No $400M ADB loan: MCWD

Thursday, February 23, 2012

CONTRARY to the claims of the Freedom from Debt Coalition (FDC), the Metropolitan Cebu Water District (MCWD) assured there is no $400-million or P17-billion loan from the Asian Development Bank (ADB).

MCWD general manager Armando Paredes said they are not capable of getting such a loan from any financial institution.

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Paredes told the City Council yesterday that MCWD’S equity is only P1.7 billion, which already includes their retained earnings and valuation of assets.

“So how can we borrow 10 times our equity with any bank? That is impossible,” he said.
Paredes also told the legislative body that if MCWD borrows money from a financial institution, it should be within their borrowing capacity.

Debt

At present, Paredes said they have an outstanding debt of P900 million, which was incurred between 1980 and 1990 to fund various projects in several areas of Cebu. The debt is still payable for the next 10 years.

If the debt equation ratio is 1:1, Paredes explained they can borrow only P800 or P900, at most, from any financial institution.

“MCWD will not take the risk of going into a loan which we ourselves cannot pay off.

At the same time, no financial institution would be crazy to lend us money which they believe we’re not capable of paying,” he said.

If they will implement surface water projects, Paredes said they will follow Carmen Water Supply and Danao Water Supply whose development was shouldered by other entities.

“And then we will just buy water. This (set-up) is very much cheaper in terms of investment on the part of MCWD,” he added.

Online post

But if there is no loan, Abigail Almera of the MCWD Employees Union asked Paredes before the council why the ADB website states that the $400-million loan is said to be due for approval on April 4, 2012.

Paredes retorted that he has not signed any loan application.

As to the union’s concern on the possible increase of water rates, Paredes said they will go through the process if rate hikes are implemented.

The process includes getting their board of directors’ approval, having the Local Water Utility Administration review the proposal, and conducting a public hearing.

Once the hikes are approved, MCWD will be posting in the paper the rate increase seven days before its effectivity.

In earlier reports, MCWD, together with the Davao City Water District, were said to have borrowed $400 million each from ADB to finance their water supply improvement, expansion of distribution lines, and waste management projects for 19 years, starting this year.

The project is said to be an offshoot of the $2.2-million ADB urban water supply and sanitation project study, which is being funded by the French Government.