<![CDATA[Repeal of water contracts in Philippines could complicate Chinese dam loan repayments: congressman]>
The Philippine water regulator's decision to cancel the 15-year extension of concession deals with the country's two largest utilities after pressure from President Rodrigo Duterte could affect payments on a China-funded loan for a vital dam project, according to a lawmaker.
Manila Water Co Inc and Maynilad Water Services were looking to charge users a water security fee on their bill, money that would have been put towards the repayment of a US$211 million loan from the Export-Import Bank of China (Exim Bank).
The loan is for the construction of the New Centennial Water Source-Kaliwa Dam Project, which is meant to secure water supply to Manila even during dry seasons.
Water regulator Metropolitan Waterworks and Sewerage System (MWSS) on Wednesday told lawmakers it had revoked last week a decision to extend water concession deals with the two utilities until 2037. The existing concessions will expire in 2022.
Congressman Carlos Zarate noted that even without the loan factored in, the two utilities were "already claiming a 100 per cent increase in rates" as a result of the revocation.
"Because the concession agreements have been cut from 2037 to 2022, this will result in some complications," said Zarate, who is from the left-wing Bayan Muna Party.
"Eventually, [repayment of the principal and interest] will be added to the price of water. [The utilities] will compute how many years the loan has to be repaid. They will pass this on to consumers, [further increasing water rates]."
The water companies have not said anything about the impact of the Kaliwa Dam loan on their bottom line, while the government has not offered any assurances to consumers that their water rates will not be affected by the cancelled concessions.
The proposed New Centennial Water Source-Kaliwa Dam Project is meant to provide water security for Metro Manila. Photo: MWSS
Zarate said MWSS deputy administrator for engineering Leonor Cleofas had revealed during a Wednesday hearing at the House of Representatives that the regulator had scrapped the two concession deals on Duterte's orders.
Cleofas confirmed that while it was MWSS which had signed the US$211 million loan with Exim Bank, "those who will be paying for the loan would be the concessionaires", who in turn would pass the costs on to their customers.
On top of the loan, she said Manila Water and Maynilad must immediately put up a local counterpart funding of 2 billion pesos (US$39.3 million) as the amount will be remitted to Exim Bank and used to pay the Kaliwa Dam project contractors.
In the same hearing, lawmakers learned that the total cost that would eventually be passed on to the consumers was at least 41 billion pesos (US$806.5 million), covering the principal of the loan as well as two separate conveyancing and piping systems for the two utilities to extract water from the dam.
Zarate added that the Bayan Muna Party also has a petition pending before the Supreme Court to scrap the Kaliwa Dam loan.
The water rates issue boiled over on December 3 when Duterte disclosed that an arbitration court in Singapore had ordered the Philippines to pay Manila Water and Maynilad US$217.43 million for the government's decision to freeze water rate hikes, in violation of their existing contracts.
The president had described the concession agreements with Manila Water Co Inc and Maynilad Water Services as "onerous and disadvantageous" to the public.
Duterte last week also publicly lambasted the Zobel brothers and Manuel Pangilinan of First Pacific, who are respectively behind Manila Water and Maynilad.
"They are screwing us and they're screwing us all the way," the president warned. "If I go down, you go down."
Top executives of the two companies have since apologised to Duterte in behalf of the tycoons. The companies have said they will not pursue the arbitral award, and have asked to sit down with the government and renegotiate terms.
This article originally appeared on the South China Morning Post (SCMP).
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