December 16, 2019 | 12:30 am
MAYNILAD WATER Services, Inc. risks
financial difficulty should its creditors simultaneously demand payment of
loans totaling some P42 billion due to a “material change” in its contract with
the government, which has revoked extension of the water concession beyond
2022.
Meantime, Metro Manila’s west zone
water provider has suspended its capital expenditure program pending resolution
of issues involving its concession contract, which the Justice department has
ordered reviewed.
These are among the issues faced by
one of its shareholders DMCI Holdings, Inc., said its Chairman and President
Isidro A. Consunji.
He told reporters that the water
company has loans of about P42 billion, which become due and demandable under
its covenant with lenders in case of any material change in its contract.
“Under our loan covenants, any material change in the contract lahat ng
(all the) loans [become] due and demandable,” he said.
In a hearing at the House of
Representatives on Wednesday last week, Maynilad President and Chief Executive
Officer Ramoncito S. Fernandez said he learned of the Dec. 5 revocation of the
15-year extension of Metro Manila’s water concessions on Dec. 11. “While we
were meeting almost [the] whole day, our creditors have already asked us how
will this affect [the company]. ‘Will you still be able to pay the loans that
you’ve contracted with us long term’?” he told reporters then.
DMCI Holdings has a 25.24% stake in
Maynilad, while Metro Pacific Investments Corp. holds 52.8%. Japan’s Marubeni
Corp. has a 20% stake, while the balance is held by other shareholders.
Metro Pacific shares partially
recovered on Friday with an 11.9% surge to P3.01 apiece after falling further
on Thursday to a multi-year-low P2.69, while DMCI shares similarly gained 9.9%
to P5.55 each after sinking further to P5.05 on Thursday, also another
multi-year low.
Metro Pacific is one of three
Philippine units of Hong Kong’s First Pacific Company 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.
“Sa ngayon lang, lahat ng
capex namin suspended (Right now, all our capital expenditures are
suspended),” Mr. Consunji said.
He said the suspended spending
program means the third water treatment plant in Putatan, Muntinlupa is on
hold, along with a similar facility in Dagat-dagatan in Caloocan City. Both
plants are supposed to help in responding to Metro Manila’s water shortage as
water in Angat Dam, the capital’s main source, remains below ideal elevation.
Mr. Consunji said latest estimates
show the suspended projects cost around P30 billion.
He added that the suspension was
meant to avoid legal action from contractors should the company fail to secure
a loan from banks as payment for construction of water treatment plants.
Asked how long the capex program’s
suspension could last, he replied: “Until this thing is resolved — ’yung
MWSS contract, kung meron negotiation ng contract. Hanggang matapos
’yun at acceptable sa bangko, call lahat ng loans. (Until
this thing is resolved — the contract with the Metropolitan Waterworks and Sewerage
System, if there is a re-negotiation of the contract. Until that is over and
the outcome is acceptable to the banks, all the loans will be called.)
He said Manila Water probably has
the same amount of demandable loans, which if called by the lenders could sink
the concessionaires.
“Pag they cancel the
extension, bankrupt ang dalawang kompanya.”
Their woes arose after President
Rodrigo R. Duterte threatened to sue their top officials, plus government
executives responsible for their concession agreements, for “economic
sabotage.”
The threat came after Manila Water
on Nov. 29 disclosed 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. The water company did not move to enforce the
award or compel the government to pay.
Arbitration was a legal remedy
provided under the contract crafted by the administration of Fidel V. Ramos
when water distribution in Metro Manila was turned over to the private sector
in 1997.
Adjustments in water rates as
applied for by the companies go through the scrutiny of the MWSS regulatory
office. The same goes for capital spending on projects, which the regulator
approves only if they are prudent and efficient.
“It appears that if the contract is
shortened, ’yung mga capex to provide for supply, waste-water treatment
will be suspended dahil ’di kayang bayaran ’yan by 2022. (It appears
that if the contract is shortened, the capex to provide for supply, waste-water
treatment will be suspended because these can’t be paid by 2022),” Mr. Consunji
said.
The original concession contracts
between the government on the one hand as well as Maynilad and Manila Water on
the other were supposed to end in 2022, but these were separately extended by
the government under then President Gloria Macapagal-Arroyo. — Victor V.
Saulon
No comments:
Post a Comment