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Enrique Razon as the newest water tycoon

EYES WIDE OPEN - Iris Gonzales (The Philippine Star) - April 22, 2021 - 12:00am

Perhaps no other businessman in the country knows the murky waters of regulated businesses more than ports and casino tycoon Enrique “EKR” Razon.

It’s no surprise the Zobel brothers chose him as their new partner in Manila Water Co., and Razon, the astute tycoon that he is, already brought in new names to the company’s board of directors, all with expertise in regulated industries.

Razon’s nominees to the board are Eric Recto, who used to head oil giant Petron, and Octavio “OV” Espiritu, who was former president and CEO of Far East Bank and Trust Company. Cesar Buenaventura is an Ayala nominee to the board, but is no stranger to Razon. He is a director of Razon’s International Container Terminal Services Inc.(ICTSI) and was former country chair of Pilipinas Shell. He is also a director of many listed companies that are in regulated businesses.

EKR, whose 51 percent voting rights in the company will take effect once regulatory processes are completed, is expected to bring in more people to form the new management of Manila Water as it transitions into a post COVID-19 era.

During last week’s virtual annual stockholders’ meeting, there was no sign of EKR just yet, but sources said he played a role in the negotiations of the new water concession contract which have been finally concluded after President Duterte called the previous deals as onerous.

Maynilad, on the other hand, still has no new agreement, but is sure to benefit from this development because if Manila Water already has a new contract, Maynilad’s revised agreement shouldn’t be too far behind.

The new concession agreement

Signed last March 31, the new deal for Manila Water provides the continuation of the concession until July 31, 2037.

It largely adopts the provisions of the New Clark City Water contract which was bagged by a consortium led by the Villar Group’s Prime Water Infrastructure Corp.

Furthermore, the revised agreement removes the recovery of the corporate income taxes and adjustment for foreign currency differential (FCDA), but retains the rate rebasing mechanism under the original contract.

To mitigate the impact of tariff increases on customers, the revised agreement lowers the inflation factor to 2/3 of the Consumer Price Index adjustment and imposes caps on increases in standard rates for water.

Instead of a market-driven appropriate discount rate, Manila Water shall now be limited to a 12 percent fixed nominal discount rate and there will be a tariff freeze until Dec. 31, 2022.

Water services

Razon’s entry into Manila Water isn’t his first dip into the water business, but it’s certainly bigger and perhaps more exciting for a global tycoon like him.

Will consumers or at least Manila Water’s customers finally see an end to water interruptions?

I won’t have my cistern dismantled just yet. After all, the water problem in the Philippines is due to a combination of many factors and not just supply and demand. There are weather disturbances such as the El Niño dry spell, lack of water infrastructure, population density in Metro Manila, and opposition to new dams.

As an industry source told me, Razon may be an astute and savvy businessman, but he is no magician.

Nonetheless, with his entry in the water company, combined with the Zobels’ experience and expertise in the business, plus the new water contract, water services, hopefully, can only get better.

 

 

Iris Gonzales’ email address is eyesgonzales@gmail.com. Follow her on Twitter @eyesgonzales. Column archives at eyesgonzales.com

ENRIQUE RAZON
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