The Philippine utility’s acquisition of the Wawa bulk-water project strengthens its control over Metro Manila’s water supply—but brings heavier debt and interest expenses.
**MANILA—**Manila Water Co. reported stronger first-half profitability and cash generation as higher tariffs lifted revenue faster than operating costs, helping the Philippine utility absorb the early financial burden of its acquisition of the Wawa Bulk Water Supply Project.
Water and used-water revenue increased about 12% to ₱21.04 billion in the six months ended June, accounting for nearly all of the group’s revenue growth. The increase came primarily from higher customer rates rather than greater water consumption, underscoring the importance of regulated tariff adjustments to the company’s latest results.
Total operating revenue, including finance income, rose 11% to ₱22.19 billion. Costs excluding depreciation and amortization increased by a more modest 6%, according to management’s cash-cost presentation.
That gap produced a meaningful improvement in operating leverage. Earnings before interest, taxes, depreciation and amortization rose 13% to ₱16.41 billion, while the EBITDA margin widened to 74% from 72.9% a year earlier.
Net income attributable to Manila Water shareholders increased 6% to ₱8.47 billion. Consolidated net income rose 10% to ₱9.13 billion.
The results highlight a changing financial profile for Manila Water. Its core utility operations are producing more cash, aided by tariff increases and relatively restrained cash costs. At the same time, the company is taking on substantially more debt to finance a strategic push deeper into the water-supply chain.
A Bet on Water Security
In January, Manila Water paid ₱26.25 billion to settle the subscription payable associated with its 2025 acquisition of WawaJVCo Inc., the company behind the Wawa Bulk Water Supply Project.
The settlement wasn’t a new acquisition in the first half. It was the cash payment for an investment completed in September 2025, when Manila Water obtained a controlling interest in WawaJVCo.
To fund the payment, Manila Water drew a ₱27 billion, 15-year loan from BDO Unibank. Net of transaction costs, proceeds were about ₱26.8 billion—closely matching the amount paid for the Wawa investment.
The transaction effectively replaced an acquisition payable with long-term bank debt. Manila Water also obtained additional loans for capital spending and general corporate requirements, lifting total new borrowings during the first half to more than ₱35 billion.
The Wawa acquisition is central to Manila Water’s strategy. The project is expected to provide an additional source of raw water for Metro Manila, where supply security has long been constrained by dependence on a limited number of sources.
Following the acquisition, Manila Water combined its East Zone concession and Wawa operations into a single reporting segment. The company also began integrating the project’s raw-water supply with its existing treatment and distribution network.
The approach gives Manila Water greater control over a larger portion of the water value chain. Rather than focusing mainly on treating and distributing water delivered from external sources, the company will have a direct economic interest in the infrastructure supplying raw water to its concession area.
That integration could provide long-term operating benefits. It also concentrates execution risk. Manila Water must complete the project, manage its financing costs and secure appropriate regulatory recovery through future tariffs.
Tariffs Do the Heavy Lifting
The East Zone remained the group’s main profit engine. Water volumes were broadly stable, while average tariffs increased substantially following the implementation of scheduled rate-rebasing and inflation adjustments.
That distinction matters for investors. Tariff-driven revenue growth can translate quickly into higher earnings because many of a water utility’s operating expenses don’t rise at the same rate. But it also depends on the regulatory framework and Manila Water’s ability to meet service and investment commitments.
The first-half figures show that dynamic at work. Revenue rose by double digits even though billed-volume growth was limited. Cash costs increased at roughly half the rate of revenue, widening margins and helping offset higher depreciation and financing expenses.
Operational improvements also contributed. Collection efficiency remained strong, while nonrevenue water—the share of treated water lost through leaks, theft or metering issues—declined in the East Zone. Lower water losses allow a utility to generate more billable revenue from the same amount of supply.
The company’s domestic subsidiaries added to the improvement. Boracay Island Water Co. meaningfully lifted revenue and net income following substantial tariff adjustments, strengthening the contribution from Manila Water’s operations outside the East Zone.
Boracay’s performance illustrates how tariff resets can change the economics of smaller concession businesses. Once higher rates take effect, incremental revenue can flow through to earnings relatively quickly, provided consumption and collection rates remain stable.
Better Cash Flow, Heavier Interest Burden
Reported cash flow from operating activities nearly doubled to ₱5.63 billion from ₱2.85 billion a year earlier. The improvement reflected higher operating earnings as well as lower spending on service-concession assets compared with the unusually capital-intensive year-earlier period.
Manila Water’s cash-flow statement requires some interpretation. Under accounting rules for service concessions, much of the company’s infrastructure investment is classified as operating activity rather than conventional investing activity.
Before spending on service-concession assets, the company generated about ₱11.70 billion of operating cash. That provided more internally generated funding for infrastructure and debt service, even as Wawa payments and dividends absorbed significant cash.
Still, the acquisition has sharply increased Manila Water’s financing burden. Total borrowings reached roughly ₱161.56 billion at the end of June, up by nearly ₱30 billion from December.
Net interest expense more than doubled to approximately ₱3.11 billion, limiting the amount of EBITDA growth that reached pretax profit. The group’s financing exposure is also sensitive to interest rates because about three-quarters of its debt carries floating rates.
Reported earnings received an additional lift from a ₱1.07 billion gain related to the modification of WawaJVCo’s existing loan. Because that gain arose from a change in debt terms rather than water operations, it shouldn’t be treated as recurring income.
Excluding the gain, the contrast becomes clearer: Manila Water’s operating business improved, but much of that progress was consumed by higher interest and depreciation charges.
The Next Test
Manila Water’s first-half results suggest that its established concession remains capable of producing substantial earnings and cash. Tariff increases, efficient collections and controlled cash costs pushed EBITDA growth ahead of revenue and elevated the margin to 74%.
The Wawa investment, however, changes what investors must watch.
The acquisition gives Manila Water a potentially valuable source of raw water and creates a more vertically integrated business stretching from supply to treatment and distribution. But the company has financed much of that strategic expansion with debt, leaving future earnings more exposed to interest rates, project execution and regulatory decisions.
For now, the utility’s improving cash generation provides a cushion. The longer-term judgment will turn on whether Wawa delivers enough additional water—and enough recoverable economic value—to justify the leverage taken on to acquire it.
Manila Water has strengthened its control over its most essential input. It now has to show that greater water security can also produce stronger returns for shareholders.
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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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