Manila Water urges MWSS to settle rate rebasing issue

BY IRIS CECILIA C. GONZALES, Senior Reporter/BusinessWorld Ayala-owned Manila Water Co., Inc. urged state-owned Metropolitan Waterworks and Sewerage System (MWSS) to settle concerns on rate adjustments so that investors can prepare for their bids for the government’s stake in Maynilad Water Services, Inc. (Maynilad). "The government needs to settle the rate rebasing issue immediately because this will help buyers determine their bids," Manila Water President Antonino T. Aquino said in an interview. Manila Water is leading a consortium vying for the government’s majority stake in Maynilad. Other groups vying are the consortium of DM Consunji, Inc. and Metro Pacific Group, a group by Noonday Asset Management Asia Pte., Ltd. of Singapore; and Karunakaran Ramchand of India. The government, through MWSS, will bid out its 83.97% stake in Maynilad, the troubled water utility firm that used to be a joint venture between the Lopez Group and French group Suez, for a minimum of $56.4 million or roughly P3 billion. A $30-million performance bond is also required from the winning bidder. The issue on rate rebasing or whether Maynilad would be allowed to adjust rates in 2008 has been a major concern for prospective buyers, Mr. Aquino said. Under the original concession agreement, Maynilad is scheduled for rate rebasing by 2008. The move would allow Maynilad to adjust rate, based on inflation, investments and foreign currency adjustments. Some of the prospective bidders such as DMCI favor a rate adjustment but Mr. Aquino said the rate rebasing may be deferred to 2013. The average Maynilad rate is P30 per cubic meter. "We don’t want a situation that bidders will be over aggressive in their bids because they know they will get a rate rebasing by 2008," Mr. Aquino said. Government corporate counsel Agnes VST Devanadera said MWSS will settle the issue this week. "We’re doing the consultations already. Some bidders are concerned that if there will be no rate rebasing, they will not be able to recover their investments immediately but there are other ways to recover their investments," Ms. Devanadera said in a separate interview. Manila Water’s Mr. Aquino expressed hopes the issue would be settled soon so that bidders can properly prepare for their bids, which would significantly be based on allowable rate adjustments. The four investor groups have until Nov. 7 to submit their technical and financial bids, after MWSS extended the Oct. 24 deadline. MWSS hopes to conclude the sale by December. Investors sought an extension of the bidding date because of the delay in receiving the transaction documents necessary for them to determine their bids. The bidders received the transaction documents from MWSS last Sept. 21 or two weeks after the original schedule which was Sept. 6 but MWSS officials said they didn’t want to rush the documents. The MWSS took control of Maynilad last year from Benpres Holdings, Inc., which decided to get out of the water business because of Maynilad’s huge losses. Maynilad services the West Zone, which covers Caloocan, Manila, parts of Quezon City, Pasay, Valenzuela, Parañaque, Muntinlupa, Malabon, Navotas, Las Piñas, and areas in Cavite.