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Philippines: Water rates will go up if contract extension is canceled — Manila Water, Maynilad
MANILA, Philippines — The Philippines’ two biggest water companies said Wednesday that rates could go up should the government revoke the extension of concession deals of both utilities as the move would shorten the period that the water providers can recover their investments.
President Rodrigo Duterte has berated both Manila Water Company Inc. and Maynilad Water Services Inc. and accused the two companies of forging contracts with “onerous” provisions that are disadvantageous to the public.
The presidential tongue-lashing came after a Singapore-based arbitration panel ordered the Philippine government to indemnify Manila Water and Maynilad for the losses they suffered from an unenforced rate hike.
At a congressional hearing, Manila Water and Maynilad said they’ve been informed that the Metropolitan Waterworks and Sewerage System Board has canceled the concession contract extension of both water firms from 2022 to 2037. The two have three days from receipt of the notice to submit their position papers.
While regulator MWSS said it is still unclear whether rates will shoot up if the water providers’ contract would be terminated, top officials of the two companies warned that adjustments could go “very high.”
“Definitely it (water rates) will go very high because the rationale of the extension at the time was to mitigate any spikes in tariffs,” Maynilad CEO Ramoncito Fernandez told lawmakers.
Separately, Manila Water board member Antonio Aquino said: “Kung mawawala po yung extended term talaga pong magkakaroon ng mas malaking adjustment kung ang mababawi mo doon sa mas maikling panahon.”
(If the extended term will be canceled, there will be a very big adjustment because we need to recover what we’ve spent in a shorter period.)
‘Grave concern’
Amid Duterte’s attacks, the two firms have agreed to drop more than P10 billion in compensation claims from the government as well as defer raising rates originally scheduled for early next year.
Under their concession agreement, both companies can recover over the life of the concession period their operating, capital maintenance and investment expenditures. The two utility companies have been supplying water in Metro Manila under contacts signed with the government in 1997.
Prices of shares of Manila Water and Maynilad have been falling daily since last week.
In the same congressional hearing, Maynilad’s Fernandez expressed concern over the MWSS’s move to scrap the extension of the water companies’ concession deal.
“We would like to react that it is with very grave concern that we view this action and we believe also that it’s not proper to unilaterally revoke an agreement,” he said.
The MWSS said that if the contracts are canceled by 2022, new operators may come in. — With reports from The STAR/Louise Maureen Simeon
Source: https://www.philstar.com/business/2019/12/11/1976203/water-rates-will-go-if-contract-extension-canceled-manila-water-maynilad#jxmtxv6sJuRvv6dF.99