Banks ‘suspend’ new loans to Maynilad amid woes on water supply contract
MANILA, Philippines — Banks have suspended lending money to embattled Maynilad Water Services, Inc. amid uncertainties over the future of its water supply contract with the government, the utility firm’s parent company said Monday.
A Singapore-based arbitration panel has ordered the Philippine government to indemnify both Maynilad and Manila Water Company, Inc. for the losses they suffered from an unenforced rate hike, triggering angry responses from President Rodrigo Duterte.
Duterte has accused both utilities of forging contracts with “onerous” provisions that are disadvantageous to the public. The Metropolitan Waterworks and Sewerage System, the Philippines’ water regulator, has rescinded the 15-year extension of the water concession deals. The existing contracts will expire in 2022.
In a disclosure to the stock exchange, Maynilad’s parent company, Metro Pacific Investments Corp., said that while the water provider can finance its current projects, the shortening of the concession term puts new projects that seek to improve the system in limbo.
“Banks have suspended lending money to Maynilad to finance its new capex (capital expenditure) program,” MPIC said.
“Maynilad, however, remains hopeful that the renegotiation of the concession agreement will result in a satisfactory resolution of the various issues for all the stakeholders,” it added.
The MWSS’s decision to terminate utilities' extended water contracts comes at a time Duterte seeks more private capital to bankroll his ambitious infrastructure plan.
Amid pressure from Duterte — who has repeatedly promised businessmen he will respect the sanctity of contracts — Maynilad and Manila Water 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 agreement with the state, both water providers can recover over the life of the concession period their operating, capital maintenance and investment expenditures. The two utility companies have been servicing millions of customers in Metro Manila under contacts signed with the government in 1997.
Top officials of Maynilad and Manila Water have warned that water rates could go “very high” should the government revoke the extension of concession deals as the move would shorten the period that they can recover their investments.
Editor's Note: Manuel V. Pangilinan, the chairman of Maynilad, is also chief executive of PLDT. A unit under PLDT's media conglomerate has a majority stake in Philstar Global Corp., which runs Philstar.com. This article was independently produced following editorial guidelines.
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