Maynilad warns of P571-B fallout if contract clipped

The national government stands to spend P571 billion on water service improvement programs and fees if it does not extend its concession agreement with Maynilad Water Services Inc. for another 10 years, a company official said on Monday.As Maynilad has yet to recoup its investments in the concession, company chief operating officer Randy Estrellado said the government would have to pay P239 billion as “expiration payment” should it decide to end the revised contract agreement in 2037.

The company’s 25-year exclusive concession was first granted in 1997, which was then extended until May 6, 2037 after much wrangling with the previous administration.

Maynilad, however, is hoping for a further extension until 2047, reiterating the need to recover expenditures and implement water service improvements.

Tariff adjustment“If the concession agreement ends in 2037, we will not have yet collected enough tariff to recover our committed capital and operational expenditures to improve our service levels because we already assumed that the agreement would be extended until 2047,” Estrellado said.

He noted that in determining the tariff required to recover Maynilad’s expenditures during the rate reset conducted last year, the company and the Metropolitan Waterworks and Sewerage System already assumed that the concession agreement would be extended until 2047.

This resulted in a lower tariff adjustment of 35.61 percent, compared to 58.56 percent if the concession will end in 2037.

This means that a customer who consumes 30 cubic meters of water a month is currently saving as much as P212 in their monthly bill as the costs are stretched out for a longer period, according to Maynilad.

“With [the concession extension], Maynilad will have a longer period of cost recovery, resulting in lower tariff increases. This reduction in the tariff increase translates to real savings for consumers, making water services more affordable and manageable for households and businesses alike,” the company added.Estrellado also said the government would have to spend an additional P332 billion just to reach 2047 targets, including ensuring water availability for another 1.8 million Filipinos and building more water treatment plants to increase supply.

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In proposing to extend its agreement with the government, Maynilad also said it had outlined an P85-billion investment program to expand its water services within the 2037 to 2047 period.

The expansion is slated to raise the company’s covered service area in the east zone from 11.6 million individuals in 2037 to 11.8 million by 2047.

Under the program, the company also plans on establishing water treatment plants with a capacity of around 450 million liters per day and 55 kilometers of new primary water lines. INQ