Government eyes $125-M loan to finance Maynilad rehab

The Arroyo administration is eyeing a $125-million loan from the World Bank (WB) to finance the rehabilitation of the Maynilad Water Resources Inc. (Maynilad) after the government took over its concession from the Lopez group.

Maynilad president Fiorello Estuar said negotiations are on-going for the loan which would finance the rehabilitation of Maynilad’s most problematic pipelines and ultimately reduce the company’s non-revenue water (NRW).

According to Estuar, the loan would go through the Manila Water and Sewerage System (MWSS) which was in direct negotiations with the WB along with finance officials.

Estuar said Maynilad has already piloted a stop-gap program that would reduce Maynilad’s losses while the rehabilitation plan was still under deliberations.

"Our NRW in Manila, Pasay and Makati have always been the most problematic," Estuar said. "In these areas, we estimate that we are losing 75 to 90 percent of the water we pump through our pipelines."

Estuar said Maynilad tested its Water Supply Improvement Project in Tondo, the district with the highest NRW of 90 percent.

"These lines are old and we do not have the instrumentation to detect where the leaks are or where the illegal connections are because they are underground," he said.

According to Estuar, Maynilad decided to shut down the pipelines and instead laid out another network above-ground which would be easier to monitor for illegal connections.

"This is a small area of about 3,000 households and we used to pump 30 million liters a day but we were only getting paid for about 3 million liters," Estuar said. "System-wide, it will not have a significant impact but eventually, we will use this model to address systems losses."

After shutting down the underground lines and instead using the lines above ground, Estuar said Maynilad was able to reduce its NRW for that district from 90 percent to only 10 percent.

"That translates to extra water that we were then able to reallocate to other low-NRW areas that now have more water supply," he said.

Estuar said rolling out pipelines above the ground was necessary anyway, since Maynilad would be forced to shut down its underground pipelines when its rehabilitation program goes into full swing.

"In effect, we are just going ahead with the preparatory work by rolling out the alternative distribution network so when we do the actual rehabilitation, we already have this network in place," he explained.

Estuar said Maynilad has already launched a P500-million project that would replicate the Tondo model in other high-NRW areas beginning this year.

"We are using the proceeds from the $120-million bond that was paid to the government when it took over Maynilad," he said. "Now we are just waiting for the rehabilitation plan to be approved and the funding to go through."

Maynilad’s rehabilitation plan is due sometime this year although the government has still to decide when it intended to dispose of the company after its franchise was returned by the Lopez group.

The French multinational Suez Lyonnaise des Eaux has already decided to stay in the Maynilad to keep the consortium intact despite the pull-out of the Lopez-owned Benpres Holdings.

Before the government take-over, Maynilad was 60 percent controlled by Benpres Holdings and the remainder was held by Ondeo Waters, an affiliate of Suez Lyonnaise des Eaux.

Ondeo had expressed its intention to pull out of the consortium last December after Maynilad hit hard times that led to its inability to continue meeting its obligations to the MWSS.

According to sources, however, the appointment of a receiver and the approval of Maynilad’s draft rehabilitation plan had compelled both Maynilad’s creditors and investors to continue discussing the company’s recovery program.