MWSS to present revised contracts to water firms

MANILA, Philippines — The Metropolitan Waterworks and Sewerage System (MWSS) is ready to present revised agreements to the two water concessionaires once the Department of Justice (DOJ) has drafted them.

“Whatever contract will be given to me by the DOJ, we will offer it to the two concessionaires, and if they will accept it, I think that’s the only thing the President wants, that we start a new contract without the onerous provisions,” MWSS administrator Emmanuel Salamat said recently.

The MWSS could not say when the new deals will be finalized.

Maynilad has welcomed Salamat’s recent statement that the water company, as well as Manila Water, are here to stay despite threats from President Duterte to send the military to take over their operations.

“We are glad that MWSS is making that clarification because we and the business community, most especially the banking community, has been asking a lot of questions,” Maynilad president and CEO Ramoncito Fernandez told The STAR.

“We take it positively. It will definitely be a good step (for us),” he added.

Salamat earlier clarified that the MWSS is not shutting both firms out, and that the extension of the water concession deals has not been outrightly revoked, only the board resolution outlining the terms of the extension.

“It is a subject for renegotiation,” he said. “The extension will be a subject for renegotiation, and so we are not saying per se that they are already done,” he added.

MWSS had announced there would be no extension to the concession agreements after their expiration in 2022.

“When they made that public and when they wrote us, we were also very concerned because our plans that go beyond 2022 will be in limbo,” Fernandez said.

While the MWSS is treating Maynilad positively, the water firm is not being complacent on what direction the government is going regarding the concession deals.

“There is still a lot of questions in the mind of the business community and the public as to what will happen to the contracts. (It) is still hanging,” Fernandez said.

While it is willing to cooperate and discuss, Maynilad admitted that its nod on the supposed new agreement would have to be studied.

“It really depends on the alleged onerous provisions of the contract mentioned by different (people), we will have to see the entire contract,” Fernandez said.

Maynilad has requested for a meeting with the MWSS to discuss things but it has yet to get a response from the agency.

Long-term concerns

Maynilad vice chairman Isidro Consunji said that if the government’s decision to cancel the extension of the water concession agreement until 2037 pushes through, it could spell a water shortage in the long run since both water companies would have limited funding sources to pursue expansion projects within their respective franchise areas.

He added that water companies like Maynilad have already secured funding from banks for long-term expansion projects until 2037. And according to Consunji, Maynilad has loans amounting to P42 billion. Cancelling the concession agreement would prevent the water firms from securing long-term loans for these projects.

“It appears if the contract is shortened, the capital expenditure (capex) to finance traditional supply will be suspended because we would not have the capacity to pay loans by 2022,” Consunji said.

“Access to funding to pursue necessary capex would also be limited,” he said.

This is because banks and financial institutions base their lending on the concession agreement, with the MWSS deciding on the tariffs of the water concessionaires.

“If they cancel the extension, the two water concessionaires will go bankrupt because under our loan covenants, any material change in the contract will make all loans due and demandable,” Consunji said.

Surigao del Norte Rep. Robert Ace Barbers, who also sits as vice chairman of the joint House committees on Good Government and Public Accounts, said the water services of these firms in Metro Manila may be transferred to MWSS in the next two years.

“The government, through the MWSS, can make use of the next two years preparing to operate the water delivery system, just in case there is really a need to rescind the contracts of these two water companies,” he said.

“Thus, the operation, control and management will be reverted back to MWSS,” he added. “Perhaps within the next two years we can do that already. But as of now, our (House probe) investigation is not geared towards that direction,” Barbers maintained.

Gov’t should honor contract

Former president Fidel Ramos, the brains behind the privatization of water services in the country, in a Dec. 4 letter to Duterte, essentially said the government should honor the MWSS Concession contract.

Ramos said the privatization of MWSS enabled Metro Manila residents to have access to water. Before 1997, the MWSS was unable to fulfill its mandate, which resulted in very poor service to the public, water loss of around 60 percent, not to mention decades of under-investment and mounting government debt in excess of $1 billion.

Furthermore, Ramos said the 1997 MWSS Privatization and its Concession Agreement is recognized as the first of its kind in Asia and is viewed as an example for other countries moving toward the same.

Vice President Leni Robredo urged the administration yesterday not to be reckless in deciding on the issue of the water concession deals as this could have a chilling effect on local and foreign investors.

Robredo also said she is in favor of a review of the government’s alleged “onerous” contracts with water concessionaires Manila Water and Maynilad.

“There should be a review, especially if it appears that there were onerous provisions in the contracts,” the Vice President said over dzXL.

She, however, pushed for a “calmer” approach of the government in pushing for better water concession agreements. – With Danessa Rivera, Delon Porcalla, Iris Gonzales, Helen Flores