PH govt, Maynilad sign new 26-year deal


The Philippine government through the Metropolitan Waterworks and Sewerage System (MWSS) and Maynilad Water Services Inc. have executed a new and revised 26-year concession agreement for water services in Metro Manila’s West Zone and parts of Cavite.


In a disclosure to the stock exchange, Maynilad’s parent company Metro Pacific Investments Corporation said the new agreement will last July 31, 2037, and has a provision for a tariff freeze until December 31, 2022.


Also, Maynilad will no longer be allowed to recover corporate income taxes and the foreign currency differential adjustment (FCDA) was taken out of the agreement.


FCDA is a quarterly-reviewed tariff mechanism that allows concessionaires to recover losses arising from fluctuations in foreign exchange rates. This mechanism was included in the previous agreement for foreign currency-denominated loans that are used to fund the expansion and improvement of water and sewerage services of Maynilad.


The revised agreement also set the annual inflation factor to 2/3 of the consumer price index, and capped water and sewerage services to 1.3 times and 1.5 times, respectively, of the previous standard rate.


And instead of the market-driven appropriate discount rate, Maynilad is now limited to a 12-percent fixed nominal discount rate.


However, the original rate rebasing mechanism is retained. The mechanism determines the charges of Maynilad for its water and sewerage services based on performance, expenses, earnings, unrecovered investments and service improvement plans. This will be done every five years.


MWSS said the new concession deal will help Maynilad puts its water projects back on track.


“The signing of the new concession agreement is a big step toward water security and it’s a win-win for all stakeholders,” said MWSS Chairman and Acting Administrator Reynaldo Velasco.


In 2019, Maynilad and Ayala-owned Manila Water Co. Inc. came under fire from President Rodrigo Duterte over alleged “onerous” provisions in their contracts with the MWSS. The President then ordered the Department of Justice to review the government’s first deals with the two firms that were signed in 1997.


What also angered the President was the water supply crunch in Metro Manila in March 2019 and the Singapore arbitration court rulings ordering the government to pay Manila Water and Maynilad more than P10 billion in damages.


Manila Water signed a revised agreement with the MWSS last April.


The West Zone concession area  of Maynilad is comprised of portions of the cities of Manila, Quezon City and Makati; and the entire of Caloocan, Pasay, Parañaque, Las Piñas, Muntinlupa, Valenzuela, Navotas and Malabon in Metro Manila; the cities of Cavite, Bacoor and Imus, and the towns of Kawit, Noveleta and Rosario in Cavite province.



Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.