Last October 2001, both parties signed Amendment 1 of the February 1997 Concession Agreement, basically allowing MWSI to adjust its water rates and recover the foreign exchange losses that the company absorbed after the drastic depreciation of the peso against the dollar following the Asian financial crisis in 1997.
"In the notice to the MWSS, Maynilad asked the MWSS to perform its obligations, notably, to enter into an agreement with Maynilad on the action plan on service targets, the rates to be implemented in January 2003, and the issues to be addressed on the concerns of Maynilad’s lenders which constitute the main elements of Amendment No. 1," Benpres corporate secretary Enrique Quiason told the Philippine Stock Exchange.
MWSI is a joint venture corporation whose capital stock is 59 percent owned by Benpres; 20 percent by Ondeo of France and another 20 percent by Lyonnaise Asia Water Ltd. In 1997, the consortium bagged the right for a 25-year concession of the MWSS’s West Service Area, providing it the sole right to operate and maintain the water utility in the said area.
Quiason cited that since the signing of the new agreement, the MWSS board, however, has repeatedly extended the deadline for its implementation which was originally set for Jan. 3, 2002.
"The subsequent deadlines set for June 30, July 31 and Oct. 31 this year have also lapsed. Maynilad declined any further extension of the latest deadline when it lapsed last week," he said.
In addition, Quiason said MWSI is also seeking the full implementation of the foreign exchange loss recovery mechanism approved by MWSS last year under the same amendment. Under the rate rebasing mechanism, set to take effect in January 2003, MWSI will be able to recover its forex losses through a series of gradual tariff adjustments over several years to cushion the impact on its customers.
When MWSI took over the concession, it was required to assume MWSS debts totaling $800 million or about P20 billion at the then prevailing exchange rate. But due to the peso devaluation, these debts have doubled to around P40 billion.
MWSI officials said the recovery of forex losses and rate rebasing are major factors that would secure the company’s $350-million term loan that would be crucial to its operations, particularly in improving service delivery, reducing non-revenue items, and expand its coverage areas in the southern part of Metro Manila. – Conrado Diaz Jr.