THE Central Office of the Metropolitan Waterworks and Sewerage System (MWSS) has been required by the Commission on Audit (COA) to show proof that it has made efforts to collect government claims from Maynilad Water Services Inc (Maynilad) amounting to P5.071 billion.
In the 2023 audit of MWSS, state auditors aired concern that the agency had shown lack of diligence in enforcing the government’s claim which represents borrowing costs and penalties due to Maynilad’s delay in remitting concession fees.
Auditors revealed that the MWSS-CO had earlier requested the COA for approval of its recommendation to drop the penalty cost from its books, citing an order from the Rehabilitation Court in 2007.
According to the audit report, Maynilad stopped remitting concession fees in 2001 claiming financial difficulties, forcing the MWSS to use its own resources and to seek assistance from private lenders.
On March 16, 2004, the MWSS signed a subscription agreement with BNP Paribas to raise funds to compensate for Maynilad’s non-remittance of concession fees.
On June 1, 2005, the Rehabilitation Court approved the rehabilitation plan submitted by the water concessionaire, integrating the terms and conditions of the Debt Capital Restructuring Agreement proposed by Maynilad. A subsequent order issued in 2007 declared that Maynilad has successfully implemented the debt restructuring.
MWSS-CO then requested Maynilad for payment of the premium on the BNP Paribas Notes, but the latter declined, invoking the 2007 order of the Rehabilitation Court. This led to MWSS incurring interest and penalties.
In 2011, MWSS retired the BNP Paribas Notes by executing several loan agreements or bridge loans with various banks.
Based on the government claim, the cost of borrowings amounted to P3.953 billion while penalties on the delayed remittance of concession fees totaled P1.118 billion.
In an opinion dated October 5, 2011, the Office of the Government Corporate Counsel (OGCC) affirmed that the claims of the MWSS against Maynilad remains valid regardless of the Rehabilitation Court’s order.
“The OGCC further stated that MWSS CO cannot waive its claim for the payment of interests and penalties because the MWSS-Board of Trustees is not authorized by law to do so,” the COA noted.
“However, despite the favorable opinion rendered by the OGCC… the MWSS CO has requested the COA’s approval to drop the subject penalty from the books,” auditors said.
During the exit conference with the audit team, the MWSS management assured auditors that it is “diligently and actively pursuing the disputed claims” with Maynilad.
At the same it agreed with the recommendation from the COA to require the Legal Services Department as well as the Finance Department to coordinate with the OGCC regarding available options in pursuing its claims against Maynilad to recover the costs incurred by MWSS.
