Maynilad seeks P3.44-B compensation

MANILA, Philippines - West Zone water concessionaire Maynilad Water Services Inc. is seeking sovereign compensation of P3.44 billion for revenue losses it claims to have incurred from Jan. 1, 2013 to February 28 this year as a result of the postponement by the Metropolitan Waterworks and Sewerage System (MWSS) of the implementation of the increase in its basic water charge as awarded after its arbitration proceedings.

The company, in statement issued yesterday, said the amount of the claims would continue to rise as long as the MWSS declines to implement the rate hike.

The MWSS has put on hold the implementation of the awarded base water rate hike until the arbitration process for both metro water concessionaires—The other being Ayala-led Manila Water Company Inc.— have been completed.

MWSS chief regulator Joel Yu has said this is meant to prevent the occurrence of “inconsistencies” in the implementation of the concession agreement.

This puts on hold talks between the water regulator and Maynilad for the proposed three-year implementation of a 9.8 percent increase in its 2013 average basic water charge of P31.28 per cubic meter. This translates to an average increase of P3.06 per cubic meter in its basic charge.

The company has formally communicated this with the Department of Finance.

“Maynilad and Manila Water are completely separate and different from each other. They have their own concession agreements, their own assigned areas to improve water and sewerage service in, their own different rates, and their own arbitration proceedings which are independent of each other,” the company said.

“Under the sovereign undertaking, the national government undertook to compensate Maynilad if its rates adjustments are delayed by MWSS,” it added.

The MWSS has maintained that Maynilad would not incur losses because it is allowed to recover its investments for the remainder of the concession agreement, through succeeding rate rebasing that would be conducted in the years 2017, 2022, 2027 and 2032.

“In other words, assuming there is in fact a shortfall in Maynilad’s recovery of its investments, the same will be addressed by way of a rate adjustment in a future rate rebasing exercise. There is no lost revenue, in effect. That is the model under the Concession Agreement and we are faithfully observing it,” said Yu.

He said the government has already submitted its position to the Finance department on Maynilad’s claim for a sovereign guarantee, maintaining that “the provisions of the concession agreement on the matter are quite clear and that the requirements for Maynilad to make a valid claim are not present.”

Maynilad maintains that the postponement of the implementation of the rate hike threatens its operations

“Each day that we are unable to collect the proper rates, our service to the public is affected and ultimately this will impact our revenues. In the end, it threatens our viability as well as our and MWSS’s ability to provide the services the consumers need and deserve,” the company said.

In September 2013, the MWSS denied the petition of Maynilad and Manila Water to raise water rates in accordance to its five-year rate rebasing scheme.

In July 2013, the MWSS has also passed a resolution stating metro water concessionaires cannot pass on corporate income tax to consumers.

This prompted Maynilad and Manila Water to seek arbitration as provided for in their concession agreement.

On Dec. 29,the ICC then upheld the alternative rate rebasing adjustment of Maynilad allowing it to raise its basic water charge by P3.06 per cubic meter. Of this, P2 accounts for the recovery of income tax.

Maynilad services the west zone of Metro Manila covering Manila (all but portions of San Andres and Sta. Ana), Quezon City (west of San Juan River, West Ave.), EDSA, Congressional, Mindanao Ave., northern part from the districts of the Holy Spirit and Batasan Hills, Makati (west of South Super Highway), Caloocan, Pasay, Parañaque, Las Piñas, Muntinlupa, Valenzuela, Navotas and Malabon, cities of Cavite like Bacoor and Imus and towns of Kawit, Noveleta and Rosario.

Maynilad is co-owned by Pangilinan-led Metro Pacific Investments Corporation (MPIC) and Consunji-controlled DMCI-Holdings Inc.

Ayala-led Manila Water, on the other hand, services the Metro Manila east zone concession area that covers parts of Quezon City and Makati, the southeastern parts of Manila, Taguig, Pateros, Marikina, Pasig, San Juan, Mandaluyong, and Rizal province.