FOR failing to cure its alleged breach of contract, the Cebu Provincial Government will terminate its joint investment agreement (JIA) with Manila Water Consortium Inc. (MWCI).
In its regular session on Monday, Dec. 9, 2019, the Provincial Board (PB) en masse passed a resolution authorizing Gov. Gwendolyn Garcia to sign the notice of termination against Manila Water.
The approved resolution was filed by PB Member John Ismael Borgonia (3rd district), who heads the committee on provincial and municipal properties.
“During our meeting with the PB members last week, we outlined step-by-step how Manila Water, in the past six years that I have not been around, had violated several provisions in the JIA. It’s just rather very significant that presently, the President (Rodrigo Duterte) is also taking action against Manila Water and Maynilad for those agreements which are grossly disadvantageous to the Filipino people,” said Garcia.
The governor had issued a notice of breach/default against Virgilio Rivera, Manila Water president and chairman of the board of directors.
The notice, dated Aug. 29, was received by Cebu Manila Water Development Inc. general manager Constantine Uy on the same day.
Garcia gave Manila Water 90 days to cure the breach it had allegedly committed. The deadline was last Nov. 27.
Garcia, though, was dissatisfied by Rivera’s response, dated Nov. 4.
“They did write back and I wrote back too because in their lengthy explanation and justification, I could find neither acceptable justification nor any legal basis in truth and in fact,” Garcia said.
With the impending termination, Garcia said the Capitol will have to weigh its options on how to proceed with the development of bulk water supply in Luyang River in the northern town of Carmen.
Item 5.8 of the JIA under the termination clause provides that the other party may purchase all of the outstanding shares owned by the party at default.
“Negotiations with Manila Water are off the table... I ensure that the Province, the interest of the Cebuanos, must always be protected regardless of who sits as governor,” Garcia said.
On March 21, 2012, during Garcia’s earlier stint as governor, the Capitol entered into a JIA with Manila Water to manage the bulk water supply.
It had a 49-51 percent profit-sharing scheme in favor of the private partner.
The JIA led to the creation of Cebu Water, a joint investment company, for the construction and development of water supply facilities that would deliver treated bulk water.
The JIA provided an option to engage in retail supply in certain areas and to some areas in the province by tapping the surface water source of the Luyang River.
In 2014, the P1.1 billion water supply project started producing 35 million liters of water daily for homes in Metro Cebu.
Water produced by the Carmen facility was sold to the Metropolitan Cebu Water District (MCWD). Cebu Water and MCWD have a 20-year supply agreement.
In September, then MCWD general manager Jose Eugenio Singson Jr. said the 35 million liters of bulk water the MCWD got daily from Luyang River were supplied solely to Lapu-Lapu.
But after nearly five years since the Luyang River started supplying bulk water to homes in Metro Cebu, the Province found that Manila Water had deprived the former of an estimated P150 million worth of revenues.
Aside from reportedly not remitting 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 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 breaches, 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.
In another development, the Cebu City Council granted the request of the MCWD to look for water in vacant lots owned by the Cebu City Government and the Archdiocese of Cebu.
Areas that the MCWD is eyeing are the Sto. Tomas de Villanueva and Holy Cross Parish at the South Road Properties (SRP), Mary Help of Christians Parish on Buhisan Road in Barangay Basak, San Vicente Ferrer Parish in Barangays Sambag 1 and 2, Our Lady of the Sacred Heart Parish on Escario St. in Barangay Kamputhaw, Archbishop’s Palace on D. Jakosalem St. in Barangay Zapatera and San Carlos Seminary on Juan Luna Ave. in Barangay Mabolo.
The MCWD also wants to conduct water exploration activities at the elementary schools in Barangays Inayawan, Labangon, Pardo, Basak, Bulacao, Punta Princesa, Oprra, Banilad and Kamputhaw, the area beside the Capitol Site Barangay Hall, Apas National High School and an area on Salinas Drive in Barangay Lahug.
The MCWD is requesting a copy of the tax declaration or transfer certificate of title and a copy of a sketch or lot plan of the said lots.
In October, then MCWD general manager Singson sent separate letters to the Cebu City Government and Cebu Archbishop Jose Palma about their plan to look for hidden wells.
Singson, in the letter, assured that the exploration activity will not cost the City and the archdiocese anything. If the MCWD cannot find any water in the said areas, the properties will be returned to their normal state.
But if there is a viable source of water in the involved areas, the MCWD will give monetary consideration in the form of royalty or revenue share per cubic meter of water that will be extracted from each well.
In a resolution sponsored by City Councilor Dave Tumulak, he said the MCWD has been trying to find ways to increase the water supply through medium-term and long-term solutions.
Tumulak said some barangays in the city have had “little to no water at all” for the past several months, including Barangays Punta Princesa, Inayawan, Apas and Sambag 1. (RTF, JJL)