Nearly three decades after aggressively going after the East concession offered during the privatization of Metropolitan Waterworks and Sewerage System in 1997, Ayala Corp. has decided to divest itself of Manila Water Co. Inc., the listed water utility it built in an area that covered its major real estate development and eventually extend its foot print beyond the Philippines.
Ayala and its wholly-owned subsidiary, Michigan Holdings, Inc., have decided to sell to Trident Water Company Holdings, Inc. of port and casino operator Enrique Razon Jr. their combined 577.99 million Manila Water common shares along with the 872.5 million preferred shares held by another Ayala unit, Philwater Holding Co. Inc.
This latest deal, valued at P14.5 billion, is the culmination of a series of transaction that started in 2020 that initially gave Razon a 25 percent stake in Manila Water. Razon has built up that stake to a controlling 58.35 percent of Manila Water, where he now sits as chairman of the board.
Manila Water is a cornerstone investment for Prime Infra, Razon’s still privately held infrastructure development arm that is now expanding Wawa dam in Rizal to supply water to the listed utility as well as generate electricity. Razon plans to take Prime Infra public.
MWSS has extended Manila Water’s concession deal to 2037 after the original 25-year deal expired in 2022.
After the latest deal is completed, Ayala will no longer hold common shares of Manila Water, stripping it of any voting rights. However, Ayala will retain an effective 12.08 percent economic stake through the preferred shares which will be paid on an installment basis over 5 years. Once the preferred shares have been fully paid, Ayala’s economic stake in Manila Water will drop to zero.
Ayala Corp;.’s chief financial officer Alberto M. De Larrazabal and former Economic Planning Secretary Karl Kendrick T. Chua have resigned as directors of Manila Water following the sale of shares to Trident Water. Chua also ceases to be a member of Manila Water’s Executive Committee and Talent and Remuneration Committee.
During the February 1997 bidding of the two water concessions offer by MWSS, the Ayala-led consortium actually offered the lowest water rate for both the East and West concessions. The rules, however, require that in such a case the water concession area that got the lower bid—the water rates offered by the Ayala consortium for the East is around half that for the West–will be awarded to the bidder.
Ayala’s aggressive bid for the East concession is understandable. The areas covered by the East concession was where most of the major real estate developments of Ayala are located, including the financial district of Makati and, years later, Bonifacio Global City. The West concession area is also more problematic in terms of century-old water system and the amount of debt it carries.
As a consequence of its winning the East concession, the second lowest bidder, the Lopez-led consortium, won the West concession area and formed Maynilad Water Services Inc. that eventually became part of the MVP Group of businessman Manuel V. Pangilinan.
