(Bloomberg) -- Philippine President Rodrigo Duterte is giving Manila water providers the option of accepting new contracts written by the government -- or see the state take over in areas where they operate.
Duterte decided to offer new agreements to Manila Water Co. and Maynilad Water Services Inc. after being presented with legal options on the water contracts at a Monday night Cabinet meeting, spokesman Salvador Panelo said in a briefing Tuesday. He added that the terms will be “very different” from those in the existing contracts, which Duterte said contained “onerous” provisions.
“Should they refuse to accept the new agreements, the president will order the cancellation of the water contracts, order the nationalization of water services in their respective areas of operations and prosecute all of those involved,” Panelo said.
Later Tuesday, Duterte said he considers the original contracts with the water providers to be “null and void” because there are “so many provisions that infringe” on Philippine laws.
“I have this draft. Either they accept it or not,” Duterte said at a televised briefing.
Justice Secretary Menardo Guevarra, who is leading the contract review, told ABS-CBN News Channel on Wednesday that the proposed new deals will remove provisions that prohibit the state from interfering in tariff-setting and require it to compensate water providers for delays in rate hikes. He also wants to cut out a clause that allows providers to pass on certain taxes and costs to consumers.
Guevarra expects to finish discussions with concessionaires in six months. Manila Water and Maynilad will continue to enjoy exclusive rights to service the capital while their current pacts exist, he said.
Manila Water rose 12.3% at the close Tuesday, while Maynilad owners DMCI Holdings Inc. and Metro Pacific Investments Corp. were up 4.3% and 4% respectively. The Philippine benchmark stock index rose 0.6%.
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