The water controversy hogging today’s headlines may take a turn for the worse.
The two private water concessionaires, as one utility executive warned, could face bankruptcy if the government pushed its plan to cancel the extension of their concession agreements.
Lenders of Manila Water Co. Inc. and Maynilad Water Services Inc. will call on the immediate payments of their loans and trigger a cross default among other creditors of the two companies. Their bankruptcy, of course, will disrupt water services in Metro Manila and nearby municipalities and bring the metropolis back to its dark ages in the 1990s.
The turn of events will soon make an impact on the credit rating of the Philippines. A market analyst agreed that with the sanctity of contracts between the government and the private sector in question, credit rating agencies may pause on the Philippines and initially downgrade their outlook before deciding to lower the country’s debt grade.
S&P Global Ratings in May this year raised the Philippines’ sovereign credit rating a notch to BBB+ from BBB, citing the country’s stable outlook, above-average economic growth, healthy external position and sustainable public finances.
The upgrade put the Philippines at par with Mexico, Peru, Thailand, and Trinidad and Tobago, and higher by a notch than Italy, Portugal, Hungary, Panama and Uruguay.
But the Philippines is poor at attracting foreign investments compared with its peers in Asia. High power rates, lack of infrastructure and regulatory risks are among the investment drawbacks in the country.
Water concession agreements in the Philippines, it seems, are also not safe every time a new administration assumes office. Maynilad Water vice chairman Isidro Consunji recently voiced out his fears on the possible cancellation of the extension of the water concession agreements set to expire in 2022.
He expressed grave concern over the possible impact of the government’s plan against Maynilad, which holds the concession for the west zone, and Manila Water, which manages the east zone.
MWSS earlier said it revoked the resolution extending by 15 years the 25-year concession agreements of Manila Water and Maynilad that were originally signed in 1997 during the term of former President Fidel Ramos.
“I am concerned... about the whole thing, if they cancel the extension, the two companies will be bankrupt. Under our loan covenants, any material change in the contract, all loans become due and demandable. That’s standard for all contracts,” says Consunji.
Maynilad has a debt exposure of around P42 billion while Manila Water likely has the same level of debt.
“Any material change in contract or a loan becomes due and demandable, so technically if they do that, the banks can call in their loans. Both companies for sure will close,” Consunji said.
He said Maynilad had suspended the implementation of its capital expenditure projects worth P30 billion pending the resolution of the extension issue.
“All our capex are suspended... you will sign contract, you will ask for a loan but what if you cannot get a loan?” Consunji asked.
“It appears that if the contract is shortened, the capex to provide for supply, waste water treatment will be suspended because it cannot be paid by 2022. You’re ensuring a water shortage in the future if this capex program is suspended because this is for additional water supply and additional wastewater treatment,” Consunji added.
President Rodrigo Duterte earlier said the government’s concession agreements with the two water companies contained “onerous” provisions that were disadvantageous to the public.
Footloose Labor chief
Labor Secretary Silvestre Bello III certainly has a lot of explaining to do about his frequent travels abroad.
For starters, he has to justify his numerous trips—at least 40 as of last count—and account for the estimated P40 million he spent. That’s P1 million per trip, and the hapless Filipino taxpayers are paying for it.
The Labor chief is trying to cover his tracks, saying he has to be up close and personal with the millions of overseas Filipino workers.
He might be right, but an efficient manager does not do the dirty job to show all and sundry that he is a good leader. It looks like he doesn’t trust his lieutenants, specifically the labor attaches.
Meanwhile, the prevailing labor situation at the home front is not exactly sunny and bright, and it definitely needs his physical presence to put things in ship shape condition.
A case in point is the influx of undocumented Chinese POGO (Philippine Offshore Gaming Operators) who are giving the concerned authorities, notably the Bureau of Immigration, a king-size headache. Records show that there are at least 138,000 POGO workers in the Philippines to date.
Gambling is illegal in China and Beijing has accused the Philippines of luring its workers to the POGO facilities here where they are forced to work “live slaves” in sub-par conditions.
So what is the Labor secretary doing about this?
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