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ADB Loans to Private Utility to Improve Water Distribution in Manila

The Asian Development Bank agreed today to provide loans totalling over US$170 million to a private utility to improve and expand water distribution and wastewater treatment services in the Philippines capital of Manila.

The project will enable Maynilad Water Services, Inc, which holds the concession for water and sewerage services in western Metro Manila, to provide an uninterrupted water supply to existing customers and to expand water coverage to 98 percent of its concession area, and sewerage and sanitation coverage to 93 percent. This is the Bank's first assistance to a privatized water and sewerage utility.

The firm is one of the two concessionaires of the government-owned Metropolitan Waterworks and Sewerage System (MWSS) which has the mandate to provide water and sewerage services to 13 cities and 24 municipalities in Metro Manila, Rizal and part of Cavite. Under a concession agreement, Maynilad has 25 years to rehabilitate and operate the water system, reduce physical losses, check illegal usage and expand coverage.

Before its operations were privatized in 1997, MWSS was plagued by problems of nonrevenue water and a lack of funds to maintain and expand an aging network to service a growing population. It was servicing only a part of the metropolitan area's population.

Maynilad has assumed implementation of two ADB-funded MWSS projects - the Angat Water Supply Optimization project and the Manila South Water Distribution project - to increase water supply. With water losses under control and an expanded distribution network, consumers will also benefit from a new source of water expected from the Umiray-Angat Transbasin under another ADB-funded project.

The ADB assistance - which consists of a US$45 million loan and a cofinancing loan of up to US$126 million equivalent under the Bank's complementary financing scheme -- is part of a US$350 million debt package being raised by the water firm to meet its financing needs up to the year 2002. Beyond that time, revenues are expected to reach self-sustaining levels. Other financiers include the European Investment Bank and a syndicate of international commercial banks.

Equity financing of US$135 million will be provided by Maynilad's sponsors (Benpres Holdings Corporation of the Philippines, Suez Lyonnaise de Eaux of France and Lyonnaise Asia Water Limited of Singapore).

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