Manila Water shares slump 40% intraday amid water dispute
MANILA, Philippines — Shares in Manila Water Company Inc. took a beating Tuesday amid a legal tussle with the Duterte administration that’s casting uncertainty on the fate of the company’s water supply contract.
Shares in the Ayala-led water provider sagged 35.76% or P3.34 to close at P6 apiece. Manila Water dipped by as much as 40% intraday. According to Bloomberg, this is the biggest drop on record.
“MWC was hit hard today... Its market [capitalization] is now around P12 billion, so if it ends at around this price, then it will have lost another P6 billion from the market cap today,” Luis Limlingan of Regina Capital said.
“I think investors are liquidating as fast as possible based on the spike in trading activity and while there so much uncertainty re: the concessionaire extension,” Limlingan added.
Shares in Metro Pacific Investments Corp. — which holds the majority of economic interest in another embattled utility Maynilad Water Services, Inc. — were up 4.59% on Tuesday.
DMCI Holdings Inc., a shareholder of Maynilad, slipped 2.52%.
Meanwhile, investors switched back to Philippine equities, with the main index jumping 0.38%.
President Rodrigo Duterte has verbally attacked both Maynilad and Manila Water after a Singapore-based arbitration panel ordered the Philippine government to indemnify the two water providers for the losses they suffered from an unenforced rate hike.
Duterte has accused both utilities of forging contracts with “onerous” provisions that are disadvantageous to the public. The Metropolitan Waterworks and Sewerage System, the Philippines’ water regulator, has rescinded the 15-year extension of the water concession deals.
The MWSS’s decision to terminate utilities' extended water contracts comes at a time Duterte seeks more private capital to bankroll his ambitious infrastructure plan. The existing contracts will expire in 2022.
READ: Water utilities' woes seen hurting investor confidence
Amid pressure from Duterte — who has repeatedly promised businessmen he will respect the sanctity of contracts — Maynilad and Manila Water agreed to drop more than P10 billion in compensation claims from the government.
According to MPI, banks have suspended lending to Maynilad, adding that the shortening of the concession term puts new projects in limbo.
Separately, Manila Water said that based on its initial evaluation of its cash flows, it can still sustain its operational needs and it was looking forward to the early resolution of issues so that approved projects that will require additional funding will be executed.
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