* My article in BusinessWorld, March 19, 2020.
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When President Rodrigo Duterte lashed out at Maynilad and
Manila Water that hold concession agreements (CA) with the government via the
MWSS on Dec. 3, 2019, the stock prices of both companies and their allied firms
suffered significant declines starting Dec. 4, which continued until
mid-December. I continued the series to last Monday, the last trading day of
the Philippine Stock Exchange (PSE). The percentage decline of stock values
until this week remains big, 49% and 32% for Manila Water Co. Inc. (MWC) and
Metro Pacific Investment Corp. (MPI) respectively (see Table 1).
MWC has lost some P18 billion while MPI lost around P40
billion in stock value from the harassment by the President. Very
irresponsible.
Consider also that the PSE is a lightweight in terms of
market capitalization in Asia Pacific, only $241 billion as of February 2020
and our per capita capitalization was only $2,222, just a third of Thailand, a
fifth of Malaysia and 1/50 of Singapore. Soon Vietnam and Indonesia might
overtake us (see Table 2).
India has a market capitalization of $4.08 trillion and a
higher per capita of $3,015 than us.
Now consider this COVID-19 or Wuhan virus, water demand
is high this March as the hot season has started and people wash hands very
often. I computed the decline in Angat Dam water in the first half of this
month — it is 0.15 meters per day. At this rate, Angat water will reach the
minimum operating level of 180 meters by around mid-May and water rationing
will happen again after that (see Table 3).
It is important that the two concessionaires develop new
short-term water sources and they will need even short-term loans to fund the
immediate capex (capital expenditure) but banks remain hesitant to lend to them
because of the Presidential harassment that hangs over them until today.
Despite these financial limitations, the Ayala and MPI
groups have bent over backwards and extended billions of pesos to their
employees, contractors, suppliers, lessors and customers during this virus
situation. The Ayalas, for instance, extended a total of P2.4 billion for this.
Payment of water bills, rentals, electricity bills have been postponed by at
least one month with no penalties or disconnection notices by the two
concessionaires.
The President’s political harassment should end and the
original concession extension to 2037 should be honored. The Clean Water Act
plus Supreme Court Mandamus have jointly raised the requirement from 50% to
100% sewerage coverage and it is estimated that this will require an investment
of P458 billion until 2037.
When the political uncertainties are removed, the two
concessionaires should be able to mobilize new loans to finance the huge
investments needed for the remaining 17 years.
This virus scare has shown us many things, like the need
for sustained hygiene and cleanliness, that requires lots of clean water
flowing from our faucets to help remove the virus. May this lesson sink into
the minds of the President and his officials regulating the water sector.
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