Manila Water seeks new arbitration

To force gov’t to pay 79 billion

Manila Water Company, a unit of Ayala Corporation, has filed a Notice of Arbitration with the Permanent Court of Arbitration in Singapore in a bid to make the government pay for claims seen to reach 79 billion.

In a statement, Manila Water said it decided to seek arbitration after the National Government, through the Department of Finance (DOF), has not honored the Notice of Claim filed by Manila Water on April 23, 2015.

Through this Notice of Claim to the Republic of the Philippines via the Department of Finance, Manila Water called upon the government’s Letter of Undertaking to reimburse its losses in operating revenues arising from a significant diminution in the rate of return committed in its concession contract.

These losses are expected to be reimbursed as they are actualized for each remaining year of Manila Water’s Concession, and which are at this point estimated to amount to 79 billion for the entire period of 2015 up to 2037.

In the Letter of Undertaking, the government, through the DOF, undertook to indemnify Manila Water, against any loss caused by any action on the part of the MWSS resulting in the reduction of the standard rates “below the level that would otherwise be applicable in accordance with the Concession Agreement.”

This denies Manila Water a rate of return “allowed from time to time to operators of long-term infrastructure concession agreements in other countries having a credit standing similar to the Philippines” pursuant to Section 9.4 of the Concession Agreement.

“Even if Manila Water continues to pursue its claim, it started to implement the new rates set by MWSS in June 2015 which incorporates a reduction of 1.66 per cubic meter in the basic charge,” the company said.

Metro Manila’s other water concessionaire, Maynilad Water Services Inc. said it has also incurred revenue losses amounting to 8.4 billion due to government’s alleged refusal to grant them tariff increases as provided for in their concession agreements.

Foregone revenues at Maynilad Water Services are currently at 4.9 billion while losses suffered by Metro Pacific Tollways Corporation have reached 3.5 billion so far. Maynilad is partly owned by Metro Pacific Investments Corporation and DMCI Holdings.

In an interview, Maynilad chief finance officer Randolph Estrellado said they had asked government last February to reimburse them for losses amounting to 3.4 billion since 2013.

Since then, Maynilad has incurred losses of 200 million a month from March to May and 180 million a month since June and this will continue to grow for as long as the government refuses to grant the tariff hike despite Maynilad’s getting a favorable decision via arbitration.

Maynilad has already won the arbitration with its regulator Metropolitan Waterworks and Sewerage System while arbitration with the Philippine Government is about to start soon.

“The arbitration with the MWSS we won that. What we did is we asked the regional

trial court to order MWSS to give us our award. And the regional trial court has set the hearing on November 24, 2015,” said Maynilad president Ricky Vargas.

Vargas explained that “we went to the court so that the court can order the MWSS to execute the arbitral award.”

On the other hand, he said “the arbitration with the government is we'd like them to honor the obligation under the letter of undertaking in the concession agreement for Maynilad's revenue losses.”

He said they hope arbitration can start in Singapore in the first quarter next year since the presiding judge has already accepted the post as well as the nominees of Maynilad and MWSS.