Despite El Nino, Manila Water Net Income Surge to PhP4B

Manila Water Company Inc. (PSE: MWC) has reported a net income (unaudited) of PhP3.987 billion in 2010, up from PhP3.23 billion in the previous year, driven by steady growth in water sales volume. Net income was further boosted by a one-time downward adjustment on its depreciation expense.

The year 2010 was characterized by the arrival of the El Nino phenomenon, which required drastic reduction in water allocation for Metro Manila’s requirements. To combat the impact of lower water supply, the company further improved network efficiency. By the end of the year, the level of water losses in the East Zone further dropped from 15.8% to 11% – the lowest on record – thus allowing Manila Water to sustain its delivery of 24/7 potable water service to its customers and continue the connection of additional customers to its rapidly expanding network.

As a result, billed volume for the year grew by 3.5% year-on-year to 409.8 million cubic meters (mcm). To date, more than 99% of East Zone customers benefit from 24 hour water availability at an average pressure of 18psi.

Manila Water’s ability to ensure reliable service is a direct consequence of the investments that the company has implemented over the past 13 years. In 2010 alone, the company invested a total of PhP9.6 billion to further improve the reliability and expand the coverage of its water and wastewater networks.

To support its capex requirements, Manila Water secured a $150 million loan facility in the second half of 2010. The company’s total debt (excluding concession obligation) to equity ratio was placed at 1.03x.

Looking forward, the company aims to invest more than PhP10 billion annually for the next two years. Key items for implementation are the development of new water sources, foremost of which is the tapping of Laguna de Bay as an additional source of raw water supply, network reliability improvements, as well as the building of several sewage treatment plants to further improve sanitaion coverage in the East Zone.

Manila Water will also complement the East Zone’s growth with initiatives to expand its business outside of Metro Manila. It currently has concessions in Laguna and Boracay, as well as an ongoing management contract in Ho Chi Minh, Vietnam. The company has also recently disclosed its bid for a management contract for non-revenue water reduction and water supply improvement in Bangalore, India. In 2010, revenues from outside the East Zone totaled PhP290 million.