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2 water firms face bankruptcy over cancellation of agreements

The two private concessionaires of state-run Metropolitan Waterworks and Sewerage System face bankruptcy if the government will pursue the cancellation of the extension of their concession agreements which will expire in 2022, a top executive said over the weekend.

Consumers will also deal with water shortages in the future with the suspension of the water firms’ capital expenditure program, according to Maynilad Water Services Inc. vice chairman Isidro Consunji.

Consunji 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 Co. Inc. 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 which were originally signed in 1997 during the term of former President Fidel Ramos.

This would mean their roles as concessionaires would end in 2022, unless the agreements are renewed.

“I am concerned if they are going to be level-headed 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,” Consunji said.

He said Maynilad has a debt exposure of around P42 billion while Manila Water is also seen to have 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.

Consunji said Maynilad had suspended the implementation of its capital expenditure projects worth P30 billion until the extension issue resolved.

“All our capex are suspended...you will sign contract, you will ask for a loan but what if you cannot get a loan?” Consunji said.

“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 said.

President Rodrigo Duterte earlier said the government’s concession agreements with the two water companies contained “onerous” provisions which are disadvantageous to the public.

Duterte was reacting to the decision of the Permanent Court of Arbitration in Singapore which ordered the government to pay Manila Water P7.39 billion for the non-implementation of water hikes from June 1, 2015 to Nov. 22, 2019.

The arbitration court also upheld its October 2018 ruling ordering the government to pay P3.4 billion for Maynilad’s losses from March 11, 2015 to Aug. 31, 2016.

Duterte ordered the filing of appropriate criminal, civil and administrative charges against Manila Water and Maynilad and all those involved in the crafting of the water concession deals.

This prompted Manila Water and Maynilad to signify their intent to cooperate with the government to settle the issue.

Topics: Metropolitan Waterworks and Sewerage System , MWSS , Maynilad Water Services Inc. , Manila Water Co. Inc.
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