Maynilad Water Services Inc (second concession)

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In December 5, 2006 the state-owned Metropolitan Waterworks System (MWSS) awarded to DMCI-MPIC Water Company an 83.97% stake in Maynilad Water Services Inc. (Mayniland), which provided water and sewerage services to Metro Manila East Water Supply and Wastewater Service Zone. In 1997, Mayniland, a consortium formed by Pilipino Benpres Holdings Corp. (60%) and French Suez (40%), was granted a 25 year exclusive concession to provide water and sewerage services in the area of West Metro Manila in 1997, running until May 2022. Under the concession, Mayniland committed to invest US$ million over the contract period. However, in 2005 Benpres returned its stake in the concession to the government after a serious of financial difficulties and disputes with the regulator, while Suez saw its stake reduced to 16%. Under the 25 year concession contract, Maynilad’s exclusive service area comprised approximately 540 sq. kilometres of West Metro Manila and included eight cities and three municipalities in the Metro Manila area, and one city and five municipalities in Cavite province. In 2006, the total population of Maynilad’s service area exceeded 8 million and its network facilities include two water treatment plants and approximately 4,100 kilometers of pipes and aqueducts. There was no information on Maynilad’s number of connections in 2006. The 83.97% stake in Maynilad was awarded through a competitive tender process in which three consortia submitted bids, but only two were accepted as valid by the privatization agency (MWSS). The DMCI-MPIC consortium, which was integrated by Hong Kong based First Pacific Company Limited (50%) and Filipino DMCI (50%) won the tender by offering the highest equity increase in Mayniland (US$447 million). The other qualified bidder, which was a consortium formed by Manila Water and another Alaya family controlled company, lost the tender by offering US$400 million in equity increase for Mayniland. The third bidder was the Singaporean Noonday-Rubia consortium was disqualified for failure to pay the US$2.5 million bid guarantee and show that it had P6 billion in capitalization. The terms of DMCI-MPIC bid comprised: 1. A cash payment of US$56.7 million for acquiring the 83.97% stake in Mayniland, the repayment of financial assistance provided to Mayniland by MWSS, and interest. This payment was stipulated in the bidding process as the minimum financial bid and comprised US$22.7 million for the 83.97% stake in MWS, US$31 million for the of financial assistance provided to MWS by MWSS, and US$3 million for interest; 2. An equity contribution of US$447 million by DMCI-MPIC consortium over three years. The equity contribution was to finance capital expenditure and to repay existing credits of Mayniland. In December 2006, Mayniland had around US$256.8 millions of debt which was subject to various debt restructuring agreements. The bidding process required that, if not paid in cash, the additional equity contribution were required to be supported by a standby letter of credit issued by a BBB rated bank; and 3. A mandatory US$12 million performance bond to be provided by DMCI-MPIC for Mayniland’s obligations under the concession and the payment of transaction fees and expenses of US$16.9 million. The transactions contracts were signed in December 28, 2006. The completion of transaction occurred in 23rd January 2007. There was no public information on Mayniland’s investment commitments for the remaining 15 years left in the concession besides the committed equity contribution of DMCI-MPIC’s consortium. In February 2007, DMCI-MPIC Water Company announced it planned to raise its planned annual expenditure from the original US$58 million (Pesos 2.9 billion) to US$100 million (Peso 5 billion), totaling about US$600 million (Peso 30 billion) over their first six to seven years of Maynilad’s ownership. In September 2009, Maynilad Water Services, Inc. (Maynilad) got an approval from the Metropolitan Waterworks and Sewerage System (MWSS) on the extension of its concession for another 15 years, or by 2037. In April 2010, the extension of the concession was approved. In June 2011, the company announced that it was on track to spend US$ 136 million for the calendar year to improve and extend its network in the south of Manila. The project was to benefit over 520,000 residents. Capital spending for the year 2011 was US$ 245.47 million (P10.5 billion). As of February 2012, Maynilad connected its one millionth water service account. In May 2012, the World Bank extended a US$275 million loan to state-run Land Bank of the Philippines to be made available to the two water concessionaires (Maynilad and Manila Water Company) to be used to improve wastewater collection and treatment practices in Metro Manila. Of the total loan, US$178.3 million are to be used by Maynilad in sewage treatment plants and associated wastewater conveyance systems in Quezon City, Pasay, Alabang, Muntinlupa, Valenzuela, and a septage treatment plant in the southern part of Metro Manila. In June 2012, Maynilad Water Services has completed the construction of a sewage treatment plant worth P25 million (US$ 600,000) designed to treat up to 570 cubic meters per day of waste water.The new STP is expected to benefit 4,400 people in the area and help clear the San Juan River Basin. Sponsors - Myanilad is owned by MPIC (56.8) and DMCI Holdings (27.2%) Marubeni is set to purchase 205 of the shares from DCMI by end of 2012. http://www.mayniladwater.com.ph/corp_profile.asp As of April 2010, Maynilad Water plans to spend P564 billion from an original P206 billion in capital investment it submitted in 2008 to accelerate and expand expansion projects in the western sector of the capital region.