Ayala’s Manila still in hot water

A joint congressional panel was asked Wednesday to investigate the role of Jose Rene Almendras, president of the Ayala-led Manila Water Company Inc. when it signed the concession agreement with the government in 2008, then joined the Aquino administration in 2010 as Energy secretary.

Ayala’s Manila still in hot water
ADAM’S ALE ISSUE. Senator Grace Poe (left), chairperson of the Senate Committee on Public Services, lobs questions at Emmanuel Salamat (center), administrator of the MWSS, and Jose Rene Almendras (right), president/CEO of Manila Water Company during the Senate public hearing Wednesday regarding the shortage of water in Metro Manila. Lino Santos
“As vice chairman of this committee, I’m looking at the different liabilities of the persons involved in government contracts,” said Cavite Rep. Crispin Remulla, vice chairman of the House committee on good government and public accountability, during a hearing late Monday.

“I suggest that we investigate the matter of Secretary Almendras being with Ayala and the Philippine government and the conflict of interest attached to his office,” he added.

The Metropolitan Waterworks and Sewerage System told the same joint committee on Wednesday that has decided to revoke a previous resolution approving the extension of the concession agreements with Maynilad Water Services Inc. and Manila Water from 2022 to 2037.

MWSS deputy administrator Leonor Cleofas made the disclosure as the joint committee on good government and public accountability and on public accounts continued its probe into the water concession agreements following President Rodrigo Duterte’s threat to scrap the deals with the two private water concessionaires.

At the joint hearing Wednesday, Cleofas said the MWSS board on Dec. 5 decided to revoke the extension of the concession agreement.

“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,” Cleofas told legislators.

“Based on the recent directive of the Office of the President and the Cabinet… they are now revoking ... the board resolution adopted in 2008,” she added.

The two water concessionaires earlier committed not to collect the P10.7 billion granted to them by the arbitral court in Singapore following President Duterte’s threat to scrap the concession agreements with the two companies.

The House joint committee conducted the hearing in response to a resolution filed by Dasmariñas City Rep. Elpidio Barzaga, Jr.

In his resolution, Barzaga, chairman of the House committee on natural resources, said Manila Water claimed losses of billions of pesos, even though it posted a gross income of P6.5 billion, up 6 percent from the previous year.

On the other hand, he said, Maynilad reported a net income of P7.3 billion in 2018, up from P6.8 billion in 2017. According to its 2018 annual report, its core income increased by 5 percent due to the combined effect of a 3-percent growth in billed volume and several rounds of tariff increases. 

The Department of Justice is investigating the possible criminal culpability committed by government officials during the two previous administrations for negotiating and signing the “onerous” and “grossly disadvantageous” water concession agreements with Manila Water and Maynilad.

In an interview on GMA News TV, Justice Undersecretary Markk Perete said that under the Anti-Graft and Corrupt Practices Act, there is provision stating that government officials and employees cannot enter into contracts that are grossly disadvantageous to the government.

Justice Secretary Menardo Guevarra earlier said the concession agreements prohibit government interference in rate-setting and contain a provision for indemnity in case of such interference.

Perete said the concession agreements were approved in 1997 during the term of former President Fidel Ramos. These were renewed in 2009 and 2010 when Gloria Macapagal-Arroyo was President, he added.

Perete said officials of the Department of Finance at the time are among those who may face possible criminal charges for the onerous provisions in the contracts.

Duterte on Tuesday threatened to stage a government takeover of the operations of water services in Metro Manila if he fails to get a satisfactory explanation regarding the existing concession agreements.

Perete explained that government takeover of the operations of the water services through expropriation maybe conducted but would have to go through the courts.

Perete said that this is just one of the options that the government is looking into if the companies refuse to remove the unfair provisions in their agreements.

Perete said that the willingness of Manila Water and Maynilad to sit down with the government for a concession review is a welcome development and that the DOJ still hopes for a successful renegotiation.

The Palace, meanwhile, said Duterte will evaluate the letters sent to him by Maynilad and Manila Water stating that they are heeding his call to revisit the 1997 water concession agreements.

Presidential Spokesman Salvador Panelo also said the President would read the letters before the public for transparency.

The letters, signed by business tycoons Manuel Pangilinan and Fernando Zobel de Ayala, state they agree to revisit the water deals for amendments of the provisions which are onerous to government and consumers, Panelo said.

Pangilinan’s Metro Pacific Investments Corp. owns a controlling stake in Maynilad while Manila Water is a subsidiary of Ayala Corp.

The two water firms distribute water in Metro Manila and nearby provinces under agreements signed with the Metropolitan Waterworks and Sewerage System during the Ramos administration, but a review by the Department of Justice revealed onerous provisions were stipulated in the deal.

Maynilad president Ramoncito Fernandez said water rates would rise if the extension of their concession agreement is revoked.

“The rationale of the extension at the time was to mitigate the spike in tariffs,” he said.

The said revocation of the extension was a “grave concern” and that they were notified of it just last Wednesday.

Guevarra on Wednesday said the ball was now with the two concessionaires.

“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.

The DOJ said it found a dozen provisions in the 1997 concession agreement that were onerous and disadvantageous to the government and the consuming public.

“Most notable were the prohibition against government interference in rate-setting and the provision on indemnity for possible losses in the event of such government interference,” Guevarra said.

The DOJ also found the extension of these contracts to 2037 irregular, considering that the extension was granted 12-13 years before the original expiration of the 25-year concession agreements in 2022.

The concession agreement took effect in 1997 during the term of President Fidel Ramos and covers a 25-year period, which ends in 2022.

Arroyo extended the concession agreement for another 15 years in 2009 or until 2037.

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

MWSS Administrator Emmanuel Salamat yesterday assured the public there would be no interruption in water service while the government works out its problems with the two water concessionaires. With Macon Ramos-Araneta

READ: ‘Sovereignty lost in water deal’

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Topics: Jose Rene Almendras , Manila Water Company Inc. , Crispin Remulla
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