Duterte threatens takeover of Manila water firms

Two private companies took over water distribution in Manila from the government more than twenty years ago

Philippine President Rodrigo Duterte has threatened a government takeover of the capital's water services unless its two private utilities accept a new contract, his spokesman said Tuesday, an ultimatum experts warned could spook investors.

Duterte's government will offer a deal to replace the one first crafted in the 1990s when Manila's troubled water system was privatised and which the president calls a "colossal rip-off", his spokesman Salvador Panelo said.

"Should (utilities) Maynilad and Manila Water refuse to accept the new agreements, the president will order the cancellation of their present water contracts and order the nationalisation of water services in their... areas," Panelo said.

No text has been made public and neither firm immediately provided comment on the proposal.

The companies, which serve some 16 million customers, have drawn the president's ire since they won a roughly $145 million arbitration ruling against the government last month over rejected rate increases.

Analyst Calixto Chikiamco warned the offer was "like putting a gun to their (utility operators') head", and risked leaving investors wondering if agreements would be unilaterally changed.

"If the outcome is cancellation and nationalisation, that will have a negative impact across the board for foreign investments,” he told local TV.

Duterte has claimed the water firms were committing "economic sabotage" with terms they obtained in their 1997 franchises, including recouping corporate income tax costs from ratepayers.

The companies took over water distribution from the government after a water crisis in the capital, caused in part by the system's heavy debt and a notoriously inefficient pipe network.

Duterte's public comments, repeated several times in speeches since December, helped drive the stock price of Manila Water and Maynilad's listed parent firms down by more than a combined $2 billion.