President Arroyo issued the directive to Department of Public Works and Highways (DPWH) Secretary Simeon Datumanong who sits as the board chairman of the Metropolitan Waterways and Sewerage System (MWSS) where the water rate hike petition has been pending since December last year.
The Presidential directive came after Arroyo met at Malacañang last Tuesday with top executives of Maynilad Water Resources Inc. led by its chairman, Oscar Lopez and president, Rafael Alunan III.
President Arroyo met with them after they gave a briefing to the Cabinet Cluster headed by Datumanong on the status of the Maynilad-MWSS concession agreement. The meeting was also added by MWSS administrator Jose Mabanta.
The water firm served last week a notice of force majeure to suspend their payments of concession fees to the MWSS after President Arroyo frowned upon increases in water rates to recover Maynilad’s losses due to peso-dollar fluctuations.
In a press conference later, Alunan said Maynilad was heartened by the actions taken by President Arroyo on the controversy.
In their petition to the MWSS, the Maynilad sought to impose the so-called Automatic Currency Exchange Rate Adjustment (auto-CERA) which would allow the water firm to pass on to their consumers the burden of the exchange rate fluctuations affecting their dollar-denominated loans.
"Everybody wants a ‘win-win’ solution, possibly a ‘win-win-win,’ with the consumers being the ultimate winners in this issue," Alunan said.
Alunan pointed out that after the Dec. 22, 2000 public hearing, the MWSS "approved in principle" their petition.
However, subsequent events that followed the change of government to the new administration intervened and the MWSS did not act on their pending petition until Maynilad threatened to give up their concession due to mounting losses.
"Circumstances forced us to issue the notice of force majeure. If there is no viable option for us, then we would invoke the contract clause for re-negotiation ‘in the event of material adverse changes’ and we believe that a 100 percent depreciation of the peso was a ‘material adverse change’ on us," Alunan said.
Although the water firm has already issued a force majeure notice, Alunan disclosed, Maynilad paid P1.5 billion in concession fees to the MWSS for January and February this year.
Alunan revealed Maynilad has a cash flow deficit of P6.3 billion as a result of their currency exchange losses and the water firm may likely retrench a significant number of their workers and employees as a result.
"It’s really a horror story for us because we have practically run out of time and have run out of cash," Alunan admitted.
Presidential spokesman Renato Corona said the President recognized that Maynilad indeed has been faced with financial problems largely as a result of more than doubling of their company’s foreign debt obligations since the peso fell to its lowest levels of more than P50 to $1 during the previous Estrada administration.
Maynilad got the concession to run and operate the West Zone service area in August, 1997 when the peso was still at P26 to $1.
"So really they have to pay their foreign loans double the original amount. The government understands that problem, however, it is not only Maynilad which suffered the same setbacks," Corona pointed out.
"On the other hand, let us look into this, perhaps, it is not only force majeure or giving up their concession which is only way out here. Let us look into and study this carefully because it is not that easy to just give back their concession and go into a re-bidding," Corona quoted the president.
He said what turned off President Arroyo from Maynilad’s water rate hike petition was "threats" to give back their concession to the MWSS.