15-year extension of water deals revoked on Rody’s order

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    THE Metropolitan Waterworks and Sewerage System (MWSS) has revoked the 15-year extension of the concession agreements of the Maynilad Water Services Inc. and Manila Water Company Inc. (MWCI) from 2022 to 2037.

    MWSS deputy administrator Leonor Cleofas told the joint hearing of the House committees on public accounts and on good government that the MWSS board revoked the extension in a meeting last December 5 on orders of President Duterte.

    “Based on the recent directive of the Office of the President and the Cabinet, they (MWSS board members) are now revoking, and I think the term used is revoking, the board resolution adopted in 2008,” Cleofas told congressmen.

    “It was on the agenda that the board should tackle the resolution on the approval of the extension of the concession agreement that was in 2008 and 2009,” she added.

    The concession agreements took effect in 1997 during the term of former president Fidel Ramos and covered a 25-year period, which ends in 2022.

    Former president Gloria Arroyo extended the concession agreement for another 15 years until 2037 in 2009, or 13 years before the original deals were set to end.

    The extension of the water agreements were among the provisions questioned by the Department of Justice (DOJ) when it reviewed the concession deals with Maynilad and Manila Water.

    Maynilad president and chief executive officer Ramoncito Fernandez questioned the government’s decision to revoke the extension unilaterally.

    “We would like to react that it is with very grave concern that we view this action. We believe also that it’s not proper to unilaterally revoke the agreement,” Fernandez said, disclosing that Maynilad only knew of the MWSS decision yesterday on Wednesday morning.

    In a disclosure to the Philippine Stock Exchange, Metro Pacific Investments Corp., the parent firm of Maynilad, said: “Based on the resolution, Maynilad was given an opportunity to state its position on the matter and Maynilad is currently studying the same.”

    Manila Water board member Antonino Aquino said their spending plans were based on the extension.

    “We presume na mababawi ang lahat ng investment natin for that extended period of time.

    Kung mas mahaba ‘yung ating recovery period, mas mababa ang magiging epekto sa taripa (We presumed that we’ll be able to recoup all our investments for that extended period of time. If the recovery period is long, it will have minimal effect on the tariff),” Aquino said.

    Justice Secretary Menardo Guevarra said it is now up to the two utility firms what action to take following the revocation of their agreements’ extension.

    “The ball is now in the concessionaires’ court. Take note that the proper time to renew the contract is upon expiration of the concession agreements in 2022, as expressly provided in the agreements themselves,” Guevarra said when sought for comment on the MWSS move.

    Guevarra said the MWSS decision was made upon President Duterte’s directive, which he added “was in turn based on the DOJ recommendation after finding that the extension of the contract had no legal basis.”

    Sen. Grace Poe, chairwoman of the Senate committee on public services, said the country could suffer from another water crisis once the contracts of Maynilad and Manila Water ends in 2022.

    For one, Poe noted that if the services of the two firms are not extended beyond 2022, all pipe-laying and water distributions projects will immediately be stopped.

    “If the government revokes the extension, the distribution process of water in households and in businesses will be adversely affected. Even if we already have the Wawa dam, there will be no one which will distribute water,” Poe said in an interview after the hearing on the proposed creation of a water agency.

    Poe said the government must come up with a contingency plan in the event of another water shortage.

    President Duterte had threatened to scrap the government’s contracts with the two utility firms for allegedly abusing “onerous” and “disadvantageous” provisions in their concession deals, particularly the prohibition against government interference in rate-setting and the provision on indemnity for possible losses in the event of such government interference.

    On Tuesday, Duterte threatened to take over the operation of the water services in Metro Manila and expropriate the facilities operated by the two water utility firms.

    Justice Undersecretary Markk Perete said any expropriation will undergo court proceedings if it comes to that, especially since Maynilad and Manila Water have introduced improvements in terms of water facilities.

    “The expropriation would require the government to buy the private property or facilities and this would undergo court proceedings to determine the final price for the expropriation,” Perete said.

    Perete stressed expropriation is just one of the many options that the government is looking into if Maynilad and Manila Water refuse to remove the onerous provisions in their water concession agreements.

    Duterte’s threat of a government take-over came even after Maynilad and Manila Water announced they will no longer pursue the P10.8 billion award by the Singapore-based Permanent Court of Arbitration (PCA) for damages and losses that they incurred after their water rate hikes were rejected by the previous administration.

    The PCA has ordered the Philippine government to pay Manila Water the amount of P7.39 billion for the company’s losses from June 1, 2015 to November 22, 2019.

    In 2015, the PCA awarded Maynilad P3.4 billion as sovereign compensation for revenue losses it incurred from January 1, 2013 to February 28, 2015 alongside opportunity losses of at least P208 million added for every month of delay in payment for not allowing the company to implement its rate hike allowed under the rate rebasing provisions of their concession agreement.

    Chief Presidential Legal Counsel and concurrent presidential spokesman Salvador Panelo confirmed the Office of the President has received separate letters from the managements of Maynilad and Manila Water agreeing to cooperate in the review of their concession agreements for possible amendments or revisions.

    Panelo, in a statement, said the letters, dated December 10, 2019 of Maynilad and of Manila Water, were signed by Mr. Manuel V. Pangilinan and Mr. Fernando Zobel de Ayala, respectively.

    “The separate letters of Maynilad and Manila Water basically state that they are heeding the call of the President and are willing to revisit the concession agreements for amendments or revisions of the provisions which are onerous to the government and ultimately, their consumers,” Panelo said.

    Panelo said the President had already read the letters and “will evaluate this development, as well as study the practical and legal consequences of the situation, before making any decision on what measure to undertake next”.

    “PRRD wants to speak first with all the lawyers involved in the preparation, negotiation and drafting of the present concession agreements and determine the reason why they allowed the incorporation of onerous provisions… These companies not only have inefficiently delivered water to the households but exacted unconscionable amounts from the taxpayers,” he said.

    Panelo said Malacañang made the letters public “for transparency and to show that all the steps being undertaken by the government in resolving this issue with the two Metro Manila water concessionaires are aboveboard and legitimate.”

    Finance Secretary Carlos Dominguez III said Maynilad and Manila Water were driven by Duterte’s pronouncements that corrections are needed for the concession deals.

    “The President believe that it is time to review those terms and he sent a signal that these have to be revised and we are pleased that the concessionaires have actually come forward to do two things, number one, they said that the arbitral awards that gave them something of upwards of P10 billion will not be enforced or collected and that they’re willing to review those terms. And in fact, I suppose from their side, make suggestions on how to correct the imbalances in those concession agreements so we will wait for their formal proposals,” Dominguez said.

    Socio-economic Planning Secretary Ernesto Pernia said the planned renegotiation or drafting of new water agreement was necessary because the original contracts have been found to be “unconstitutional.”

    Perete said the DOJ is now studying the possible criminal liabilities of government officials of the previous administrations who signed the concession agreements with Maynilad and Manila Water.

    Perete said the anti-graft law prohibits government officials from entering into contracts or agreements that are grossly disadvantageous to the government and the public.

    “Ang foremost consideration na tinitingnan natin is ‘yung possible criminal liability nung mga government officials and employees who entered into the contract (The foremost consideration that we are looking into is the possible criminal liability of government officials and employees who entered into the contract),” Perete told radio DZBB. – With Jed Macapagal, Jocelyn Montemayor, Raymond Africa and Ashzel Hachero