Maynilad says banks have stopped lending money amid cloudy water supply deal

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West zone concessionaire Maynilad says banks have suspended loans for its expansion plans after government cancelled its longer supply contract, making uncertain its future beyond 2022.

Metro Manila (CNN Philippines, December 16) — Maynilad Water Services Inc. said banks have stopped lending money for its expansion and investment plans following news that the government has voided its longer supply contract, making business beyond 2022 uncertain.

The west zone concessionaire said Monday that additional investments for improved services have been put on hold without funding from lenders.

"While Maynilad can finance its current projects, the shortening of the concession term prevents it from commencing new projects to improve the system, as the banks have suspended lending money to Maynilad to finance it new capex (capital expenditures) program," the utility firm told the Philippine Stock Exchange through its parent company Metro Pacific Investments Corporation or MPIC.

The Metropolitan Waterworks and Sewerage System cancelled the extension of the extended contracts with Manila Water and Maynilad upon the order of President Rodrigo Duterte — which was granted in 2009 to ensure that the two concessionaires will continue to supply water to Metro Manila until 2037.

The President has repeatedly ranted publicly about the deals which were discovered to carry provisions "disadvantageous" to the government, which allowed the two companies to collect demand refunds from the state to cover losses from denied rate hike petitions.

READ: Robredo urges ‘calmer’ approach on water concession deals

Maynilad said it has earmarked ₱186.5 billion in investments for the next two decades to attain full sewerage coverage, as required by the Clean Water Act. It earlier revealed plans to build a new water treatment plant near Laguna Lake to increase supply as supply from Angat Dam dwindles.

The water firm netted ₱11.8 billion as of end-September, a 5 percent decline versus the same period in 2018 due to bigger expenses despite higher revenues.

MPIC, as well as its partner DMCI Holdings Inc. and east zone supplier Manila Water, have tumbled in the last two weeks since Duterte publicly lashed out against these water concessionaires for supposed "onerous" contracts with the Philippine government.

READ: Manila Water, MPIC stocks plunge amid uncertain deal with gov't

Duterte said he wants new water supply contracts with the private firms. Manila Water and Maynilad earlier warned that cutting their contracts short could trigger water rate increases due to the shorter period given for them to recover their investments.

MPIC confirmed a report from Maynilad Vice Chairman Isidro Consunji that cutting short its service contract to 2022 would leave the company unable to finance its planned expansion and service upgrades.

"Maynilad, however, remains hopeful that the renegotiation of the concession agreement will result in a satisfactory resolution of the various issues for all the stakeholders," the listed MPIC said.

Both Maynilad and Manila Water formally informed Malacañang last week that they are willing to renegotiate the terms of their 1997 supply agreement with the MWSS. Both have also said they will not collect losses worth ₱10.8 billion from rejected water rate hikes, which an international tribunal ordered the Philippine government to pay.