Manila Water, MPIC stocks plunge amid uncertain deal with gov't

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Stock prices of Manila Water and Maynilad's parent firm Metro Pacific Investments Corporation continue to languish as the future of supply contracts with government remains in limbo.

Metro Manila (CNN Philippines, December 13) — Stock prices of the embattled Manila Water and Maynilad's parent firm Metro Pacific Investments Corporation (MPIC) appear far from a swift recovery, as shares have slumped ever since President Rodrigo Duterte ranted about their "onerous" supply contracts with the government.

Manila Water enjoyed a brief lift in share prices as it announced its victory before an international tribunal on November 29, which demanded the Philippine government to pay ₱7.39 billion to cover losses incurred by the water from rejected water rate hikes in from 2013 to 2017. That day, the stock rose by 1.08 percent to ₱18.70 which extended to another pickup on Monday, December 2 to ₱18.98 apiece. 

READ: 'Onerous' water deals cost gov't ₱10.8 billion, DOJ says

Manila Water shares went downhill the next day after Justice Secretary Menardo Guevarra said the water concession deals signed in 1997 — which were cited as basis for the indemnities sought by the utility firms — were "onerous," and that Duterte was "visibly upset" with the tribunal's ruling. The President went on to publicly decry the concession agreements in several speeches, saying these carried provisions "disadvantageous" to the public.

Manila Water stocks were almost halved in value in the last two weeks, closing at ₱11.04 on December 12 and surpassing its one-year low as of Friday morning's trading session. Shares ended the week at ₱10.02, 47.2 percent lower from the start of the month. Its parent Ayala Corporation has also seen lower share prices in the past two weeks.

Manny Pangilinan's MPIC, Maynilad's parent firm, also saw share prices fall by 31 percent. Its partner DMCI Holdings also saw stock valuation slide from ₱6.40 to just ₱5.55 apiece by Friday's closing bell after Duterte started the word war against water concessionaires.

READ: Duterte warns of gov’t takeover, warrantless arrests over water deals

Two market analysts said the downtrend has been sustained as investors are "discouraged" from placing their bets in these companies amid uncertainty in the fate of water contracts.

"Although the intention of the President seems very good for the public and the consumers, it's not good to the eyes of the investors, both local and international," Astro Del Castillo, managing director of investment firm First Grade Finance Inc., told CNN Philippines.

Del Castillo added the recent fallout regarding water deals has sparked "regulatory risks," which could also affect other utility companies that have supply deals and rate-setting negotiations with government. He pointed out that recent events could affect "future and other contracts."

Another stock trader added that regulatory issue "discourages investors" from investing in utility companies, given the negative sentiment.

"Compared to other stocks which are very expensive now, this is a bargain. But due to the regulatory risk, no one wants to touch it at the moment," the second trader said, noting that these stocks are actually good investments in the long term as are in the water business. "There's always a repeat order because it's water — you need it everyday."

Manila Water, MPIC, and DMCI shares continued to languish as of midday trading on Friday. Del Castillo said an eventual "meeting of the minds" between the water concessionaires and the government would stop the bleeding, as he cited the willingness of both parties to sit down and talk.

It has been a rough week for the concessionaires as their top officials have had to explain themselves in separate hearings at the House of Representatives and the Senate. The Metropolitan Waterworks and Sewerage System also cancelled the extension of their supply contracts until 2037, which meant that the two firms are only assured business until 2022 unless a new deal is reached.

Ex-MWSS chief on water deals: 'I was thinking of the Filipino people'

Duterte said he wants new water supply contracts with the private firms. Manila Water and Maynilad earlier warned that cutting their contracts short could trigger water rate increases due to the shorter period given for them to recover their investments.

"There has been no acceptance by the President of their offer, nor has he declined it. The subject is still under review by the President," Presidential Spokesperson Salvador Panelo said in a statement on Friday.

The two concessionaires have formally informed Malacañang that they will not collect the proceeds of the arbitration, worth a total of ₱10.8 billion. They also expressed willingness to re-negotiate contract terms.