July 02, 2015

Manila Water Company Inc's M(WC) Laguna concession expanded to cover the entire province

Manila Water Company Inc (MWC) disclosed yesterday that the Provincial Government of Laguna (PGL) and MWC’s wholly-owned subsidiary Manila Philippine Ventures Inc (MWPV) signed an amendment to their joint venture agreement. The territorial scope of the JV agreement will be expanded from the cities of BiƱan, Cabuyao and Sta. Rosa to cover all cities and municipalities in the entire province of Laguna. The amendment likewise included the provision of wastewater services and the establishment on an integrated sewage and septage system.

MWVP is the JV partner of the Laguna provincial government in Laguna AAAWater Corporation (Laguna Water). Laguna Water is the operating company that holds the 25-year concession contract (up to 2032) to operate the provincial government’s water facilities.

Consequent to the amendment of the JV agreement, Laguna Water signed an amendment to its concession agreement with PGL (a) expanding its concession area to cover the entire province of Laguna and (b) including in the service obligations the provision of wastewater services and the establishment of an integrated sewage and septage system in the province. Laguna Water is 70%-owned by MWVP.

Our take: Although Laguna Water’s contribution to MWC’s consolidated revenues and earnings remain small at 5% and 2%, respectively, the contract amendment should encourage more investments in the province, thus ensuring MWC’s long-term growth. By our estimate, Laguna Water’s population base should increase by more three-folds given the expansion in the service area. Based on 2010 Census of Population and Housing, the province of Laguna has a total population of 2.7m residents compared with more than 6m for the East zone concession. -  WealthSec