Row between MWSS, Maynilad worries Marubeni

The Japanese shareholder of Maynilad Water Services Inc. has grown “concerned” over recent disagreements between  Metro Manila’s two water concessionaires and regulator Metropolitan Waterworks and Sewerage Authority (MWSS) that could affect a plan to increase water rates, its local partner said.

David Nicol, chief financial officer of Metro Pacific Investments Corp., which controls Maynilad, admitted that the current environment “was not as nice as they envisioned.”

“I think there have been some concerns [from Marubeni] at the moment. They are very discrete about this process. There are a lot of considerations and back-and-forth discussions with Tokyo,” Nicol said last week. A Marubeni official could not be reached for comment.

Marubeni finalized a deal to enter Maynilad in February, acquiring a combined 20-percent stake in the water utility for roughly $400 million. The deal reduced Metro Pacific’s Maynilad stake to about 52.8 percent while Consunji-led DMCI Holdings Inc. was left with about 25.24 percent.

This was a few months before MWSS conducted an audit on Maynilad and Manila Water Co. Inc., which are both in negotiations with MWSS to increase rates. MWSS in June said that the practice of both concessionaires to pass on part of their income taxes to customers was “grossly unjust.”

Both concessionaires argued that they were merely following concession agreements approved by the government when the utilities were privatized.

Maynilad, which serves Metro Manila’s west zone, is seeking an increase of P8.58 a cubic meter while Manila Water, a unit of Ayala Corp. that serves the east zone, wants to increase its rates by P5.83.

Inquirer source with direct knowledge of the matter said that the MWSS was set to reject this week the petition of both Maynilad and Manila Water to increase rates.

MPIC president Jose Ma.  Lim said in a briefing last week that MWSS “indicated rates that were lower than the application we made” but he declined to provide specific figures.

“Our position is we should follow the formulas stipulated in the concession agreement,” Lim said.

Maynilad is a major contributor of Metro Pacific’s earnings, accounting for about 44 percent of net operating income. Maynilad’s total revenues for the first half increased 11 percent to P8.5 billion on higher volumes and tariffs, Metro Pacific reported last week.

Net income was down 1 percent to P3.3 billion on refinancing charges on existing debt.