Palace warns water firm over payment suspension

Malacañang warned the Maynilad Water Resources Inc. yesterday against implementing its notice of force majeure to suspend payments of concession fees to the Metropolitan Waterways and Sewerage System (MWSS).

Presidential Spokesman Renato Corona issued the warning when Maynilad served the default notice to the MWSS Thursday after President Arroyo frowned on the proposed water rate increase. Maynilad said the increase was to recover company losses due to peso-dollar fluctuations in the repayment of foreign loans.

Corona told The STAR yesterday Mrs. Arroyo won’t be threatened by Maynilad into government action to bail out the financially troubled water firm, and instead would just re-bid its concessions to interested parties.

"They bidded on certain presumptions and costings. If they find no alternative viable option, they are saying they will now return the concession to the government," said Corona as he accused the water company of trying to pull a fast one.

Maynilad president Rafael Alunan III earlier warned that the firm may no longer continue with its new installation projects for the West Zone if the government refuses to re-negotiate the concession agreement and allow it to recoup losses.

Aside from maturing bridge loans, Alunan said Maynilad, which won the bid in 1997, has to settle P3.1 billion worth of short-term guaranteed loans and some P2.7 billion worth of maturing debts from March to December 2001.

The debts represent the arrears it inherited from the MWSS when the service area was privatized.

"You cannot separate that (inherited loans) from the concession. They are now suddenly asking for generous terms after winning it. It would be unfair to the No. 2 and No. 3 bidders," Corona pointed out.

"We’ll bid it out again if necessary because we cannot allow the water rates to be increased if that’s their reason," he said.

Corona, however, admitted the force majeure notice could pose problems for the Arroyo administration since it could impact on public utility firms doing business with the government.

"We also just inherited this problem from the previous administration," he said.

While conceding that a volatile foreign exchange rate was partly responsible for Maynilad’s losses, Corona said the government believed the company’s financial troubles were mostly "system losses" related to leaks and illegal connections.

"These are what we call systems losses where the company could improve its revenue collections," Corona pointed out.

He also noted with concern announcements by Maynilad that it may be forced to lay off workers as a cost-cutting measure, which meant government had to address the swelling ranks of the unemployed.

Corona ruled out a possible subsidy to address the Maynilad problem, saying the Arroyo administration is facing a projected P225-billion budget deficit in the present fiscal year.

On the other hand, he said Maynilad’s failure to pay its maturing foreign loans may reflect badly on the country’s image abroad.

"It’s not really that easy whether we grant their petition or raise water rates... The impact is not only the grant of water rate increase," Corona said, adding a compromise might have to be worked out.

Mrs. Arroyo earlier directed the Department of Finance and the MWSS to meet with Maynilad management to look for ways for the company to recoup some P2.3 billion in losses due to peso-dollar fluctuations.