Maynilad pipelines P85 billion for 10-year spending plan

MANILA, Philippines — Maynilad Water Services Inc. is eyeing to spend P85 billion in capital expenditures (capex) over a 10-year period if its request to extend its concession agreement with the Metropolitan Waterworks and Sewerage System (MWSS) until 2047 is approved.

In a position paper dated Oct. 12, Maynilad is asking the MWSS to approve its proposal to extend its revised concession agreement (RCA) for another 10 years from May 6, 2037 to July 31, 2047.

“During this 10-year period of time, Maynilad expects to invest an additional P85 billion for capex implementation projects that will deliver the above-described service improvements and benefits,” the west zone concessionaire said.

The capex will allow Maynilad to provide potable water to an additional 200,000 people to 11.8 million in 2047 from 11.6 million in 2037 within its concession area.

The water concessionaire will also grow its domestic and non-domestic accounts with access to water services by 40,383 water service connections.

The company will also be able to replace another 250 kilometers of old pipelines to further control non-revenue water (NRW), which it aims to reach 20 percent by 2047.

Maynilad’s latest total NRW level improved to 43 percent in 2022 from 68 percent in 2006, recovering around 413 million liters per day.

The company targets to reach the 25 percent NRW level the World Bank recommended by 2027.

During the additional 10-year period, Maynilad is also looking to implement three additional sewerage treatment plants which will increase sewerage coverage by 12 percentage-points from 76 percent to 88 percent and treat an incremental 221 million liters per day of sewage.

Maynilad’s franchise under Republic Act 11600, signed on Dec. 10, 2021 but effective Jan. 22, 2022, will have a term of 25 years or until 2047.

However, Maynilad’s concession under the operative RCA with the MWSS will expire on May 6, 2037 – oughly 10 years ahead the end of its franchise.

Maynilad said extending its RCA would provide customers affordable water security as this would allow a longer period of cost recovery via tariffs through 2047 results in lower tariff increases.

Based on its financial simulations, the appropriate one-time equivalent R-tariff increase could be reduced from 58.56 percent to 35.61 percent by extending the cost recovery period by 10 years.

Extending the RCA will also enable the company to “embark on an accelerated and massive capex implementation and service improvement program between 2023-2027 which would deliver higher water and wastewater service levels to consumers by 2027.”

Its massive accelerated capex program covers the undertaking of 1,107 projects over a compressed five-year schedule; the awarding of project contracts worth at least P222 billion, of which over P163 billion will be disbursed between 2023-2027.

By 2027, Maynilad plans to expand its coverage to 103,084 new customers, equivalent to 700,000 people with access to potable water; recover 585 million liters per day from addressing leaks; increase treated sewage by 122 million liters per day and add at least five more cities in its sewerage coverage.

“Your approval of Maynilad’s application for the Extension, and our firm commitment to implement an accelerated capex program under the MWSS board-approved business plan, will strengthen Maynilad’s operational and financial capabilities, and enable us to provide consumers with affordable water service without undue uncertainty nor delay,” the west zone concessionaire said in its position paper.