| REPUBLIC ACT 8041 - The privatization process Under Republic Act No. 8041 (The National Water Crisis Act of 1995) as implemented by Executive Order No. 286 (December 1995) and 311(March 1996). The MWSS was mandated to enter into arrangements that will result in the participation in any or all segments of operations of the MWSS facilities. The government divided the network into two service areas, the west zone and east zone. Each zone has its own water treatment facilities and is geographically contiguous. The bidding was done through a two-envelope process. The first envelope contained the technical and business submissions and included the strategic, operational and organizational aspects, a financial submission containing capital expenditures, amount and sources of debt and equity, cash flow financing and target returns and financial performance. The second envelope contained the bid rate. The bid rate was a percentage of the pre-privatization MWSS water rates. The first envelope was evaluated first to limit the bidders to those with strong technical and financial capabilities in utility operation and also ensure that foreign sponsors were among the top operators. The second envelope was then opened to determine the winners. A total of four bids were submitted. The concession was awarded to the bidder with the lowest percentage/tariff bid. The Manila Water Company Inc. (MWCI) submitted the lowest bid for both the west and east zones but the bidding rules disallowed them from operating both zones. MWCI won the east zone concession with a bid of P2.32 per cubic meter while Maynilad Water Services Inc. (MWSI) won the west zone with a bid of P4.96 per cubic meter. The agreements were embodied in a Concession Agreement executed on February 21, 1997. The Concessionaires assumed operation on August 1, 1997. Under the Concession Agreement, the MWSS handed over responsibility for managing and expanding the bnetwork to the two private companies. Ownership of all fixed asets was however retained by MWSS. However, while operational and investment responsibility were given to the private operators, the operation and maintenance of common infrastructure is the responsibility of the joint venture company which is to be formed by the Concessionaires. The objectives of the privatization were, to improve and expand the delivery and coverage of water and sewerage services, increase the efficiency in operating the network, minimize tariff impact and transfer the financial responsibility in the provision of water and sewerage services to the private sector while allowing them a fair rate of return. |