ZAMBOANGA, Philippines, March 24 – Islamic militants in the southern Philippines were paid US$97,750 to release Warren Rodwell, a negotiator said after the Australian waded to freedom following 15 months in captivity.

Al Rashid Sakalahul, vice governor of the strife-torn island province of Basilan, said late Saturday he had negotiated Rodwell's freedom with a feared leader of an extremist group known for beheading his victims.

The weak and emaciated 54-year-old former soldier was released on Saturday off Pagadian, a port city on Mindanao island, some 100 kilometres (60 miles) east of where he was kidnapped on December 5, 2011.

Police quoted him as saying he was left in a boat by his captors in waters between Basilan and Pagadian and told to row to safety. But the tide was out and Rodwell had to wade through the mud to reach safety on shore.

Wharf supervisor Nathaniel Campos said he spotted the soaked and mud-splattered Australian as he waded ashore in darkness, and asked him if he was a tourist.

"No, I'm not a tourist. I am a kidnap victim. Please help me!" Rodwell reportedly replied.

The ransom was substantially less than the $2 million the kidnappers, members of the Abu Sayyaf militant group, initially demanded after they broke into the house Rodwell shared with his Filipina wife in the town of Ipil.

Sakalahul said he succeeded in getting them to reduce the ransom to four million pesos.

"It was really a tough negotiation but in the end, with God's help, we managed to secure the release of Rodwell," he told reporters.

Sakalahul said he came forward to deny speculation in Manila that "middlemen" had pocketed some of the ransom.

"My only mission was to save the life of Rodwell by getting him out from the Abu Sayyaf. I am clean. My conscience is clean," he said.

He said the negotiations were conducted with an emissary of Puruji Indama, an Abu Sayyaf commander in Basilan notorious for beheading and mutilating victims.

Indama gained prominence after he and other Muslim militants attacked a Philippine military convoy, killing and mutilating 14 marines in 2007.

In November 2009 Indama kidnapped three ethnic Chinese factory workers and beheaded one of them before releasing the other two.

Police in Pagadian quoted Rodwell as telling them he had been repeatedly transferred from one small island to another to elude pursuit. He was not shackled but was always closely watched.

"He said he had several opportunities to escape but was not successful. They would open fire and force him to stop," said Inspector Eurem Macasil.

The Abu Sayyaf, founded in the early 1990s with seed money from Osama bin Laden, is blamed for the country's worst terror attacks including a series of bombings and kidnappings mainly targeting foreigners and Christians.

Both the Philippine and Australian governments have a no-ransom policy and Sakalahul said they did not know of the payment.

"Neither our government or the government of Australia knew of this. It was the family of Mr Rodwell who gathered the money," he said in a television interview.

Australian Foreign Minister Bob Carr said Canberra did not pay any money to secure Rodwell's release.

"Just be clear that the Australian government never pays ransoms," he told the Australian Broadcasting Corporation.

"I won't comment on arrangements that may have been made by Mr Rodwell's family and Abu Sayyaf, made through the Philippines anti-kidnapping unit and their police force."

President Benigno Aquino's spokeswoman Abigail Valte said the Philippine government was unaware of any ransom payment.

"The policy of the government remains that we do not pay ransom. Having said that, we have no information nor confirmation on that alleged ransom that was paid," she told reporters.

After his release Rodwell was flown by helicopter to a military base in the city of Zamboanga for medical treatment.

Senior Philippine military sources said he was being cared for in a tightly-secured, special US military enclave within the Philippine base.

A rotating force of 600 US Special Forces has been stationed in the southern Philippines since 2002 to help train local troops to combat Islamic militants such as the Abu Sayyaf.