Manila water supplier surrenders concession

One of the two main water suppliers for Manila and its suburbs is surrendering its water concession, in the clearest sign that the politically powerful Lopez family is in serious financial trouble.

The Philippine Stock Exchange composite index yesterday closed 1.4 per cent lower, at 1,013.31 points, on the news that the Lopez-controlled Maynilad Water Services was returning the water concession to the state's water regulatory agency, the Metropolitan Waterworks and Sewerage System (MWSS).

Maynilad cited 'compelling financial, regulatory and natural causes in the last five years'. The company, which made the announcement after failing to get approval to raise water rates, was also demanding a 17.5 billion peso (HK$2.57 billion) refund from the government.

Congressman Jose Salceda, a former securities analyst, said the government should share the blame for the failure, which he believed could undermine investor confidence. 'It's clearly a failure of economic policy.'

He said President Gloria Macapagal-Arroyo's administration should have anticipated Maynilad's withdrawal from the concession.

The Lopez group of companies is a huge conglomerate with interests in telecommunications, power and property development, and financial ratings of its flagship corporation, Benpres Holdings, appear to affect the country's bond ratings.

Opposition Senator Tessie Aquino-Oreta saw the move as 'a big challenge' to Mrs Arroyo. She said the Lopez family, with its media empire, would play kingmaker in the 2004 presidential elections which Mrs Arroyo hoped to win.