Businessman Enrique Razon buys into embattled Manila Water

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Port magnate Enrique Razon, Jr. has bought a 25 percent stake in the Ayala-owned Manila Water on Monday, as the embattled utility firm is in the middle of renegotiating its supply contract with the government.

Metro Manila (CNN Philippines, February 3) — Ports giant Enrique Razon, Jr. bought a 25 percent stake in embattled Manila Water, the utility firm announced Monday.

The Ayala-led company said Razon, through his firm Prime Metroline Holdings Inc., has agreed to infuse ₱10.7 billion in Manila Water, which currently supplies customers in the east zone of Metro Manila.

The transaction will be carried out through Razon's new unit, to be called Trident Water. Manila Water's parent firm Ayala Corporation will keep a 38.6 percent stake, the listed firm said in a statement.

Speculations of a "white knight" buyout swirled late last week as Manila Water sought for a trading suspension until 10 a.m. Monday. The company then announced that it plans to raise around ₱9 billion in additional capital by offering 900 million common shares at ₱10 apiece. In a disclosure on Monday, Manila Water said Razon's holding firm acquired 820 million shares at ₱13 apiece.

Manila Water said it will use the fresh funding from Razon "to improve the water and wastewater distribution system" in its service areas.

The deal came amid negotiations between Metro Manila concessionaires for a new supply deal with the national government. President Rodrigo Duterte has ordered the cancellation of contract extensions granted by former Pres. Gloria Macapagal-Arroyo that authorized Manila Water and its counterpart Pangilinan-led Maynilad's supply deals until 2037. Duterte pointed out that lopsided provisions allowed the private players to charge losses they incur to the state.

READ: 'Onerous' water deals cost gov't ₱10.8 billion, DOJ says 

The cancellation left Manila Water's fate beyond 2022 uncertain, after Duterte pointed out "onerous" provisions in its existing supply deal. The President has repeatedly ranted against these concession agreements in a series of public speeches since December, which pushed Manila Water's stock price to plummet.

READ: Manila Water, MPIC stocks plunge amid uncertain deal with gov't

A new deal is being drafted by the Department of Justice, together with the Department of Finance and with regional lender Asian Development Bank.

Malacañang has threatened a government takeover if the two water firms do not cooperate with them on the pending deals.

Razon, the fourth-richest in the country according to Forbes, has made a fortune out of operating the container yard at the Port of Manila through his company International Container Terminal Services, Inc. (ICTSI). He has ventured into the water business with his bid to develop Wawa Dam in Rizal.

The ₱20-billion project has been approved in November 2019, which should be able to add about 80 million liters of water per day to Metro Manila and nearby provinces by 2021.

READ: Maynilad says banks have stopped lending money amid cloudy water supply deal

"The entry of Prime, which is led by businessman Enrique Razon Jr., as a strategic investor to Manila Water is expected to bolster Manila Water’s ability to provide reliable, efficient and sustainable water and wastewater services in the east zone and at the same time pursue growth initiatives both domestically and globally," Manila Water said in a disclosure.

Ayala President Fernando Zobel de Ayala said in a separate statement that Manila Water can leverage Razon's global expertise to help the utility firm penetrate more foreign markets.

ICTSI and Ayala Corporation shares traded lower following the news, down 1.54 percent and 1.45 percent, respectively. Meanwhile, Manila Water stocks are far from recovering its December 2, 2019 level at ₱18.98 — prior to the President's tirades against the company. Shares at the Ayala-owned utility firm ended at ₱12.76 each after Monday's session.