Maynilad Water Services, Inc. has vowed that rate increases for the next three years would be trimmed by three quarters if a proposal to extend its concession contract is approved by the government.

"That basically is the message, that an extension of our concession agreement would result in about a 75% decrease in tariff rates increases," Rogelio L. Singson, Maynilad president, told BusinessWorld.

Maynilad’s contract to supply water to the western Metro Manila will expire in 2022 and the utility is seeking a 15-year extension to 2037. East zone concessionaire Manila Water secured last April regulatory approval for a similar 15-year extension of its concession term to 2037.

Under Maynilad’s first rate rebasing adjustment approved by the Metropolitan Waterworks and Sewerage System (MWSS) in 2009 — a year after the company exited corporate rehabilitation — a total increase of P10.78 per cubic meter for 2009 to 2012 would be charged by the water utility.

Under the application to have the concession extended, the company would bring down by 75% the total rate increase for 2009 to 2012 to P2.67 per cubic meter, or P0.89 annually, due to a longer recovery period.

Rate rebasing is a mechanism conducted every five years by the MWSS and its concessionaires to allow the latter to recover capital, operating, and investment expenditures and to evaluate expenses to make water services efficient.

Maynilad also intends to increase investments in the west zone by 274% under a business plan up to 2037. From P87.245 million in capital expenses up to 2022, the water utility is planning to increase by 210% its capital outlay to P183.184 million. Operating expenses will also increase by 250% to P253.528 million from P101.249 million. Concession fees, which will account for the biggest increase, will go up by 729% to P127.752 billion from P17.523 billion.

The bulk of Maynilad’s intended capital spending will go to sewerage facilities.

Mr. Singson said Maynilad wants institutions like the World Bank to cover expenses should the extension be approved.

Asked if an initial public offering could be conducted by the company should the extension be granted — a development which could shore up investor interest in the company — Mr. Singson said nothing has been decided yet.

Bobby Diciembre, media campaigner of the Freedom From Debt Coalition, however, cautions that a "comprehensive review" should be conducted by the government first before arriving at a decision.

"We believe that a comprehensive review should first be done by the government to assess if Maynilad truly delivered on the promises it gave, as well the framework of the concession agreement," Mr. Diciembre said in a phone interview.

Citing Maynilad’s business plan, Mr. Diciembre said there would still be a "negative effect on consumers because there will still be increases, however small."

Construction-based DMCI Holdings owns 44.59% of Maynilad while Pangilinan-led Metro Pacific holds 55.41%. The two firms bought the utility when it was re-privatized by the government in 2007. The original owners, the Lopezes, returned the franchise to the government two years earlier.

Maynilad’s service area covers the west zone concession which includes Pasay, Caloocan, Las Piñas, Parañaque, Valenzuela, Muntinlupa, Manila except Sta. Ana, some areas of Makati and Quezon City, Malabon and Navotas, as well as Cavite City, Rosario, Imus, Noveleta, Bacoor, and Kawit in Cavite. — Jose Bimbo F. Santos