Pipe fixes drain Maynilad's revenue increase
MANILA, Philippines — Investments poured by Manuel V. Pangilinan-led Maynilad Water Services Inc. to fix ageing pipes last year helped it save 1 billion liters in water each day, putting it in a better position to cushion a potential repeat of water shortages this dry season as dams run dry.
More than 95% of water supply in Metro Manila comes from state-run Angat Dam and its depletion last year due to fewer rains prompted concessionaires like Maynilad to conduct rotational interruptions to maximize supply.
On Wednesday, Metro Pacific Investments Corp., Maynilad’s parent company, said it is bracing for the worst this year.
“Maynilad nevertheless remains focused on programs to maximize water distribution from the limited resources provided by the Angat Dam, where water levels have declined to disturbing lows,” MPIC said in a statement.
READ: Manila’s water shortage seen to persist amid blame game on supply woes
As of last year, Maynilad’s non-revenue water fell to 25.3% of total water it distributes from 29.8% the previous year and “68% 13 years ago.” Non-revenue water measures the amount of water wasted during distribution due to leaks, so a lower figure marked an improvement.
Such improvements did not come without a price. While Maynilad’s revenues jumped 9% to P24 billion last year due to higher rates and more water connections, the company’s core net income ended the 2019 flat year-on-year to P7.7 billion due to “heavy investments” in new facilities. The company’s capital expenditures reached P12.4 billion last year.
“Higher amortization and depreciation expenses” also offset the increase in revenues, MPIC added. “As a practical matter,” Maynilad is also unable to pay out dividends to its investors, said MPIC president and chief executive Jose Ma. Lim.
Maynilad caters to the west zone of Metro Manila which includes 17 cities and municipalities, including Caloocan, Pasay, Navotas, Malabon, Paranaque and select areas in Makati, Manila and Quezon City, as well as Cavite province.
Maynilad and the other water concessionaire in the capital, Manila Water Company Inc., drew the ire of President Duterte after the companies sought payment worth P10.8 billion for winning an arbitration in Singapore over rate increases the government failed to implement few years ago.
Duterte refused to pay the companies their due, blasting the firms for the water shortage, and moved to unilaterally review the 15-year extension of their contracts with the government, which is currently ongoing. Without the extension, the contracts of Maynilad and Manila Water will end in 2022.
“[T]he fall in our share price, along with the prices of other listed companies with Government concessions, shows that despite our growth, investors now attach sharply higher risk premiums for Government adherence to contract,” Lim said.
“Ironically, even though there is huge demand for the services we provide, our discretionary investment spending beyond committed infrastructure projects will divert to less risky businesses like warehousing, real estate, and tourism,” he added.
MPIC improves financial performance
As far as the overall business is concerned, MPIC reported the conglomerate booked a consolidated core net income of P15.6 billion in 2019, up 4% from previous year’s P15.1 billion.
Capital expenditures, excluding acquisitions and investments, amounted to P72 billion last year, the statement said.
Pangilinan, the chairman of Maynilad, is also chief executive of PLDT. A unit under PLDT's media conglomerate has a majority stake in Philstar Global Corp., which runs Philstar.com.
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