zone of Metro Manila and surrounding suburbs contributed P3.26 billion (up 22 percent) and new businesses pitched in P164 million (up 173 percent).

Manila Water reported 908,797 or 6 percent more connections from 853,828. In the East Zone, the company reported 869,926 connections from 826,391. Laguna Water had 32,037 connections from 21,123; Boracay Water had 4,944 from 4,481; and newly acquired Clark Water had 1,890 from 1,833.