By Jenniffer B. Austria

Manila Water Co. Inc., a unit of Ayala Corp., yesterday said the decision of regulator Metropolitan Waterworks and Sewerage System to defer rate hikes until next year will affect its capital expenditure program and reduce its ability to provide services to Metro Manila residents.

Manila Water chief finance officer Luis Juan Oreta told reporters that revenues from the proposed water rate hike would finance bulk of the company’s capital expenditures in the next few years.

“The impact [of the rate hike deferment] on the financials of the company will be limited. The impact would be more on the capital expenditure, especially if the deferment persists for a long time,” Oreta said.

He said the cut in the expenditure program would likely affect facilities for the development and treatment of waste water.

The company earlier said it would construct a P1.5-billion waste water treatment plant to increase the company’s current production capacity by at least 100 million liters per day.

Manila Water last year said it planned to invest P37 billion over the next five years. It committed to spend P187 billion in capital expenditure for the entire 25-year concession period ending in 2022.

Manila Water plans to spend another P163 billion if regulators agree to extend its concession period by another 10 years, raising its total capital expenditure for the entire 35-year period to P350 billion.

Oreta said the company earlier asked for a P2.40 tariff rate increase starting Jan. 1 this year. The company settled for a P0.50 increase amid the difficult economic conditions.

Oreta said the P0.50 rate increase would still enable Manila Water maintain a double-digit growth in rate hike.

Share price of Manila Water yesterday fell by the most since March 2005 after the regulator announced there would be no rate increase this year.

Manila Water fell 16 percent to P10.75. The stock declined as much as 22 percent earlier.

MWSS administrator Diosdado Allado said Thursday that it would not allow Manila Water and Maynilad Water Services Inc., which serves the other half of the capital, to increase their rates this year to ease the burden on consumers hurting from a global recession.

“Manila Water has always been considered as a defensive stock with a really good business prospect,” said Jan Bertulfo, who helps manage about $1 billion at Rizal Commercial Banking Corp. “But with government holding back on the rate increases, there are concerns that its earnings growth would fall to single digits.”