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Water utility says order to drop rates will not dilute its revenues

A technician monitors water systems on a control panel at the Phnom Penh Water Supply Authority.
A technician monitors water systems on a control panel at the Phnom Penh Water Supply Authority. Pha Lina

Water utility says order to drop rates will not dilute its revenues

Prime Minister Hun Sen’s order for the capital’s water supplier to lower its rates and compensate customers for charges incurred under a new payment scheme introduced in May will not have a significant impact on the company’s revenue or growth plans, a finance officer at the listed state-run utility said yesterday.

Ros Kimleang, chief of accounting and finance at Phnom Penh Water Supply Authority (PPWSA), played down the impact of the premier’s announcement on Sunday, which stated that higher water fees introduced in May were unfair and PPWSA should restore fees to their previous level and pay back the difference to customers who paid bills at the higher rates.

“There will not be any serious impact because we did not include the price hikes in our revenue collection plan for this year,” he said.

He said that even at the previous rates the company would still realise a profit on its operations.

“Our revenue is still increasing and operations are still profitable,” he said.

On May 15, PPWSA introduced a new water rates scheme that increased the cost of water usage according to consumption levels. While Kimleang did not break down the rate changes, he said the new scheme increased rates by less than 10 percent in each consumption category.

He said the additional revenue generated by the revised rates was intended to cover payments on around $100 million in loans that PPWSA had taken out from development partners to expand its services.
PPWSA, which treats and supplies water to Phnom Penh and parts of Kandal province, generated $54 million in revenue last year, with $12.5 million net profit.

Kimleang declined to estimate the financial cost of the premier’s order to return water rates to their former level and compensate customers for extra charges. However, based on its 2016 posted financials, the company could have expected to generate around $5 million a year in additional revenue under the new pricing scheme.

Despite the news the company would be stripped of this potential revenue, PPWSA’s share price on the Cambodia Securities Exchange (CSX) remained steady yesterday, closing sideways at 3,980 riel per share in thin trading.

Lamun Soleil, director of market operations at CSX, said the lack of a reaction was hardly surprising as most of the bourse’s investors were long-term investors rather than speculators.

“This short-term error collection of revenue would not affect the long-term views of PPWSA’s long-term investors,” he said.

Svay Hay, CEO of Acleda Securities, elaborated that most of PPWSA’s public shareholders have purchased its stock for its dividend payouts and as such were not particularly sensitive to fluctuations in revenue growth.

“Only growth investors are very sensitive to changes in a company’s revenue,” he said. “If there are too many growth investors, there will be a lot of buying and selling of a stock whenever something happens that impacts a company’s revenue.”

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