MANILA, Philippines — The government still prefers to work with the country’s two biggest water companies and is not yet open to inviting new players in the industry.
In an interview, Justice Secretary Mernardo Guevarra said the government will only consider giving the contracts to other water providers should renegotiation with the current concessionaires collapse.
The news sent Manila Water Company Inc.’s shares higher on Wednesday, recovering from the previous day’s rout amid a legal tussle with the Duterte administration that’s casting uncertainty on the fate of the concessionaires’ water supply contract.
President Rodrigo Duterte has verbally attacked both Manila Water and Maynilad Water Services Inc. after a Singapore-based arbitration panel ordered the Philippine government to indemnify the two water providers for losses they suffered from an unenforced rate hike.
Duterte has accused both utilities of forging contracts with “onerous” provisions that are disadvantageous to the public. The Metropolitan Waterworks and Sewerage System, the Philippines’ water regulator, has rescinded the 15-year extension of the water concession deals. The existing contracts will expire in 2022.
New players can come in if negotations fail
“We are still considering them. We are just renegotiating their contracts,” Guevarra told reporters, adding the government will delete the “onerous” provisions that the Department of Justice previously identified in the concession deals.
“So if we don’t have any agreement, then we have to go to court so that the rescission [of the contracts] may be actually done. But only then will we open the field to other competitors,” he continued.
Shares in Manila Water climbed 14.17% on Wednesday to close at P6.85 apiece at the stock exchange. On Tuesday, shares in the embattled Ayala-led water company took a beating and dipped by more than 40% intraday, the biggest drop on record.
Meanwhile, shares in Metro Pacific Investments Corp. — which holds the majority of economic interest in Maynilad — were up 9.40% on Wednesday while DMCI Holding Inc., a shareholder of Maynilad, climbed 9.61%.
Business leaders have warned that moves against the two water companies could spook investors at a time Duterte seeks more private capital to bankroll his ambitious infrastructure plan.
Amid pressure from the firebrand leader — who has repeatedly promised businessmen he will respect the sanctity of contracts — Maynilad and Manila Water agreed to drop more than P10 billion in compensation claims from the government.
According to MPI, banks have suspended lending to Maynilad, adding that the shortening of the concession term puts new projects in limbo.
Separately, Manila Water said that based on its initial evaluation of its cash flows, it can still sustain its operational needs and it was looking forward to the early resolution of issues so that approved projects that will require additional funding will be executed.
Editor's Note: Manuel V. Pangilinan, the chairman of Maynilad, is also chief executive of PLDT. A unit under PLDT's media conglomerate has a majority stake in Philstar Global Corp., which runs Philstar.com. This article was independently produced following editorial guidelines.
— with Kristine Joy Patag