Due to unresolved issue on dev’t cost: MCWD drops Ayala water Project

Unresolved issues have forced the management of the Metro Cebu Water District (MCWD) to “abandon” the proposed multi-billion Carmen Bulk Water Project of the Ayala-led consortium.

The Ayala-led consortium has however asked for an extension until June 10.

Last May 10, the MCWD management sent a letter to the project proponent terminating the negotiations on the proposal, which was projected to supply an additional 50,000 cubic meters of water to the water district’s 1.5 million customers.

Last March 21, Armando Paredes, general manager of MCWD, wrote Sherisa P. Nuesa, chief finance officer of the Manila Water Co. Inc., the biggest investor in the consortium, saying the project failed to secure a notice of acceptance, therefore “it is now deemed rejected by the Metro Cebu Water District.”

The Carmen Bulk Water Project is an unsolicited build-operate-transfer (BOT) venture involving construction of 30-kilometer pipeline from Carmen to Cebu City.

In response to latest letter of the MCWD, the Ayala-led consortium has asked for reconsideration and more time to resolve the issue on the development cost and the terms and conditions that the National Economic Development Authority-Investment Coordination Committee wants to be included in the contract.

With this, Paredes told The Freeman that the water district is giving the consortium one month, or until June 10 to resolve these issues.

With regards to the failure of the project proponent to secure a notice of acceptance, Paredes cited the provisions of the BOT Law that the receiving entity (MCWD) has the right to reject the proposed project because more than 45 calendar days had lapsed since the proponent received the notice of approval, yet there has been no notice of acceptance received by MCWD.

“Pursuant to Section 10.9 of the implementing rules and regulations of the BOT Law, we regret to inform you that due to the failure of the original proponent to submit in writing as acceptance of all terms and conditions of the approval by the approving body within 45 calendar days from receipt of the notice of approval, the unsolicited proposal is now deemed rejected by the Metro Cebu Water District,” Paredes said in his letter.

 The official also explained that it is already moot and academic to discuss the issue of reimbursement of development cost, because the “proposal is already officially rejected.”

But on April 10, Nuesa, wrote a letter to Finance Secretary Margarito Teves and NEDA Secretary Romulo Neri, seeking for reconsideration.

Likewise, in a letter to Paredes, Nuesa explained that the project was endorsed to NEDA on August 24, 2006 or before the 2006 BOT Law new IRR took effect, thus it is still covered by the old IRR.

Nuesa also said that under the IRR of the 1999 BOT Law, there is no requirement for a time period for the original proponent to make a formal acceptance of the terms and conditions.

Paredes said that they considered Ayala’s request for reconsideration, but in the event it fails to resolve the issues on the P200 million development cost and the revisions recommended by the NEDA-ICC, the water district will terminate the negotiations and reject the proposed project.

“But even under the old IRR, if the issues remain unsolved, we can reject the project,” he said.

According to Paredes, the decision to terminate the negotiations was arrived at during the MCWD board meeting on the last week of April.

“Our position is no development cost,” he said, adding that they are only for the transfer of water rights. Ayala-led consortium has already secured water rights, which gives it exclusive rights to develop the water source. Once it losses the bidding, it will transfer the water rights to the winning bidder and gets reimbursed for its expenses in securing the water rights.

 Paredes said that although the Carmen Bulk Water project is important for the water district, they are not totally relying on it because MCWD is constantly developing its own water sources.

In fact, he said that they are targeting to produce 80,000 cubic meters of water from underground and desalination sources in the next five years that will augment the water district’s existing supply of about 150,000 cubic meters of water a day.

At present, Paredes said that they are still waiting for the result of the study conducted by Woodfield Consultancy, which is commissioned by the water district to study and look for possible water sources in Metro Cebu. -(/NLQ)