CEBU Gov. Gwendolyn Garcia expressed her dissatisfaction against the response of Manila Water Consortium Inc. (MWCI) over its alleged breach of contract with the Provincial Government.
In an interview Wednesday, Nov. 20, 2019, Garcia said her office received a letter from MWCI on Nov. 4, 2019. The letter contains the company’s answers to its alleged contract violations.
“They gave several attempts to address the breaches, but none of those attempted justifications had any relevance,” she said.
The governor issued a notice of breach/default against Virgilio Rivera, Manila Water president and chairman of the board of directors.
The notice, dated Thursday, Aug. 29, 2019, was received by Cebu Manila Water Development Inc. general manager Constantine Uy on the same day as well.
Garcia gave Manila Water 90 days to cure the breach it had allegedly committed. The deadline is on Wednesday, Nov. 27.
The governor said that if by then the firm still has failed to justify its breaches, the Capitol will “take the appropriate measures under existing laws and the joint investment agreement (JIA), including but not limited to the termination of the JIA.”
Aside from reportedly not remitting an estimated P150 million worth of receivables to the Province, MWCI also allegedly increased the approved tariff rate of P13.95 per cubic meter (cu. m.) to P24.59 per cu. m.
The other three violations include allegations over the increase in the project cost or capital expenditure (Capex) from P702 million to P1,003,000,000, and the decrease in project internal rate of return (PIRR) from 19.23 percent to 12.30 percent.
The earned revenues were also reportedly plowed back to the Capex of the joint investment company.
These alleged serious and material breach, which involved the essence of the project, were reportedly not approved and authorized by the JIA parties. Likewise, the board of directors reportedly did not pass any resolution approving and authorizing the same.
Manila Water’s reply
In his letter to the governor, Rivera, Manila Water president and chairman of the board of directors, said they understood “the event of the default” cited by the Capitol.
Rivera said the increase in Capex followed the unanimous decision of Metropolitan Cebu Water District (MCWD) and Manila Water.
In 2014, the P1.1-billion water supply project started producing 35 million liters of water daily to homes in Metro Cebu.
Water produced by the Carmen facility was sold to MCWD. Cebu Water and MCWD have a 20-year supply agreement.
As for the tariff rate, Rivera said they had to come up with a rate that would make the project “financially and economically feasible.”
The change in PIRR, meanwhile, was reportedly affected by the conditions of the MCWD bulk water supply contract as well as the cash flow.
“This was considered when the company submitted the bid to MCWD and adopted a change in business plan,” wrote Rivera. (RTF)