The Philippine water regulator ordered Manila Water Co. (MWC) and Maynilad Water Services Inc. to reduce their rates, denying the utilities’ separate petitions to increase tariffs.
The Metropolitan Waterworks & Sewerage System rejected the plea of Manila Water, a unit of Ayala Corp. (AC), to raise tariffs by 5.83 pesos a cubic meter, according to a copy of the order provided by Manila Water, which supplies half of the capital’s requirements. Maynilad’s petition to lift its rate by 8.58 pesos a cubic meter was also denied, its parent Metro Pacific Investments Corp. (MPI) said in a stock exchange filing.
The two companies, which won their concessions in 1997, said they would dispute the ruling at an arbitration panel.
The decision comes after some lawmakers pledged to investigate about 15 billion pesos ($342 million) in income taxes and other expenses that the water utilities passed on to consumers. The water companies said raising tariffs will help fund as much as 1.1 trillion pesos in investments until 2037.
Manila Water shares fell 3.6 percent to 31 pesos at the close of trading, the most since Aug. 6. Parent Ayala declined 1.9 percent, while Metro Pacific sank 7.8 percent, the lowest close since Jan. 2. The Philippine Stock Exchange Index dropped 0.3 percent.
The regulator directed Manila Water to cut its basic water charge by 29 percent, to be implemented in equal tranches in the next five years, according to the order. Maynilad must implement a 4.8 percent reduction within the same period, according to its statement.
Manila Water’s ability to serve its customers will be “severely compromised and impaired,” it said in a statement. “The MWSS rate determination undermines the concession agreement and puts at risk the government’s efforts to promote public-private partnerships.”
Maynilad will review future infrastructure investments to determine how it can continue to provide services to the west zone of Manila “without compromising the long-term financial stability of the company,” according to its statement.
The Philippines attracts the least foreign direct investment in Southeast Asia, according to the World Bank. The nation received $1.87 billion of FDI in 2011, compared with $7.43 billion to the smaller economy of Vietnam, according to the bank. The Philippine economy expanded more than 7 percent for a fourth straight quarter in the three months through June, defying a regional slowdown to remain one of Asia’s best performers.
Manila Water’s profit rose 11 percent to 2.91 billion pesos in the first half as sales increased 6 percent, it said on Aug. 8. Maynilad’s net income declined 1 percent to 3.3 billion pesos due to refinancing charges, Metro Pacific said on Aug. 8.
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