Infrastructure holding firm Metro Pacific Investments Corp. (MPIC) has turned more optimistic on reaching a “bankable” new concession deal for Maynilad Water Services Inc. through an out-of-court settlement with the government.
But while the group has seen a much-improved relationship with the government, challenges from the current coronavirus disease (COVID-19) pandemic will likely prompt a 50-percent reduction in group-wide capital spending this year to around P70 billion.
For the first time since in its corporate history, MPIC posted a year-on-year decline in quarterly profit in the first quarter as various businesses were constrained by lockdown measures meant to curb the COVID-19 pandemic. MPIC’s first quarter core net profit fell by 6 percent year-on-year to P3.4 billion.
Including nonrecurring items, MPIC’s net profit fell by 46.6 percent year-on-year to P1.89 billion as the enhanced community quarantine imposed on the whole of Luzon starting mid-March reduced toll road traffic, suspended rail services and decreased commercial and industrial demand for water and power, resulting in a decrease in contribution from operations of 5 percent.
To conserve cash and prepare for contingencies arising from COVID-19 pandemic, MPIC chief financial officer David Nicol said capital spending budget would be slashed by 50 percent by reducing spending on discretionary projects, such as those on the hospitality and logistics businesses alongside some other water-related projects.
MPIC chair Manuel V. Pangilinan—who recently accepted President Duterte’s apology for earlier “hurtful” words said in relation to the allegedly “onerous” concession framework for Maynilad—said at a press briefing via Zoom on Wednesday that the present course of action would be to pursue a bilateral dialogue with the government.
“What we are hoping [for] and optimistic about is that at the end of the day, the revised agreement will be bankable because this is really the measure of the concession which we have invested [in]originally and up to now, we’re being faithful to our service obligation,” said Maynilad president Ramoncito Fernandez.
“We are waiting for a set of terms to be presented and negotiated with the government,” said MPIC president Jose Ma. Lim.
After the cancellation of the 15-year concession extension of Maynilad and Manila Water, a new contract needs to be drawn up of these concessionaires were to survive beyond 2022.
In the meantime, Lim noted that given the better relationship between Malacañang, the members of the government’s water concession committee—represented by the finance, justice, Office of the Solicitor-General, National Economic and Development Authority and Bases Conversion Development Authority—would be “more objective” and “not pressured” to insist on the original terms previously floated.
“If there’s a change of law, we’re willing to pay our taxes but please give us the commensurate pretax yields that will allow us to pay those taxes. Because the way the concessions were originally structured, the yield that we were allowed to charge excluded any payment of taxes to the government. If there’s a change of law, there must be commensurate adjustment in terms of tariffs,” Lim said.
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