Water firms warn of possible rate hikes as extension of concession deal revoked

MANILA, Philippines — Water concessionaires Maynilad Water Services Inc. and Manila Water Company Inc. on Wednesday warned of possible rate increases as they expressed “grave concern” over the “unilateral” cancellation of the extension of their concession agreements.

Metropolitan Waterworks and Sewerage System (MWSS) has revoked the 15-year extension of the water firms’ concession agreements. The agreements would supposedly end in 2037 but due to the revocation, these will expire on 2022.

READ: MWSS revokes extension of Maynilad, Manila Water concession deals

While they are still computing, officials of water firms said that hikes on water tariffs may occur in the next years to compensate for their investments should their concessions end in 2022.

“We’re still computing but definitely it [water tariffs] will go very high because the rationale of the extension at the time was to mitigate any spikes in tariffs or presyo ng tubig because kailangan pang mag-invest pa ng mga water concessionaires nang mas malaki,” Maynilad president and chief executive officer Ramoncito Fernandez said in a joint panel hearing at the House of Representatives.

(We’re still computing but definitely water tariffs will go very high because the rationale of the extension at the time was to mitigate any spikes in tariffs or price of water because we needed to invest more.)

“Maraming factors ang kailangan i-compute (There are so many factors to compute)… It’s definitely more than 100%,” he added.

For his part, Manila Water board member Antonino Aquino said the same will likely happen with the firm.

“Ganun na rin siguro ‘yung mangyayari dito (That’s will also happen here),” Aquino said.

He also pointed out that the firm’s spending plans were based on the extension that was agreed upon in 2009.

He added that if their concession would be cut short, there will also be a big adjustment in terms of how the firm will earn back their investments.

“Base po doon sa approval, ginawa na namin ‘yung spending plan that presumes that mababawi po ang lahat ng investment natin for that extended period of time. Kung mas mahaba po ‘yung recovery period, mas mababa ang magiging epekto sa taripa,” Aquino said.

(Based on the approval of the extension, we plotted our spending plan that presumes that we will get back our investments for that extended period of time. A longer recovery period will have a lower impact on tariffs.)

“Kung mawawala ‘yung extended term, talagang magkakaroon ng mas malaking adjustment kung ano ang mababawi mo doon [sa investment] sa maikling panahon,” he also said.

(If the extended term will not push through, there will indeed be a bigger adjustment on how we will get back our investments in a shorter period of time.)

The two water concessionaires also expressed concern on what they called the “unilateral” cancellation of the concession extension.

“It is with very grave concern that we view this action and we believe also that’s it’s not proper to unilaterally revoke the agreement,” Fernandez said.

Both Maynilad and Manila Water officials said they just received the notice of revocation on Wednesday.

Lawyer Harold Azardon Office of the Government Corporate Counsel (OGCC), however, said that the two water concessionaires will be given three days upon receipt of the cancellation to respond and file their position papers.

The cancellation of the concession agreements came after President Rodrigo Duterte threatened to sue the water firms of economic sabotage last week over their alleged “onerous” concession agreements.

The President also ordered Solicitor General Jose Calida and Finance Secretary Carlos Dominguez III to come up with a new water concession contract that is favorable to the public and the government.

READ: Duterte threatens water execs, orders new deals

During a recent Cabinet meeting, the Department of Justice (DOJ) reported that it found Manila Water and Maynilad’s contracts to be disadvantageous not only to the government but more so to water consumers.

READ: Duterte threatens to sue water firms for economic sabotage

Duterte’s ire arose after the Permanent Court of Arbitration in Singapore ordered the Philippine government to pay Manila Water Co. P7.39 billion for losses incurred due to the non-implementation of rate hikes.

Meanwhile, Maynilad won its own case in 2017 in the arbitration court, which directed the government to pay it P3.4 billion.

However, the water concessionaires said they would no longer seek to collect from the government close to P11 billion that the Singapore arbitration court had awarded to them.

READ: Water firms waiving P10.8-billion award

Edited by JE