Maynilad, government ink revised concession deal

Maynilad Water Services Inc. and the Philippine government, through the Metropolitan Waterworks and Sewerage System (MWSS), have signed a new concession agreement following negotiations ordered by President Rodrigo Duterte, who criticized the old deals due to alleged onerous provisions.

In separate disclosures to the Philippine Stock Exchange on Wednesday, Maynilad’s principal shareholders Metro Pacific Investments Corporation and DMCI Holdings Inc. said that the revised concession agreement between the water distributor and the government was signed on May 18, 2021.

The new concession deal “will govern the provision by Maynilad of water and wastewater services in the West Zone Area upon its effectivity.”

The signing of the revised concession agreement between Maynilad and the MWSS came more than one month after the Ayala-led Manila Water and the government inked a new concession deal in late March. 

Malacañang has bared some of the key features in the revised concession agreement between the government and Manila Water. 

Meanwhile, the salient features of the revised concession agreement between Maynilad and the MWSS are the following:

• Confirmation of the continuation of the concession period until July 31, 2037
• Imposition of a tariff freeze until 31 December 2022
• Removal of Corporate Income Tax from among Maynilad’s recoverable expenditures as well as the Foreign Currency Differential Adjustment
• Capping of the annual inflation factor to 2/3 of the Consumer Price Index
• Imposition of rate caps for water and sewerage services to 1.3x and 1.5x, respectively, of the previous standard rate
• Removal from the Republic of the Philippine’s (RoP) Letter of Undertaking of the non-interference of the government in the rate-setting process, and the limitation of the RoP’s financial guarantees to cover only those loans and contracts that are existing as of the signing of the revised concession agreement
• Replacement of the market-driven Appropriate Discount Rate with a 12% fixed nominal discount rate
• Retention of the rate rebasing mechanism where - subject to the rate caps - 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 1997 concession agreements came under scrutiny after Manila Water and Maynilad won in separate multi-billion peso arbitration cases abroad, infuriating Duterte.

He protested on several occasions in 2019 a clause in the concession agreements that holds the government liable if it interferes with the implementation of water rates and accountable to indemnify the companies for losses incurred.

He also threatened to arrest the owners of the water firms for alleged economic sabotage.

The two water companies later decided not to demand payment amid Duterte’s tirades against them.

Maynilad serves customers in the cities of Caloocan, Las Piñas, Makati, Malabon, Manila, Muntinlupa, Navotas, Parañaque, Pasay, Quezon, Valenzuela.

It also services certain areas in Cavite such as the cities of Bacoor, Cavite, and Imus, as well as the towns of Kawit, Noveleta and Rosario.

The principal shareholders of Maynilad include Metro Pacific (52.80%), DMCI Holdings Inc., (25.24%) and Marubeni Corporation (20%). —KBK, GMA News