P127 billion and counting

"Come clean and renegotiate, or agree to be taken over."



One hundred twenty seven billion pesos is supposed to have been lost by the two MWSS water concessionaires, Manila Water and Maynilad, from the scrapping of the extension of their concession agreement to 2037.

That is the estimate of the stock analysts looking over the books of the publicly listed conglomerates controlling these two companies. That is supposed to be part of a huge pile, the total of which can only be extrapolated given the reported profits which these two MWSS “agents/contractors" (as they sometimes like to identify themselves) have amassed since 1997. One estimate has it that between them, total reported profits since taking over the government's assets was a low of P150 billion. Imagine what they would most likely amass if the extension of 15 years from the date of their contracts' expiration in 2022 subsists.   

In any event, they should have expected that revocation coming when President Rodrigo Duterte angrily ordered a review of the 25-year concession agreements they entered into in 1997, and extended for 15 more years in 2009, 12 years before the expiry dates. After all, that extension was already questioned before the Supreme Court right after it was inked. That case was on top of three other cases, still pending before the High Tribunal, questioning the very concession agreements themselves as well as what the petitioners claim as unjust, illegal and unconscionable charges, fees and expenses which the two firms have passed on to consumers from 1999 to the present.

Now, if these two firms are concerned about the P127 billion in potential earnings lost due to the cancellation of their agreements, they better prepare to lose more as the review and reformation of their contracts get underway given the latest statements coming from no less than Justice Secretary Meynard Guevarra who chaired the review panel.

For starters, Guevarra noted that the extension was illegal from Day One, precisely because the MWSS privatization ordered by then-President Ramos did not even contain a provision for it. He noted that the contract spoke of "renewal of the contract upon expiration early termination." Those two options, if we may call these such, are far, far different from simply extending the contract beyond the original period. It is clear that any renewal of contract or early termination requires the bidding for a new concession. An extension is a gift, a giveaway, that leaves a bad taste in the mouth. 

The fact that the extension was simply done via a memorandum of agreement between the government through then Finance Secretary Gary Teves (was he chairing or even just a member of the MWSS Board at that time?) and the concessionaires made this initiative even more problematic.       

In any event, Guevarra has rightly said that since Manila Water and Maynilad have both publicly—and might I add boldly—stated that they were ready to “renegotiate the terms of their original contracts,” what was there to extend? Guevarra emphasized that since they never questioned President Duterte's assertions that these contracts contained a number of onerous provisions, and which assertions were confirmed by the review panel, the more that such made the extension truly illegal. 

Again, if the concessionaires are really as concerned as they claimed they are about the revocation of the extension, they should immediately buckle down to work and discuss the renegotiation of the onerous contract provisions rather than, as being repeated by their advocates, engage the administration in never ending exchanges about the rule of law and the sanctity of contracts.

At this point in time, the tendency to lecture government on good governance, issuing out barbs bordering on blackmail and similar bombasts will not end their headaches. It will probably even do the opposite—strengthen the administration's resolve to finally put an end to these decidedly one side, grossly disadvantageous and highly unconscionable contracts.

They have two choices: Come clean and renegotiate, or agree to be taken over. No ifs and buts about it.

Topics: Jonathan Dela Cruz , MWSS , Manila Water , Maynilad , concession agreement
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