By Gillian M. Cortez Reporter
and Victor V. Saulon Sub-Editor

PRESIDENT Rodrigo R. Duterte is offering new contracts to Metro Manila’s two water concessionaires, but warned the government will take over water distribution services and pursue charges against Manila Water Co., Inc. and Maynilad Water Services, Inc. should they reject the new terms and conditions.

“It’s either they accept with no guarantee they will not be prosecuted or if they do not accept it, then I will nationalize the water system and prosecute them for plunder or estafa on a large scale,” Mr. Duterte said during a briefing in Malacañang on Tuesday afternoon.

“I said I’m proposing a new contract, you accept it and if it’s to your liking, sign it. If you don’t, then there is no water. I will order the military to take over and I will nationalize the water….and then I will file the corresponding charges.”

Presidential Spokesperson Salvador S. Panelo said earlier on Tuesday the new contracts will not have the “onerous” provisions raised by Mr. Duterte and “without any guarantee of [them not] being criminally prosecuted together with those who conspired to craft the very onerous contracts.”

Representatives of Maynilad and Manila Water did not immediately respond when asked to comment, but they had said late last year that they would want to sit down with state agencies to come up with new deals.

“Should Maynilad and Manila Water refuse to accept the new agreements, the President will order the cancellation of their present water contracts, order the nationalization of water services in their respective areas of operation, and prosecute all those involved directly or indirectly in the arrangement that led to the present suffering of the Filipino people,” Mr. Panelo added.

Mr. Panelo said the new water contracts will replace what he called a constitutionally flawed concession agreements that violated the provisions of the anti-graft law.

The new contracts were prepared by the Office of the Solicitor General (OSG) together with the Department of Justice, and presented to Mr. Duterte during a Cabinet meeting on Monday, the presidential spokesperson said.

Mr. Duterte was quoted as saying that water is a natural resource “and therefore cannot be used merely as a commercial commodity and exploited to rake in billions of pesos in profits at the expense of the consumers.”

Mr. Panelo, however, said the new contracts had yet to be sent to the concessionaires, and a meeting with officials of the two companies may not be necessary. A deadline was not discussed during the Cabinet meeting.

The market welcomed the news that Manila Water and Maynilad would be able to continue its operations if they accept the new deals.

Shares in Manila Water jumped 12.29%, parent company Ayala Corp.’s shares rose 1.91%. On the other hand, shares in Maynilad’s shareholders Metro Pacific Investments Corp. (MPIC) and DMCI Holdings, Inc. went up 4% and 4.33%, respectively.

SURPRISE
Sought for comment, the regulatory office of the Metropolitan Waterworks and Sewerage System (MWSS) was surprised at Malacañang’s announcement, including the threat of criminal prosecution against those that prepared the old contracts.

“We were consulted but the final version, as far as I know, will be prepared by the OSG (Office of the Solicitor General),” said MWSS Chief Regulator Patrick Lester N. Ty in phone interview.

“I don’t know what the final decision of Malacañang will be. I haven’t seen a formal copy,” he added.

He said nationalization of water services had previously been brought up by the government. On the question of prosecution, Mr. Ty said this would be best answered by those who prepared the contracts.

The concession agreements were first signed in 1997 during the administration of former President Fidel V. Ramos. Their validity is until 2022, but in 2009 then-President Gloria Macapagal-Arroyo approved the contracts’ extension to 2037, a move questioned by Mr. Duterte.

Justice Secretary Menardo I. Guevarra told BusinessWorld on Tuesday that the new contracts were still being finalized ahead of more dialogue on the economic aspects and implications.

“Wala pang (there is still no) consolidated draft. The DoF (Department of Finance) input and economic aspects will have to be discussed further and integrated later,” he said.

Late last year, the water concessionaires were accused of economic sabotage by Mr. Duterte after Manila Water disclosed on Nov. 29 that it had won P7.39 billion in an arbitration case with the government.

The international arbitration came after the Ayala-led company called on the government to honor its pledge to reimburse foregone operating revenues arising from a significant reduction in the rate of return committed in its concession contract.

Separately, Maynilad was granted by a Singapore tribunal on July 24, 2017 an arbitral award of at least P3.42 billion for losses resulting from the refusal of the MWSS to implement the concessionaire’s water tariffs.

Both companies during congressional hearings late last year said they would not collect the amount awarded by the arbitration court.

MPIC is one of three Philippine units of Hong Kong-based First Pacific Co. Ltd., the others being PLDT, Inc. and Philex Mining Corp. Hastings Holdings, Inc. — a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc. — maintains interest in BusinessWorld through the Philippine Star Group, which it controls.

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