Governor Gwendolyn Garcia on Thursday said Manila Water Consortium Inc. (MWCI) is prohibited from using its two newly dug deep wells in the northeastern town of Carmen for additional water sources.
MWCI dug two additional wells last May without approval from the Carmen municipal government and the Cebu provincial government, she said.
The governor and the capitol consultants, Lawyers Rory Jon Sepulveda and Marino Martinquilla, met with the MWCI representatives and Carmen town officials led by Mayor Carlo Villamor on Tuesday.
Although not yet operational, digging the two wells without prior approval from the town and the Capitol is deemed a gross violation of the joint investment agreement (JIA) entered into between the provincial government and MWCI.
The JIA was signed on March 21, 2012 for the creation of Cebu Manila Water Development Inc. (CMWDI), a joint investment company (JICO) for the construction and development of water supply facilities to deliver treated bulk water to Metro Cebu with an option to engage in retail supply by tapping the surface water source of Luyang River in Carmen.
The JIA is presently under dispute after MWCI’s “serious and material breach” to the terms and obligations of the said agreement.
Garcia issued a notice of breach to MWCI through Virgilio Rivera, its president and chairman of the Board of Directors, on Aug. 29, 2019 informing of their breaches and requiring to cure them within 90 days, but the company allegedly failed to rectify these.
The breaches include the increase of the capital expenditure from PHP702 million to PHP1.003 billion; change of tariff rate from PHP13.95 per cubic meter to PHP24.59 per cubic meter; a decrease of project internal rate of return (PIRR) from 19.23 percent to 12.30 percent; non-remittance to the Capitol of its receivables from January 2015 to July 2019; and plowing back of the earned revenues to the capex of the JICO.
On December 9, 2019, the Cebu Provincial Board passed a resolution authorizing Garcia to issue a notice of termination to MWCI.
Under the JIA, the MWCI is only allowed to extract surface water of the Luyang River in the municipality of Carmen. However, MWCI dug two deep wells in 2017 claiming that there was drought.
But Garcia cited a report from the Metro Cebu Water District (MCWD), to whom the project supplies 36.5 million liters of water daily, saying there was no evidence of drought in that period.
The project started its water supply to MCWD in 2015.
Based on the official record, there was no drought recorded from 2016 to 2018, as the project was able to deliver over one million cubic meters per month to MCWD except for some months.
“When was the drought? If the drought was in 2018, then your delivery did not show it. The main reason for adding two wells is to have more income,” Garcia was quoted as saying in a news release from the Capitol, adding that digging two more wells was done because Manila Water could not fulfill its contractual obligation to MCWD.
Based on the agreement, MWCI would supply 35 million liters of water daily to MCWD but in reality, the company is supplying 36.5 million liters.
The 35 million liters of water daily supply to MCWD, Garcia said, was the proposal of MWCI after it conducted a 10-year study in the water source.
Because of the overdrawn water from the source, she said MWCI has to pay for the excess it supplied to the MCWD, plus penalties.
Meanwhile, the governor asked Uy to tell MCWI’s officials that the provincial government will tap their main line for the waterworks project in Carmen.
The group is set to meet again for another meeting tomorrow, Sept. 4. (PNA)