MINUS UNFAVORABLE ITEMS

DOF’s Dominguez tells Maynilad, Manila Water to draft new deal

Manila Water Co. In. and Maynilad Water Services Inc. have been asked by Finance Secretary Carlos Dominguez III to outline a new concession deal with the government, minus the disadvantageous items to avoid “long” and “drawn-out discussions,” the Cabinet official said Friday.

“I've actually talked to the Ayalas and one of the partners of Maynilad and I already told them,” Dominguez told reporters in a chance interview in Manila.

Manila Water is led by the Ayala group, while Maynilad is owned and operated by a joint venture of Pangilinan-led Metro Pacific Investments Corp. and the Consunji-led DMCI Holdings.

“You guys (Manila Water and Maynilad) should also put yourselves in our position and see what items are disadvantageous to the government, then you should make your proposals already so we don't have to go through this long, drawn-out discussions,” the Finance chief said.

The concession agreements that have been extended to 2037 were canceled by the Metropolitan Waterworks and Sewerage System (MWSS).

During a board meeting last December 5, the MWSS directors revoked a resolution drawn during the Arroyo administration approving the extension of the concession agreements. The resolution extended the concession agreement by another 15 years from 2022.

“This is my personal opinion,” Dominguez said. “The contracts should recognize that times change and you cannot fix the return on a fixed basis.”

Any agreement should be based on prevailing market conditions, Dominguez noted.

“It should be referenced to what the interest rates are at that particular time.”

At the time that the concession deals were approved, “the Philippines was paying 700 basis points over the benchmark of 6%,” the Finance chief said.

“Our best spread is now 32 [basis points] over benchmark of 1.7% to 1.8%. You have to adjust also to be fair to consumers,” Dominguez said.

President Rodrigo Duterte is protesting a liability clause in the concession agreements that holds the government liable if it interferes with the implementation of agreed water rates and accountable to indemnify the companies for losses incurred.

The Permanent Court of Arbitration in Singapore has ordered the Philippine government to pay Maynilad around P3.6 billion and Manila Water P7.4 billion as compensation for losses or damages due to the liability clause.

But Manila Water and Maynilad are no longer pursuing their respective arbitral wins and will instead coordinate with the government to review the supposedly onerous provisions in the concessions deals. —VDS, GMA News