Maynilad bills gov’t for revenue losses

MANILA, Philippines - West Zone concessionaire Maynilad Water Services Inc. is calling on the government to pay for losses incurred from the refusal of Metropolitan Waterworks and Sewerage System (MWSS) to implement a rate hike.

Citing Maynilad’s letter to the Department of Finance, the firm said in a statement yesterday  the refusal of MWSS to implement the rate adjustment has resulted in revenue losses to the company for the last two years.

It added that it continues to incur losses worth at least P208 million for every month of delay of implementation of the rate adjustment.

Maynilad said it “was constrained to take this difficult step only after its pleas for the implementation of the Appeals Panel’s decision that was issued in December 2014 were repeatedly rebuffed by the current MWSS administration.”

Maynilad and Manila Water Co. Inc. sought separate arbitration proceedings with the International Chamber of Commerce (ICC) in 2013 after the MWSS rejected petitions filed to raise their rates as part of their respective business and investment plans.

In December last year, the ICC ruled in favor of an increase in the base water rate for Maynilad.

A decision, however, has yet to be issued for Manila Water.

MWSS has deferred the implementation of any water rate adjustment in Metro Manila citing that it wants to wait for the conclusion of the arbitration proceedings of Manila Water first.

“We find it more prudent to wait for the conclusion of the arbitration with Manila Water before making any tariff adjustments because we don’t want any inconsistencies in the way we conduct our regulatory mandate as defined in the concession agreement,” MWSS chief regulator Joel Yu said earlier.

Should the ICC arbitration panel rule in favor of Manila Water’s petition for a rate hike and recovery of income tax – same as Maynilad’s petition – the MWSS would implement the ruling.

In the event that the ICC issues a decision against  Manila Water’s petition, Yu said the MWSS would seek a “remedy” to harmonize the arbitration award to regulation.

“MWSS and the Regulatory Office never once told us that they would refuse to honor and implement the arbitral award unless it is consistent with the outcome of another arbitration where we are neither a party, nor have we played any part whatsoever,” Maynilad chief finance officer Randy  Estrellado said.

The two concessionaires operate independently and have their respective service areas in Metro Manila and surrounding municipalities.

Maynilad, which has Metro Pacific Investments Corp. led by businessman Manuel V. Pangilinan as a major shareholder, serves the west zone of Metro Manila covering Manila (all but portions of San Andres and Sta. Ana), Quezon City (west of San Juan River, West Ave.), EDSA, Congressional, Mindanao Ave., northern part from the districts of the Holy Spirit and Batasan Hills, Makati (west of South Super Highway), Caloocan, Pasay, Parañaque, Las Piñas, Muntinlupa, Valenzuela, Navotas and Malabon, cities of Cavite like Bacoor and Imus and towns of Kawit, Noveleta and Rosario.

Ayala-led Manila Water, meanwhile, covers parts of Quezon City and Makati, the southeastern parts of Manila, Taguig, Pateros, Marikina, Pasig, San Juan, Mandaluyong, and Rizal province.

Maynilad said it was invoking a Philippine government undertaking issued on March 17, 2010 which requires the state to “indemnify the concessionaire in respect of any losses” incurred by a delay on the part of any government-owned agency in implementing any increase in the standard rates beyond the date for its implementation in accordance with the concession agreement.

Maynilad said the delayed implementation of the tariff adjustment has resulted in very significant amounts of  lost revenues for the company in the past two years or since  Jan. 1, 2013, when the rate hike  should have been implemented.

Maynilad president and CEO  Victorico Vargas,said “the continued refusal of MWSS to discharge a clear legal duty to implement a final and binding award, in disregard of Maynilad’s rights under the concession agreement, threatens the viability of the concession and the long-term interests of its customers and creditors.”

The International Court of Arbitration’s appeals panel  has upheld Maynilad’s alternative rebasing adjustment, which called for an increase in its basic charge  by an average of P3.06 per cubic meter from the current basic rate of P31.28.

Manila Water, on the other hand, was originally asking for an increase of P5.83 per cubic meter but lowered it to 1.48 upon the order of the MWSS.