By Madelaine Miraflor
The Metropolitan Waterworks and Sewerage System (MWSS) has clarified the status of its concession agreements with Maynilad Water Services, Inc., and Manila Water Company, Inc., with the agency’s chief saying that the extension of these deals are still up for renegotiation.
Metropolitan Waterworks and Sewerage System (MANILA BULLETIN)
“It is still subject for renegotiation,” MWSS Administrator Emmanuel Salamat said in an interview. “So we are not saying that they are already done.”
Salamat issued the statement following the decision of MWSS Board of Directors to revoke the existing board resolution approving the extension of the agency’s concession deals with Maynilad and Manila Water.
If the decision holds, both companies will only be allowed to distribute water in Metro Manila until 2022, instead of 2037 as per their extended contracts approved by the Arroyo administration.
Salamat clarified that the MWSS is not shutting its door on the Pangilinan-led and Ayala-led firms. The extension has not been “outrightly revoked,” he said.
President Rodrigo Duterte said that he doesn’t want to talk directly to officials of Maynilad and Manila Water and instead told them to coordinate with Salamat.
The other day, Howard Randy A. Arzadon, assistant government corporate counsel in the Office of the Government Corporate Counsel (OGCC), said that Manila Water and Maynilad will be given time to issue their position papers about the board resolution.
The OGCC is the principal and statutory law office of government-owned-and-controlled corporations (GOCC), which oversees the operation of MWSS.
MWSS Deputy Administrator for Engineering and Technical Operations Leonor Cleofas admitted that the agency won't be able to take over water distribution for Metro Manila moving forward, citing the lack of resources and limited manpower.
She said that if Maynilad and Manila Water will be taken out of the picture, there would be a need to tap new players.
Her statement came as Duterte floated the Villar-led Prime Water Infrastructure Corp. as one company that could replace these companies for the distribution of water in Metro Manila, which is home to more than 12 million people.
Maynilad President and Chief Executive Officer Ramoncito Fernandez had warned earlier that the MWSS’ decision will result in “very high water rates” for both Manila Water and Maynilad customers as this will force both companies to fast-track their investments in order to fulfill their water service obligations.
“The rationale of the extension of the contracts was to mitigate spikes in tariffs because the concessionaires had to invest more,” Fernandez said.
For sewerage alone, Manila Water and Maynilad were given until 2037 to expand Metro Manila’s sewerage coverage up to 100 percent as part of their obligations.
Combined, both companies are looking to spend nearly P300 billion over the next 16 years to improve Manila's sewerage capacity alone.
In the last rate rebasing, Maynilad proposed to spend around P30.19 billion from 2018 to 2022 to be able to treat 320 million liter per day (mld), and another P101.45 billion from 2023 to 2037 to add 1,128 mld in its capacity.
For its part, Manila Water said it could boost its capacity to 725 mld from 2018 to 2022 for an investment worth P37.44 billion. Another P116 billion will be invested by the company from 2023 to 2037 for additional 222 mld.
Rate rebasing is a review of water utilities' past performance and the projection on their future cash flows. Done every five years, the review is supposed to set the water rates at a level that would allow both Maynilad and Manila Water recover their expenditures and earn a rate of return.
If the extended concession agreements of these companies are cancelled, it means that the company will either fast-track their projects in order to meet their targets or will just abandon them once their contracts expired in 2022. Both are seen to result in higher rates for Metro Manila.
Salamat said that talks are already on-going as to how the MWSS could address the onerous provisions in its concession deals with Maynilad and Manila Water.