MWSS, Maynilad start talks on new concession agreement

Published April 17, 2021, 6:00 AM

by Madelaine B. Miraflor

Negotiations between the Philippines government and Maynilad Water Services Inc. regarding the latter’s new water concession agreement (CA) with Metropolitan Waterworks and Sewerage System (MWSS) have already started.

This is more than two weeks since the Philippines government released the new CA between MWSS and Manila Water Company Inc.

Jennifer Rufo, head of corporate communications at Maynilad, said in a text exchange on Friday that “formal communications have started” when it comes to the new CA.

She also said that the company hopes “that it will be concluded as soon as possible”.

Just like Manila Water’s, Maynilad’s CA with MWSS had undergone an intense audit and overhaul more

than a year ago upon the order of President Rodrigo Duterte, who expressed his dismay over the allegedly unfair provisions of the previous water deals.

Justice Secretary Menardo Gueverra, who was tasked to lead the CA review committee, said the most notable onerous provisions under the CAs “were the prohibition against government interference in rate-setting and the provision on indemnity for possible losses in the event of such government interference”.

Aside from the Department of Justice (DOJ), the government panel tasked to review the CAs are the Office of the Executive Secretary, the Department of Finance, Office of the Solicitor General, Office of the Government Corporate Counsel, among others.

The last part of this process is the separate negotiations that should take place between the CA review committee and MWSS; as well as between CA and the concessionaires.

In March, when asked about these forthcoming negotiations, Maynilad President and Chief Executive Officer Ramoncito S. Fernandez told Business Bulletin that he expects that a “fair and objective review will be concluded at the soonest possible time”.

Meanwhile, Manila Water Chairman Fernando Zobel de Ayala said during the firm’s annual stockholders meeting on Friday that the new CA for the east zone concession is a “new working template for a public-private partnership” in the Philippines.

He also said that this is “a solid foundation to continue providing more reliable service in East Zone”.
Manila Water’s concession in the East Zone was affirmed until July 31, 2037.

The new CA is modeled after the New Clark City joint venture agreement of the Bases Conversion and Development Authority (BCDA), which was developed with the assistance and advice of the Asian Development Bank (ADB).

Among the new CA provisions to protect the government’s interest are the removal of government non-interference clauses and the removal of conditions that duly compromise medium- and long-term government liabilities.

These include the removal of the national government’s performance undertaking for future debt.

Likewise, all debt and expenditures of the concessionaire must be reviewed and approved by the Regulatory Office, while all fully recovered assets shall be immediately transferred to the government to ensure there is no double payment at the end of the contract.

To protect the interest of the consumers, Corporate Income Tax can no longer be charged to the consumers, while tariff freeze will be implemented until 31 December 2022.

Under the new CA, tariff adjustment for inflation will now only be two-thirds of the Consumer Price Index unlike in the previous contract, which had a 100 percent inflationary impact; and there will no longer be quarterly tariff adjustment under Foreign Currency Difference Adjustment.