Maynilad CEO on Business Strategy, Expansion

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00:00So maybe let's start there following on. Hi there. Following on from the trading debut on Friday,

00:06some would say it's a relatively muted response given what we're seeing in the broader markets as

00:11well. What do you think the contribution or what drove that? Okay. Aside from complying with our

00:25franchise requirement, the listing of Maynila has received a very strong interest both domestically

00:33and internationally. In the international front, we have gotten investments from ADB and IFC as

00:46cornerstone. Aside from very interesting sustainability-led investors like Robeco

00:54and Mobilist of UK, this has really generated very robust demand in our IPO such that at day one,

01:04we had to take the upsize option of our offering.

01:09It didn't quite translate into a robust trading debut though. So I wonder what are your thoughts

01:16on that?

01:18I think we were affected also by the Asian environment last Friday, but we're looking forward

01:27to a better performance actually because as we have seen today, the Asian markets are up

01:37again. So we hope to ride also with that.

01:41Does the IPO cover all your funding needs or are you looking to raise more?

01:49The proceeds from our IPO will fund partially our 163 billion CAPEX commitment to our regulators

02:01for this current rate rebasing. And these funds will go to our five pillars of our CAPEX, namely

02:11water source, non-revenue water reduction, wastewater coverage, and increasing capabilities, customer

02:20engagement, AI, and also our foray into improving automation.

02:25Can you give us a bit more of a sense of the longer term trajectory of these CAPEX plans? We

02:36know how for now the concessions seem to be focused on the west zone for Metro Manila. What

02:43are you looking at a bit further afield?

02:45Well, currently, our focus remains on further improving our services within the west zone. But

02:56a low-hanging fruit that we see is offering our wastewater and sanitation services to our existing

03:05commercial and industrial customers within the west zone. The third area of expansion for

03:13Manila is servicing the two huge reclamation projects in Manila Bay. And definitely, these cities will

03:23take about a decade to develop. But starting when they start construction, they will already need

03:30water and they're already talking to us and we're talking to them. The fourth area of expansion is

03:37basically the LGUs and the water districts that are adjacent to our concession area, namely in

03:45in Bulacan, in the north and in the south, Cavite. There are LGUs and water districts there that are wanting to

03:54improve their water services. And we can offer to them starting with bulk water, bulk treated water for them to

04:05improve their water availability and pressure. On some of these longer-term plans, are there any that

04:15would come as part of an overseas strategy? How are you assessing the potential there?

04:21Today, Manila is focused on the Philippines. We have an affiliate,

04:30Metro Pacific Water, that is involved in overseas projects, more specifically Vietnam.

04:41The company has also faced some challenges in the past, including on political risk that led to

04:47the renegotiation of your contract with the government. I wonder how are you assessing some

04:53of these risks as a sort of headwind for the company going forward?

04:59I personally feel better after our concession agreement was revised and renegotiated,

05:07solving the contentious provisions in our contract. But in exchange, we were able to get a 12%

05:18return on our opening cash position. But the other thing that gives me confidence is, aside from

05:27the concession agreement, we have a franchise together with it that has been extended to 2047.

05:34And therefore, a more stable framework that we're operating. Secondly, the confidence that I'm getting is

05:43because that water is a very small portion of a monthly household of a family in the Philippines,

05:52in Metro Manila more specifically. Very far from household rentals,

05:58food, transportation, electricity, and even internet load. We are very far in the expense portfolio of a

06:10family. Therefore, we have very little contribution to inflation. The other part that I am confident

06:18is that our tariffs remain to be either lower or even comparable to our Asian neighbors.

06:26I wonder as well, I mean, you alluded to some of this earlier, some of the big backers or investors for this

06:39IPO included the likes of the ADB. What are they contributing in terms of strategy and governance?

06:48Yeah, we believe ADB and IFC, including the other sustainability-focused investors,

06:57will bring to my NILAD global standards in sustainability, in governance, and even operational excellence.

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