Manila Water warns tariff hike deferment to affect investment plan

MANILA, Philippines- Ayala-led Manila Water Co. Inc. on Friday warned that the decision of regulator Metropolitan Waterworks and Sewerage System preventing water concessionaires from implementing a tariff hike this year would force the Metro Manila east zone water distributor to cut back on its investments in wastewater treatment. Luis Juan Oreta, Manila Water chief finance officer, said the “environment" would be the first casualty of the MWSS order. “By and large, there will be limited impact on our revenues...Our capital expenditures (will be affected)...if uncertainty (on the tariff hike) persists for a long time. A good portion of this capex is for wastewater treatment or cleaning up the environment," said Oreta. He said Manila Water sees its revenues to post double-digit growth this year. For its 25-year concession, which will expire in 2022, to supply water to Metro Manila's east zone, the company has committed to invest $187 billion. For this year, Manila Water will be spending some P10 billion in capital outlay. Wikipedia defines wastewater treatment as “the process of removing contaminants from wastewater and household sewage, both runoff (effluents) and domestic. It includes physical, chemical and biological processes to remove physical, chemical and biological contaminants. Its objective is to produce a waste stream (or treated effluent) and a solid waste or sludge suitable for discharge or reuse back into the environment." “Our capex program for this year is already funded but the rest of our capex may be affected," Oreta said, noting that it would be difficult to get a credit line without a certain source of the payment for the loan. He also said Manila Water is willing to “mitigate water rate hike but not eliminate it", adding that its investment plan hinges on scheduled charges imposed to its customers. We (Manila Water and MWSS) have an agreed tariff scheduled for five years. It's puzzling why they're refusing to implement it," Oreta said. He added that the company is eyeing to tap the debt market for over P1 billion in additional funds this year. Government officials earlier revealed that President Gloria Macapagal-Arroyo and the cabinet have approved “in principle" a proposal to extend the water concession agreement for 10 years or until 2032. In exchange, the government has deferred the implementation of the water rate hike for a month from January this year to February. Manila Water said it has estimated that under the proposed extension, it will be spending P355 billion in total investments for the 35-year period or some P170 billion more. Oreta added that Manila Water and its west zone counterpart, Maynilad Water Services Inc., may still be able to ask MWSS to reconsider its decision. “There are dispute resolution clauses in our concession contract and there's an arbitration panel to hear our sides," he said. In December, Maynilad announced plans to increase charges by P10.96 per cubic meter of water. Similarly, at around the same time, Manila Water sought approval to impose higher rates of P6.90 per cubic meter of water. Oreta said the basic additional rate that Manila Water wanted to impose was P2.40 per cubic meter. GMANews.TV