MWCI said that because of the "lack of disposable funds," the province waived its rights to preemptive stocks through Provincial Board Resolution No. 1354-2015 sponsored by then Seventh District Board Member Peter John Calderon approved on June 3, 2015.
Boy Santos/File
Manila Waters says: Capitol waived rights to shares
Lorraine L. Ecarma (The Freeman) - December 16, 2019 - 12:00am

CEBU, Philippines — Manila Waters Consortium Inc. (MWCI) has said the Province of Cebu waived its rights to preemptive shares upon the need to increase capital stock for additional requirements from Metro Cebu Water District (MCWD).

In a statement, MWCI said that because of the "lack of disposable funds," the province waived its rights to preemptive stocks through Provincial Board Resolution No. 1354-2015 sponsored by then Seventh District Board Member Peter John Calderon approved on June 3, 2015.

On February 5, 2015, Cebu Manila Waters Development Inc. (CMWD) through its corporate secretary wrote to then Governor Hilario Davide III and the province’s proxies for CMWD, Calderon and Martin Gerard Villamor, informing them of the increase in capital stocks needed to build additional kilometers of pipelines and additional water tanks for the Water Purchase Agreement (WPA) with MCWD.

MWCI said the province had the choice to subscribe to the preemptive shares it was entitled to or to waive that right. The province was given 30 calendar days from receipt of the letter to decide and send a reply.

In the end, the province chose not to subscribe to the preemptive shares as it did not have the funds to do so.

"It would be in the best interest of the PGC to waive its right to subscribe to the Preemptive Shares," the Provincial Board resolution reads.

Cebu Manila Waters Development Inc. was the offshoot company forged from the Joint Investment Agreement (JIA) entered into by the province and MWCI on March 2012 for the construction of a bulk water treatment facility in Luyang, Carmen with 28 kilometers of pipelines reaching Liloan town.

In the same statement, MWCI said that until September 2013 where the bulk water facility was at 95 percent complete, CMWD had yet to find any customers. At the time, MWCI added, MCWD opened a bid for a bulk water supplier to deliver to Casili, Consolacion.

"The specifications were different from the initial plan under the JIA. Nonetheless, CMWD board with PGC directors and independent director decided to participate in MCWD’s invitation to bid. CMWD won the bid and sealed the Water Purchase Agreement (WPA) by December 2013," the statement reads.

To fulfill the WPA agreement with MCWD, CMWD needed to construct seven kilometers of additional pipeline from Liloan to Consolacion. MCWD also required for CMWD to construct three water reservoirs at the site.

"Though CMWD finally got a customer, the WPA it acquired meant an additional pipeline of 7-kilometers and the construction of three reservoirs; thus, an added capex of at least ?300 million at that time," the statement reads.

According to MWCI, CMWD conducted a capital call to augment the needed additional capex and properly notified all investors. This includes the PGC.

They noted that this move was prescribed under Section 2.4 of the JIA.

"PGC opted out along with venture partner Metro Pacific Investment Corp. (MPIC). Manila Water Company and the other venture partner VicSal Development Corp. (VicSal) put in the needed funds," MWCI said further.

But the present Capitol administration questioned the revision of the business plan even before the original plan was implemented. Governor Gwendolyn Garcia also questioned why despite the substantial increase in the capitalization, the previous administration failed to secure the approval of the Provincial Board.

Currently, CMWD supplies 35 million liters of water per day to areas in Metropolitan Cebu.

Last December 9, the Provincial Board approved a resolution authored by Board Member John Ismael Borgonia, chairperson of the Provincial Board’s Committee on Provincial and Municipal Properties, terminating the partnership of the province with MWCI.

The province said MWCI committed at least five violations, among which is the increase in the project cost to P1,003,000,000 from P702,000,000; non-remittance of the province’s dues; the plowing back of the province’s share of revenues to capital expenditures; an increase in tariff rate to P24.59 per cubic meter from P13.95 per cubic meter; and the decrease in Internal Rate of Return for the province to 12.3 percent from the agreed 19.23 percent.

MWCI’s statement did not tackle the supposed non-remittance.

In a recent interview, Garcia said she is yet to sit down with the chief executive of MWCI for the province to finally receive its dues and to take JIA-prescribed steps after the termination.

The province served the notice of termination to MWCI on December 10, 2019. (FREEMAN)

METRO CEBU WATER DISTRICT
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