Malacañang opposed to planned water rate hike

President Arroyo frowned on the proposed increase of water rates by Maynilad Water Resources Inc. to recover losses due to peso-dollar fluctuations affecting re-payment of foreign-denomination loans.

The Palace Press Office disclosed yesterday that President Arroyo had ordered the Department of Finance and the Metropolitan Waterways and Sewerage System (MWSS) to meet with Maynilad management to look for other ways to recoup their reported P2.3 billion losses.

President Arroyo issued the directive during the Cabinet meeting at Malacañang last Tuesday where the Maynilad rate hike petition pending with the MWSS was taken up.

The presidential directive to the MWSS was announced only yesterday by the Palace Press Office.

In their petition to the MWSS, Maynilad sought to impose the so-called Automatic Currency Exchange Rate Adjustment (auto-CERA) which would allow the water firm to raise its rates and pass on to their consumers the burden of exchange rate fluctuations affecting their dollar-denominated loans.

"I am sure there will be a solution other than the auto-CERA," the President was quoted telling the Cabinet during their meeting.

The Cabinet noted that aside from the auto-CERA, there are still other options open to the Lopez-owned water firm to recover financial losses due to exchange rate fluctuations, officials said.

One of the options was the tapping of various modes of bridge financing such as Maynilad shareholders themselves, a government guarantee to help secure financing from the consortium led by the Asian Development Bank, or though a commercial loan from one of the government financial institutions.

Maynilad officials had earlier warned that the firm is ready to give up its concession if the government would not allow them to increase their charges.

The Palace, however, dismissed Maynilad’s threats, citing the government is in fact contemplating getting back the MWSS concession from the company.

The MWSS concession was won by Maynilad for the West Zone service area of the MWSS, while the Ayala-owned Manila Water Co. got the East Zone service area.

"The President and the Cabinet also discussed the possibility of subjecting the West Zone service concession to a re-bidding if the MWSS and Maynilad would not be able to come up with any agreement," the Palace Press Office disclosed.

Maynilad president Rafael Alunan III warned that the firm may no longer continue with new installation projects if the government refuses to renegotiate the concession agreement and allow it to recoup losses from peso depreciation.

Alunan revealed the company faces serious cash flow problems with over P4.8 billion in bridge loans from various international banks due and "demandable" this month.

Aside from the maturing bridge loans, Alunan said, Maynilad has to settle P3.1 billion in short-term guaranteed loans and some P2.7 billion worth of maturing debts from March to December 2001, representing the debts it inherited from the MWSS when the service area was privatized. – Marichu Villanueva