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No approval for Manila Water’s new deep wells
By: Mylen Manto | Published Wednesday, September 2, 2020
Gov. Gwen Garcia meets with officials of Manila Water Consortium, Inc. and the local government of Carmen to discuss the water supplier’s new deep wells dug without approval. (Lito Tecson)

Cebu Governor Gwendolyn Garcia strictly prohibited the Manila Water Consortium, Inc. (MWCI) from using its two newly dug deep wells in Carmen town as additional water sources.

MWCI dug two additional wells last May without approval from the Carmen Municipal Government and the Cebu Provincial Government.

Together with Capitol Consultants Atty. Rory Jon Sepulveda and Atty. Marino Martinquilla, Garcia met with the representatives of MWCI and Carmen town officials led by Mayor Carlo Villamor last Tuesday, September 1.

Although not yet operational, digging the two wells without prior approval from the town and the Capitol constitutes a gross violation of the joint investment agreement (JIA) entered into between the Province and MWCI.

The Province of Cebu and MWCI entered into a JIA 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 obligation in the said agreement. 

Garcia issued a notice of breach to MWCI through Virgilio River, its president and chairman of the Board of Directors, on August 29, 2019 informing of their breaches and requiring to cure them within 90 days, but the company failed to rectify these.

The breaches include change/increase of the project cost or Capital Expenditure (capex) from P702,000,000 to P1,003,000,000; change/increase of tariff rate from P13.95 per cubic meter to P24.59 per cubic meter; change/decrease of Project Internal Rate of Return (PIRR) from 19.23% to 12.30%; non-remittance to the Province of Cebu 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.

The CMWDI continued its operation, despite the dispute between the Province and MWCI, as it has a juridical personality separate and distinct from that of its stockholders and members. 

MWCI recently proposed to dig two new deep wells and sell the extracted water to the local government of Carmen at P8 per cubic meter. Manila Water projected to draw 2,500 cubic meters from the two new wells daily to supply the waterworks project of the municipality. 

Atty. Merian Buot, one of the councilors of Carmen, told the governor that MWCI started digging the additional two deep wells in May without the municipal council’s approval. In fact, they did not agree with the previous two deep wells dug in 2017.

Garcia told Constantine Uy, regional general manager of MWCI for the Visayas and Mindanao, that they cannot use the newly dug deep wells.

“You cannot use that – the two new wells,” she said, adding that their proposal seems to condone their earlier error which is the digging of two deep wells in 2017. This, she said, will not exonerate them of their mistake pursuant to the existence of two deep wells.

Under the JIA, the MWCI is only allowed to extract surface water of 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), 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 record, from 2016 to 2018, there was no drought to speak of, as the project was able to deliver over one million cubic meter 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 in adding two wells is to have more income,” she said, adding that digging two more wells was done because Manila Waters cannot fulfill its contractual obligation to MCWD.

Based on the agreement, MWCI will supply 35 million liters of water daily to MCWD but in reality, they were supplying 36.5 million liters. 

“How can you enter a water purchase agreement (WPE) that is beyond the allowed water extraction?” she asked MWCI.

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 told Uy to tell their principals that the Provincial Government will tap their main line for the waterworks project in Carmen. 

Provincial Engineer Hector Jamora and Provincial Treasurer Roy Salubre will now exercise their duties under the interim agreement entered into by the Province and MWCI. 

Jamora will supervise the technical works and operation of the project while Salubre will have access to the project’s finances.

The existing bank accounts of MWCI in relation to the project will be closed and a joint account of the MWCI and Cebu Province will be opened as per interim agreement entered into. 

The group is set to meet again for another meeting on Friday, September 4. (Mylen Manto)