MANILA, Philippines — Pangilinan-led Maynilad Water Services Inc. is set to continue operations in the west zone service area until 2037 as it signed a revised concession agreement (RCA) with the government.
In a disclosure to the Philippine Stock Exchange, Maynilad parent company Metro Pacific Investments Corp. (MPIC) said that the RCA was signed on May 18 with the Metropolitan Waterworks and Sewerage System (MWSS), which confirms the continuation of the concession period until July 31, 2037.
Maynilad’s RCA features terms similar to the RCA that was signed by east zone concessionaire Manila Water Co. Inc. last month, such as the imposition of a tariff freeze until Dec. 31, 2022.
It also removes the corporate income tax from Maynilad’s recoverable expenditures, as well as the foreign currency differential adjustment (FCDA).
The RCA also lowers the inflation factor to two-thirds of the Consumer Price Index adjustment and imposes rate caps for water and sewerage services to 1.3x and 1.5x, respectively, of the previous standard rate.
In addition, the RCA retains the rate rebasing mechanism, subject to the above-mentioned rate caps, where the rates for the provision of water and wastewater services will be set at a level that will allow Maynilad to recover, over the term of the concession, expenditures efficiently and prudently incurred, and to earn a reasonable rate of return.
The RCA also replaces the market-driven appropriate discount rate with a 12 percent fixed nominal discount rate.
Similar to Manila Water’s RCA, Maynilad said its RCA also removes the non-interference clause of the government in the rate-setting process, as well as limits the Philippines’ financial guarantees to cover only those loans and contracts that are existing as of the signing of the RCA.
In 2019, President Duterte ordered the Department of Justice (DOJ) to review the concession agreements after discovering what he described as onerous provisions in the existing contracts.
This was after the Permanent Court of Arbitration in Singapore issued a decision stating that the Philippine government should pay P7.4 billion to Manila Water and P3.4 billion to Maynilad for the losses they suffered from unenforced water rate hikes.
In the same year, the MWSS revoked the extension of the concession agreements until 2037 of both Manila Water and Maynilad Water Services.
MWSS chairman and acting administrator Reynaldo Velasco commended the signing of the RCA with Maynilad.
“The signing of the new concession agreement is a big step towards water security and it’s a win-win for all stakeholders,” Velasco said.
Velasco expressed optimism that with the new agreement, various water security projects can now move forward.
“Public-private partnership is still the best option for water infrastructure projects at this time,” he said.
The MWSS said that Maynilad’s capital expenditure projects would include the rehabilitation and replacement of old pipelines, installation of new pipes in unserved areas, and construction of new pumping stations, reservoirs and treatment facilities, among others that would result in better service to its customers.
Maynilad is the largest private water concessionaire in the Philippines, serving over 1.4 million customers. It maintains and operates some 6,831 kilometers of primary, secondary and tertiary pipelines.
It serves the west zone or the areas of Caloocan, Pasay, Parañaque, Las Piñas, Muntinlupa, Valenzuela, Navotas, Malabon, and certain portions of Manila, Quezon City, Makati and Cavite.
In contrast, Manila Water serves the east zone, which encompasses parts of Makati, Mandaluyong, Pasig, Pateros, San Juan, Taguig, Marikina, most parts of Quezon City, portions of Manila, as well as several towns in Rizal.
The principal shareholders of Maynilad include MPIC, with a 52.80 percent stake, DMCI Holdings, Inc. (25.24 percent) and Marubeni Corporation (20.00 percent).