By Madelaine Miraflor
At risk of losing their concession deals, both Manila Water Company, Inc. and Maynilad Water Services, Inc. have realized that it’s far more risky to be on the bad side of President Duterte than letting go of a few extra billions that the Philippine government supposedly owes them for winning their respective arbitration cases.
On Tuesday, both companies threw the white flag and said they will no longer ask for the billions of compensation the international court wants the Philippine government to pay them for the latter’s refusal to implement their separate water rate hike applications a few years ago.
Pending water rate increase for the first quarter of 2020 will also be put on hold, top officials of Manila Water and Maynilad said.
Jose Almendras, Manila Water president and chief executive officer, said the Ayala-led company will no longer collect P7.39 billion from the government as a compensation for the losses it incurred from June 1, 2015 until November 22, 2019 for failing to increase water rates during this period.
The Permanent Court of Arbitration (PCA) in Singapore ruled last week that Manila Water has a right to indemnification for actual losses suffered by it on account of the Philippine government’s breach of its obligation.
The decision also required the Philippine government to pay 100 percent of the amounts paid by Manila Water to the PCA and 85 percent of Manila Water’s other claimed costs.
However, less than a week since this was announced, Duterte said he will jail the executives of Manila Water and Maynilad for economic sabotage, which was followed by a series of rant fest against the two companies.
In the Philippine government’s defense, Justice Secretary Menardo Guevarra said that it’s the unfair provisions of concession agreements between water utilities and Metropolitan Waterworks and Sewerage System (MWSS) that caused the international court to decide in favor of Manila Water.
These include the provision that the government can’t interfere in the setting of water rates as well as the provision on indemnity for possible losses in the event of such government interference.
It is also for this reason Maynilad won a P3.4-billion arbitration case against the government in 2018, Guevarra said.
As for Maynilad, its chairman, Manuel V. Pangilinan, already said in April of this year that his company is “willing to drop” the arbitration case it had earlier filed against the Philippine government.
Ramoncito Fernandez, Maynilad president and chief executive officer, reiterated this on Tuesday.
“We agree with the President. We will no longer go after the award,” Fernandez said.
Delayed water rate hike
To further appease Duterte, Maynilad and Manila Water will also no longer push for their quarterly water rate adjustment for the first three months of 2020.
“We will no longer implement the approved water rate increase scheduled to start in January 2020,” Almendras said.
Maynilad will do the same, according to Fernandez.
This was days after MWSS Chief Regulator Patrick Lester Ty said that the MWSS Board of Trustees has directed MWSS’ Regulatory Office to initiate discussions with both companies to consider deferring their Foreign Currency Differential Adjustment (FCDA) applications.
“It would be an upward adjustment if approved,” Ty earlier said.
Approved every quarter, FCDA is a tariff mechanism that allows Maynilad and Manila Water to recover or compensate for fluctuations in foreign exchange rates.
The two companies have to pay foreign-dominated concession fees to MWSS, as well as dollar-denominated loans, which they used to fund their projects.
If companies are seeking for an upward FCDA, it means higher water rates for their customers for the next three months.
During the fourth quarter of this year, concessionaires both applied for an upward FCDA following the deferment of the implementation of the third quarter FCDA, which was decided upon as MWSS transitioned into a new leadership. (With a report from Ben Rosario)