AYALA-LED Manila Water Co. Inc. has filed a notice with the Permanent Court of Arbitration in Singapore in order to recover an estimated P79 billion in prospective losses from the national government.
The move came after the national government, through the Department of Finance (DOF), did not honor the Notice of Claim filed by Manila Water on April 23, 2015.
In its notice, Manila Water seeks to recover from the government its losses in operating revenues estimated to amount to P79 billion for the entire period of 2015 up to 2037.
Through the notice, the concessionaire demands that the government indemnify it by reimbursing losses in operating revenues for each remaining year of the concession as the losses are realized.
According to Manila Water, the prospective losses are a result of a “significant diminution in the rate of return committed in its concession contract.”
Manila Water had explained that it is seeking coverage of prospective losses that it will incur from the exclusion of the corporate income tax (CIT) in its tariff determination.
“Through this Notice of Claim to the Republic of the Philippines via the Department of Finance, Manila Water called upon the government’s Letter of Undertaking to reimburse its losses in operating revenues arising from a significant diminution in the rate of return committed in its concession contract,” the company said in a statement.
Manila Water pointed out that these losses are expected to be reimbursed as they are actualized for each remaining year of its concession.
In the Letter of Undertaking, the national government, through the DOF, undertook to indemnify Manila Water against any loss caused by any action on the part of the MWSS resulting in the reduction of the standard rates “below the level that would otherwise be applicable in accordance with the Concession Agreement.”
The move, Manila Water, said denies them a rate of return “allowed from time to time to operators of long-term infrastructure concession agreements in other countries having a credit standing similar to the Philippines” pursuant to Section 9.4 of the Concession Agreement.
Even if Manila Water continues to pursue its claim, it has started to implement the new rates set by MWSS in June 2015 which incorporates a reduction of P1.66 per cubic meter in the basic charge.
Manila Water has already ended its dispute with the Metropolitan Waterworks Sewerage System (MWSS) that started in September 2013 when the regulator ordered it to cut tariffs by P7.24 per cubic meter (/cu.m.)
It originally proposed a P5.83/cu.m. increase in its basic water charge of P25.07/cu.m. spread from 2013 to 2017.
The decision of MWSS prompted Manila Water to elevate the case to the International Chamber of Commerce, triggering an arbitration process.
According to Manila Water, the final award of the Appeals Panel, dated April 21, resulted in an 11.05 percent cut—amounting to P2.77/cu.m.—to its 2012 basic water charge.
Manila Water said the adjustment will be implemented throughout the remainder of the 2013-2017 rate-rebasing period.