T

he Philippines’ Manila Water Company would have to wait for approval from city-owned PT PAM Jaya and the city administration regarding its plan to acquire Suez Environment’s stake in PT PAM Lyonnaise Jaya (Palyja), Palyja’s spokeswoman said.

“The acquisition process is still ongoing because we are waiting for the approval from related authorities,” Meyritha Maryanie told The Jakarta Post on Friday.

Bloomberg News reported on Thursday that Paris-based Suez Environment had signed a share purchase agreement to sell its 51 percent stake to Manila Water, as a completion of its exit from Palyja. Manila Water is a subsidiary of Philippines’ holding company, the Ayala Corporation.

The remaining 49 percent is owned by PT Astratel Nusantara, a subsidiary of automotive giant PT Astra International.

Meyritha refused to comment further on the background of the acquisition, saying that the issue was a subject for Suez Environment to explain.

Suez Environment’s spokesperson, who refused to be named, responded in a written statement sent to the Post on Friday, saying that the decision was made due to their company’s long-term business strategy that aimed to develop its businesses selectively.

“In deciding to sell the shares in Palyja, we considered three things: investment, profits and long-term development. These things are the reflection of our selective business development policy,” the statement read.

Suez refused to explain the transaction values, saying that the acquisition had not been finalized.

Palyja, a company that supplies more than 700 million liters of water a day and has a 5,300-kilometer pipe network, has provided clean water and services to West Jakarta since February 1998 under a 25-year cooperation agreement with PAM Jaya.

The contract, which is based on a full cost recovery system, stipulates that revenue from water bills must cover all operational costs, including investment.

Critics have said that the contract’s double financing scheme has been the main cause hampering Palyja from providing affordable clean water for low-income families.

The water charge is the price PAM Jaya pays to operators to supply water to households. The water rate is the charge levied to customers. Problems started to occur when the water charge was higher than the revenue from water rates, which forced PAM Jaya into debt to private operators.

The contract also stipulates that the water rate is to be increased by 7 percent twice a year; however, former governor Fauzi Bowo rejected the water-price hikes due to fear of social unrest.

Media reports have stated that Suez’ decision to exit Palyja was due to worsening relations between the company and PAM Jaya over the ongoing price freeze, which has hampered Palyja’s ability to invest.

In 2011, Palyja booked Rp 526 billion (US$548 million) in net revenue, increasing from Rp 522 billion in 2010.

The company also booked Rp 119 billion in net profits in 2011, a rise from Rp 114 billion a year earlier. (nad)