MANILA, Philippines – The Commission on Audit (COA) has asked the Central Office (CO) of water utility regulator Metropolitan Waterworks and Sewerage System (MWSS) to show proof it has tried to collect government claims from east zone concessionaire Maynilad Water Services Incorporated (Maynilad) totaling to P5.071 billion.
State auditors, in a 2023 audit of MWSS, cited the regulator’s lack of diligence in enforcing the government’s claim which represents borrowing costs and penalties due to Maynilad’s delay in remitting concession fees.
MWSS-Central Office (MWSS-CO) earlier requested the COA to approve its recommendation to drop the penalty cost from its books, citing an order from the Rehabilitation Court in 2007.
Maynilad ceased remitting concession fees in 2001 claiming financial difficulties, according to the audit report, forcing the MWSS to use its own resources and to seek assistance from private lenders.
The MWSS signed a subscription agreement with BNP Paribas on March 16, 2004 to raise funds to compensate for the non-remittance of concession fees from Maynilad.
On June 1, 2005, the Rehabilitation Court approved the rehabilitation plan submitted by the water concessionaire. It integrated the terms and conditions of the Debt Capital Restructuring Agreement proposed by Maynilad. A subsequent order issued in 2007 declared that Maynilad had successfully implemented debt restructuring.
MWSS-CO then asked Maynilad for payment of the premium on the BNP Paribas Notes but the latter declined, invoking the 2009 order of the Rehabilitation Court. This led to MWSS incurring interest and penalties.
MWSS retired in 2011 the BNP Paribas Notes by executing several loan agreements or bridge loans with various banks.
Based on the government claim, the cost of borrowings amounted to P3.953 billion while penalties on the delayed remittance of concession fees totaled P1.118 billion.
The Office of the Government Corporate Counsel (OGCC) affirmed on October 5, 2011 that the claims of the MWSS against Maynilad remained valid regardless of the Rehabilitation Court’s order.
“The OGCC further stated that MWSS-CO cannot waive its claim for the payment of interests and penalties because the MWSS-Board of Trustees is not authorized by law to do so,” the COA said.
It added: “However, despite the favorable opinion rendered by the OGCC…the MWSS-CO has requested the COA’s approval to drop the subject penalty from the books.”
MWSS management, during an exit conference with the audit team, assured auditors that it is “diligently and actively pursuing the disputed claims” with Maynilad.
MWSS also agreed with a recommendation from COA to require the Legal Services Department and the Finance Department to coordinate with the OGCC regarding available options in pursuing its claims against Maynilad to recover the costs incurred by MWSS. – Rappler.com