Maynilad, Manila Water scrap rate hike plans

Published by rudy Date posted on April 20, 2009

Ayala firm gets 15-year contract extension

MANILA, Philippines–Water rates in Metro Manila will no longer be increased—at least for this year.

Manila Water Co. Inc. has obtained government approval for a 15-year contract extension that would allow the company to forego water rate increases in the east zone of Metro Manila this year, newly appointed company president Rene Almendras said.

Maynilad, the operator of the west zone, has also been directed by the Metropolitan Waterworks and Sewerage System to use the gains from a stronger peso to offset plans to increase its water rates for 2009.

“MWSS approved our proposal (last Friday) afternoon. But it’s not final yet because it would have to be endorsed to (the Department of Finance) and then arrangements will be made to finalize a new contract,” Manila Water’s Almendras said.

He said there had been previous discussions with finance officials regarding MWIC’s proposed extension.

The longer recovery period is expected to enable the company to increase its investment by 140 percent to P450 billion until 2037 from the originally approved budget of P187 billion until 2022.

An official of the MWSS confirmed that the agency approved Manila Water’s proposed extension on Friday.

During public consultations in March, the publicly listed unit of the Ayala group said the extension would allow the company to trim scheduled water rate increases between 2010 and 2012 to P1 a cubic meter a year. There will be no rate increase this year.

The company was supposed to raise water rates by more than P2 a year from 2009 to 2012 under the existing contract that ends in 2022.

Besides allowing lower water rate adjustments while ensuring investment recovery, the extension of Manila Water’s concession to 2037 would also result in more jobs created and more income for the government, Almendras said.

Almendras said Manila Water’s investments have so far created 17,000 jobs a year and this figure would increase to 21,000 jobs annually because of the bigger investments to be made.

Government revenue is also estimated to reach P158 billion over an extended period until 2037, compared with P62 billion in taxes and concession fees to be paid if the company’s concession ends in 2022.

Manila Water services about five million customers in the east zone of Metro Manila, which comprises Makati, Pasig, Mandaluyong, Marikina, most parts of Quezon City, some parts of Manila, San Juan, Taguig and Pateros. It also covers cities and municipalities in the Rizal province.

Meanwhile, Maynilad’s foreign exchange gain totaling about P1.6 billion came from prepayment of the firm’s dollar-denominated loans in 2007 by the DMCI-Metro Pacific group, which won the reprivatization of the former Lopez utility.

At that time, the peso exchange was P42 to a dollar. The DMCI-Metro Pacific group voluntarily prepaid the loan as part of its plan to exit from court rehabilitation and rapidly expand without any court restrictions.

Since taking over, Maynilad has spent P13 billion and will spend another P8 billion for capital expenditure this year.

Maynilad president Rogelio Singson said the 2009 capital expenditure would create about 80,000 jobs, “not to mention the convenience of adequate and potable water supply at much lower prices.”

For instance, he said Parañaque residents pay P80-P120 for a cubic meter of water delivered by trucks. “These residents will now pay an average of only P22 a cubic meter, with all the convenience of water supply, and savings on electricity from the use of booster pumps and cost of bottled water.” –Riza T. Olchondra, Philippine Daily Inquirer

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