In an urgent petition to the Department of Public Works and Highways, Maynilad president Rafael Alunan said the company also wants to be allowed to impose an automatic currency exchange rate adjustment (CERA).
According to Alunan, this would allow Maynilad to recover past foreign exchange losses and those to be incurred in the future, the same way other public utilities were allowed to use the CERA mechanism.
Alunan made no mention of how "temporary" the increase would be, saying only that the company needed the adjustment to be able to continue its expansion projects and meet its target to deliver water to all consumers in its West Zone franchise area by 2002.
Without the rate adjustment, Alunan claimed the company would be forced to scale down or even completely stop its projects to limit its financial hemorrhage.
Alunan explained that the volatility of the foreign exchange rate has eaten into Maynilad’s finances since it had to assume 90 percent of the foreign obligations accumulated by the Metropolitan Waterworks and Sewerage System (MWSS) as part of the privatization agreement.
The amount, equivalent to an initial $800 million, was assumed when Maynilad took over half of MWSS’ service area, at a time when the exchange rate was P26 to $1.
The other half of the service area was assumed by Manila Water but it only had to assume 10 percent of the state-owned corporation’s foreign obligations.
As a result, Alunan said Maynilad sustained foreign exchange losses involving P2 billion that went into debt service instead of the original purpose of expanding the water system.
The company has been rehabilitating the West Zone’s 2,534-kilometer pipe network under a 25-year concession, laying new pipes and bringing the quality of potable water up to global standards.
Since the privatization of the service area, Alunan said Maynilad had so far spent $4.5 billion on the project. He said it has set aside P8 billion in capital expenses plus P6 billion to next year and the year after.
Alunan said the amount would be used to add 1,000 kilometers of pipes to new service areas and distribute water to 200,000 households. Maynilad is also set to replace existing pipes, install 600 fire hydrants, repair 35,000 identified leaks and reduce losses due to leakage and pilferage.
At the end of the period, Maynilad said it would have raised the number of people served from 4.5 million to 6.5 million and also expand the sewerage system in the area.
Maynilad is a consortium formed by Benpress Holdings Corp., Suez Lyonnaise des Eaux of France and Lyonnaise Asia Water Limited.