Being monopolies, water business is robust

Success is the sum of small efforts repeated day in and day out. -Robert Collier


Former senator Cynthia Villar said recently that her husband Manny wants to “dispose of” the controversial PrimeWater, the water service provider of over 100 towns and cities in the country where it has existing joint venture agreements (JVA) with local water districts.

The prime reason for Cynthia’s disenchantment with the water business is that “we are not earning a lot from it.”  Secondary reason, which is all too apparent, is this– the company is encountering serious problems in delivering on their promise of efficient and affordable water service.  So much so that PrimeWater is eroding whatever political capital the Villar brand has managed to save.

Cynthia admitted what had been apparent in the last senatorial campaign of her daughter Camille.  That PrimeWater’s poor service and performance impacted negatively on Camille Villar’s senatorial run; only her tenacity and grit, along with millions of pesos in campaign funds, put her in the winning circle of 12.

PrimeWater is a subsidiary of Prime Asset Ventures Inc., which is owned by Manuel Paolo, the eldest of the Villar siblings.  So technically, both Camille and Mark do not have direct participation in the water business.  But the pressure was so intense that President Bongbong Marcos had to order an investigation on PrimeWater during the Bagong Pilipinas campaign.  Like other probe orders from the Palace, this one was easily forgotten both by officials, the media, and the public.

Still a robust business

The fact that big business conglomerates still compete among each other to take control of water—that precious natural resource—collect it in dams, clean and treat it, package it as a basic commodity for distribution, proves that the water business is as robust as ever.

The burgeoning local population needs water, now and in the next few decades, and supply is inadequate.

This is the reason behind PrimeWater’s struggle to solve the geographical problem of height of San Jose del Monte in Bulacan, and the rush with which Ricky Razon is building the Ahunan Dam in Pakil, Laguna.

Main players in the water business are PrimeWater of the Villar family; Manila Water of Trident Water Holdings Co. owned by the Enrique Razon-controlled Prime Infrastructure Capital; Maynilad of the Metro Pacific Investments Corp., DMCI and Marubeni, and Aboitiz InfraCapital which operates Apo Agua and Lima Water Corp.

The local government units have a big say on water contracts, so that when things like service go wrong, the mayor and the councilors may decide to end the joint venture agreements, just like in San Pedro City in Laguna.

City mayors and other officials should be wary, therefore, about private-sector offers to run their water systems.  

Water plan in Iloilo City


A case in point is in Iloilo City, now headed by Mayor Raisa Maria Lourdes Treñas-Chu.

A source said Aboitiz InfraCapital’s unsolicited proposal for the Jalaur bulk water project may be framed as a solution to Iloilo’s water woes, but a closer look reveals a deal that burdens both the city government and consumers. 

He is bothered by the project’s alleged “long-term costs, technical inefficiencies, and troubling legal overreach.”

At the core of this proposal is a raw water intake facility and a 23-kilometer high-line canal, for which the National Irrigation Administration (NIA) would be forced to pay nearly ₱27 billion in total “availability payments” over 33 years — even if no one uses the water. This is a blatant “take-or-pay” scheme that transfers virtually all financial risk to the government, while guaranteeing profits for the proponent. 

Despite the government’s massive payment of ₱27 billion, Aboitiz plans to charge ₱40 per cubic meter (VAT exclusive and in today’s prices) for bulk water. At the consumer level, this translates to an estimated ₱80 per cubic meter, which is double the current rate paid by Iloilo City households. 

This proposal would make Aboitiz’s bulk water supply—sourced from a river—the most expensive in the country.   In the end, both the government and ordinary Ilonggos will bear the cost. Critics also flag the raw water intake facility as “unnecessary” — a white elephant in the water treatment process that will eventually be turned over to National Irrigation Administration (NIA) only after 32 years, long after it has depreciated and lost operational value. 

The plan gives Aboitiz exclusive rights to submit and match proposals for renewable energy within the dam and canal, it was pointed out.

In a separate component,  the city government will have to take on the responsibility of securing water permits and selling the water, despite the City’s having no mandate or infrastructure for water distribution. This misalignment not only oversteps the city’s actual functions, but also exposes it to termination penalties, should the city not deliver.

It was reported that the NIA and the Province of Iloilo had rejected this proposal previously for good reason. It is time for Iloilo City to align with national and provincial interests and protect its citizens — not corporate profits.

This corner advises Mayor Treñas and the city council to study the Aboitiz proposal well before deciding on what is best for the residents and business community of Iloilo City.