A highly asymmetrical partnership

By Artchil B. Fernandez

Prior to 2018, Iloilo City residents—as well as those living in nearby localities serviced by the Metro Iloilo Water District (MIWD)—paid a minimum monthly water bill of PHP 173. In 2018, the Manuel V. Pangilinan-led Metro Pacific Group took over Iloilo City and nearby areas previously serviced by MIWD. The minimum monthly water bill rose to PHP 224. Another hike was imposed by Metro Pacific Water in October 2025, raising the minimum monthly water bill to PHP 282. The trend is clear: water bills for Ilonggos are increasing.

But the latest water bill hike may not be the end of Ilonggo consumers’ woes. Another round of increases is expected—a significant one—through the concession agreement between the Iloilo City Government and Aboitiz InfraCapital (AIC) regarding the PHP 5.12-billion Iloilo Bulk Water Supply Project. The project aims to deliver up to 80 million liters of potable water daily from the Jalaur River under a 33-year Build-Own-Operate (BOO) and Build-Lease (BL) scheme.

A close examination of the concession agreement between Iloilo City and Aboitiz InfraCapital reveals it is a highly asymmetrical partnership. The city government is placed in a disadvantageous position by assuming “significant commercial and regulatory liabilities without retaining control over the strategic water infrastructure,” according to a study of the concession agreement.

The study found that the most immediate disadvantage to the Iloilo City Government is the financial cost. “The agreement sets the Bulk Water Charge at PHP 40.20 per cubic meter (exclusive of VAT, based on 2024 pricing),” when competing joint ventures are offering only PHP 16.83 per cubic meter. The impact to consumers is plain and clear: their water bill will definitely go up when distribution costs and VAT are included. It is projected that the end-user tariff will double under AIC’s concession agreement.

One onerous provision in the agreement is the “Grantor Compensation.” The provision states that if the Iloilo City Government takes regulatory action or causes delays in permits, it must financially compensate AIC to recover costs. This shields AIC from business risk and guarantees its expected rate of return at the expense of the public.

The business model of the concession agreement is also grossly unfavorable to the Iloilo City Government. It is a Build-Own-Operate (BOO) transaction, which does not allow asset transfer. When the agreement expires, AIC will retain ownership of facilities such as the water treatment plant and pipelines. This contravenes standard Public-Private Partnership (PPP) models like Build-Operate-Transfer (BOT), where assets revert to the government at the end of the contract.

Since Iloilo City will not own the assets after the agreement expires, it will likely be forced to award another contract to AIC due to the lack of alternative infrastructure. This locks the city into a perpetual agreement with AIC, given its weakened bargaining power.

Under the “Take-or-Pay” burden of the concession agreement, it is Iloilo City—not AIC—that faces market risk. The agreement requires Iloilo City to procure water from service providers like MIWD. Should cheaper alternative supplies become available, AIC can source from them instead of availing what the city offers, thereby exposing the city to losses or even triggering a termination scenario where it must compensate AIC. In the event of losses, liabilities are deducted from the city’s share.

Worse, the “Water Supply Assumption” clause of the agreement puts the burden of securing water supply on Iloilo City. For example, if raw water is unavailable from the Jalaur River, AIC can terminate the agreement without penalty. In situations of water shortage, it is Iloilo City that must find ways to secure water rights—thus insulating AIC from environmental or resource availability risks.

In the event of the termination of the concession agreement—for whatever reason, such as failure to meet conditions or force majeure events—Iloilo City is exposed to enormous financial liabilities. The agreement requires the city to pay AIC’s losses, including outstanding debt, equity returns, and “breakage costs.” The high cost of termination will likely prevent the city from terminating the agreement, even with valid justification. AIC, on the other hand, is protected from liabilities through the “Grantor Compensation” and “Force Majeure” clauses of the agreement.

The concession agreement is clearly one-sided, with all favorable conditions granted to AIC while the Iloilo City Government is left holding the empty bag. It violates the core principle of Public-Private Partnerships (PPP), which is to balance public interest with private efficiency. In this case, AIC is freed from business risks and shielded from liabilities, while the Iloilo City Government bears all the risks and burdens.

Above all, the concession agreement is unfair to Ilonggo consumers. The exorbitant base tariff of PHP 40.20 per cubic meter—compared to the regional benchmark of PHP 16.83—is a heavy burden on the pockets of the consuming public. It fails the basic test of affordability and cost-effectiveness.

Given the lopsided nature of the concession agreement, the Iloilo City Government must reconsider its decision to approve and ratify it. The contract must be renegotiated. If renegotiation fails, the city must abrogate the agreement for being contrary to public interest. The Iloilo City Government must ensure that the best interests of Ilonggo consumers are protected and prioritized in any contract it enters.

Failure by Iloilo City to review, renegotiate, or abrogate the concession agreement with AIC will raise serious questions about the motives of city leaders in pushing a highly asymmetrical partnership. If Iloilo City leaders cannot protect Ilonggo consumers from predatory concessionaires, they have no business holding public office.