Manila Water Co., the utility chaired by billionaire Enrique K. Razon Jr., opened 2026 with the kind of earnings profile investors usually want from a regulated water business: higher tariffs, stable demand, better operating efficiency and stronger contributions from domestic subsidiaries. But beneath the headline profit growth, the quarter also marked a balance-sheet reset, as the company absorbed the financing consequences of its WawaJVCo acquisition.
The company’s first-quarter results showed net income attributable to Manila Water shareholders rising 24% to ₱4.42 billion, while consolidated net income climbed 30% to ₱4.84 billion. Total revenues increased 11% to ₱10.63 billion, and EBITDA rose 14% to ₱7.87 billion, lifting EBITDA margin to about 74%.
The earnings momentum was led by the East Zone concession and WawaJVCo, now reviewed by management as a combined operating segment after Manila Water completed its acquisition of WawaJVCo in September 2025. The segment’s combined net income rose 28% to ₱4.15 billion, while revenues increased 11% to ₱8.47 billion and EBITDA advanced 13% to ₱6.46 billion.
The driver was not volume. It was price.
Billed volume in the East Zone and WawaJVCo segment was flat at 126.7 million cubic meters, but the average tariff rose 12% to ₱65.2 per cubic meter after Manila Water implemented the fourth tranche of its approved rate rebasing adjustment in January. The company said the January 2026 adjustment included a 6.96% rate rebasing increase and a 0.68% CPI adjustment, allowing an average tariff increase of about ₱3.60 per cubic meter.
Operationally, the quarter reinforced Manila Water’s defensive utility profile. Collection efficiency improved to 100.5% from 99.2%, billed connections rose 2%, and non-revenue water improved slightly to 13.9% from 14.1% in the combined East Zone/Wawa segment.
Cost control also helped. Consolidated revenues rose 11%, while total costs and expenses excluding depreciation and amortization increased only 5%, helped by lower direct costs including power, collection fees and water treatment chemicals. Management attributed the lower power cost partly to demand planning, increased use of lower-cost facilities such as Angat, solar power utilization and reduced deepwell usage.
Outside the core East Zone business, the domestic subsidiaries added to the earnings lift. Non-East Zone Philippines net income attributable to Manila Water rose 56% to ₱513 million, with revenues up 9% to ₱2.41 billion and EBITDA up 20% to ₱1.35 billion. Clark Water was a standout, with revenue rising 46% and net income increasing 81%, supported by tariff hikes and higher billed volume.
But the cleaner earnings story came with an important caveat: part of the quarter’s profit expansion was non-recurring. Manila Water booked a ₱1.07 billion gain from WawaJVCo loan modification/debt restructuring, which lifted other income and supported the bottom line.
The bigger shift, however, was on the balance sheet.
Manila Water’s debt load rose sharply after the company tapped new borrowings tied to the Wawa acquisition and capital requirements. Total debt outstanding stood at ₱163.21 billion as of March 31, 2026. Long-term debt increased to ₱161.32 billion from ₱129.90 billion at the end of 2025, after the company drew ₱33.74 billion in long-term debt during the quarter and repaid ₱2.40 billion.
The largest drawdown was a ₱27 billion, 15-year BDO Unibank term loan entered into in January to finance the acquisition of WawaJVCo equity shares and equity accounts. Manila Water also drew ₱7 billion from an existing Metropolitan Bank & Trust Co. facility to finance capital expenditures and general corporate requirements.
That leverage fed directly into financing costs. Interest expense almost doubled to ₱1.62 billion from ₱847 million a year earlier, driven by lower capitalized borrowing costs, new East Zone drawdowns and WawaJVCo loans. Net interest expense rose 103% to ₱1.57 billion.
The result is a company that looks stronger operationally but more leveraged financially. Manila Water’s total liabilities rose to ₱207.35 billion, while equity declined slightly to ₱94.16 billion after dividends. Management said the company remained compliant with all loan covenants, and reported East Zone bank debt-to-equity at 1.53x, up from 1.09x at end-2025.
Cash flow told the same story.
Operating cash flow remained positive at ₱2.17 billion, slightly higher than ₱2.08 billion a year earlier. Excluding changes in service concession assets, management said operating cash inflow would have been ₱3.84 billion.
But investing cash flow swung to a ₱25.99 billion outflow, mainly from the ₱26.25 billion payment of the WawaJVCo acquisition-related subscription payable. Financing cash flow turned positive at ₱22.75 billion, largely because of the ₱33.74 billion in long-term debt availments, offset by dividends, debt repayments, interest payments, service concession obligations and lease payments.
Cash and cash equivalents fell 15% to ₱5.85 billion from ₱6.92 billion at end-2025. The company said the decrease reflected capital expenditures, payment for the WawaJVCo acquisition, concession fees, dividends, debt and interest, partly offset by operating inflows and loan availments.
The Wawa transaction also reshaped Manila Water’s strategic narrative. Management said the acquisition allows vertical integration, giving the company better control over end-to-end water operations, cost efficiencies, synergies and unified strategic direction. WawaJVCo was established to develop, operate and maintain the Wawa Bulk Water Supply Project, intended to augment Metro Manila’s raw water supply.
For investors, the quarter therefore presents a two-sided story.
On one side is a regulated utility benefiting from tariff recovery, stable demand, high collection efficiency and subsidiary growth. On the other is a company now carrying a materially larger debt stack, with higher interest expense and cash flows that have become more dependent on financing activity.
That may be a reasonable trade-off if Wawa strengthens long-term water security and supports future regulated returns. Manila Water’s concession term has been extended to January 21, 2047, giving the company a longer runway to recover investments and earn returns through the regulatory framework.
But the next few quarters will matter. The market will likely look beyond headline earnings and watch whether tariff recovery, Wawa integration and operating efficiencies can keep EBITDA growing fast enough to absorb higher interest costs.
For now, Razon-led Manila Water has delivered a fundamentally strong quarter. The question is no longer whether the utility can grow earnings. It is whether the new, more leveraged balance sheet can convert that growth into durable cash returns.
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Disclaimer: This is for informational purposes and is not investment advice. Figures are taken from company disclosures and exchange data; valuation ratios include the author’s calculations based on cited inputs.
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