San Miguel's Laiban bid remains unchallenged

MANILA, Philippines - San Miguel’s bid to build a dam seen to become Metro Manila’s future water supply source remains unchallenged, officials disclosed during a Thursday briefing. Despite allowing a bidding extension deadline, [the Metropolitan Waterworks and Sewerage System] waited for the challenge of another private sector entity but none came," Diosdado Jose M. Allado, the agency’s administrator, said. From February 9 this year until July 16, no private sector entity has expressed intentions to challenge the unsolicited proposal of San Miguel Bulk Water Co. Inc. (SMBWCI), officials added. Deadline for submission of bids is on August 7, a date already extended “longer than what is provided for under joint venture guidelines" formulated by the National Economic and Development Authority (NEDA), Allado said. The Metropolitan Waterworks and Sewerage System (MWSS) will hold a ten percent interest in the joint venture. Based on the bidding proposal, interested private sector participants may obtain more information from the MWSS-joint venture selection committee and inspect the selection and tender documents from July 2 to 23. Besides profit sharing, the proposed joint venture between the MWSS and its private partner to build the dam will also share losses and risks, Alberto C. Agra, the government corporate counsel, said during the same briefing. “In theory, use of government funds and resources are maximized since its equity participation is a ‘minority’ participation. It is the private sector which takes the ‘lead’ in the investment," said Agra, who is also a member of the MWSS board of trustees. Based on the project’s schedule, construction may start in 2010 until 2014 before it is commissioned in 2015. Right of way acquisition and resettlement of affected residents may begin 2010 to 2012. SMBWCI – a unit of food conglomerate San Miguel Corp. (SMC) – submitted an unsolicited proposal to build the Laiban dam in Taytay, Rizal for $1 billion. The proposal, seen to avert a Metro Manila water shortage by 2015, was received by the MWSS in February. As a result, the agency is proceeding with the selection process under the joint venture agreement scheme promulgated by the NEDA, “…[P]rocessing of the new environmental compliance certificate for the project is in progress," added Agra, who also sits as a member of the MWSS board of trustees. This view was shared by Isaias P. Bongar Jr., selection committee chairman and MWSS deputy administrator. “According to the guidelines, if no one will submit, the direction will be awarding. But it is not as easy as there are precedent conditions," Bongar said during the same briefing. Agra added that the selection committee must submit its recommendations whether it will award the contract or not. However, Agra has yet to release a deadline for the submission of the committee’s recommendation. Allado also emphasized that the project is “legal and legitimate." Before SMBWCI took an interest in the project, CalEnergy examined the proposed dam’s financial and technical requirements from June to September last year. It later withdrew its interest. Officials also warned that an earthquake fault line, a leak, and its possible privatization threaten Angat Dam, which supplies 97 percent of Metro Manila’s water needs. “That is why we really need new water source," Bongar said. “The longer the project is delayed, the more difficult the project implementation is due to the increasing number of settlers every year." Besides saying that Laiban is the only remaining water source nearest to Metro Manila, the dam once constructed may be able to avert a water shortage. Currently, Angat can only provide up to 4,000 MLD (million liters per day), short of the projected 5,600 MLD in the near future. Additionally, since Angat is an asset of the National Power Corp. (Napocor), it may be sold to a private operator. Once acquired by a private entity, water from the dam will be mainly utilized for power, Allado said. San Miguel defends ‘take or pay’ provision The foreseen water shortage has prompted the MWSS to consider a take or pay provision in SMBWCI’s proposal, Agra said. “Under take-or-pay arrangement, there is a minimum quantity of 1,600 MLD and an agreed price. The take-or-pay arrangement protects the purchaser from price increases and the supplier from price drops," Agra said. The same “take or pay" provision – blamed for high power rates in the Philippines since consumers pay for unused electricity – was defended by San Miguel in a separate briefing. Other infrastructure projects also have the same provision, Ramon S. Ang, San Miguel Corp. president, said while at the sidelines of Ginebra San Miguel Inc.’s annual stockholders’ meeting. "They can't say that the proposal will make water expensive. We believe the cost will just be right. There's nothing bad about this project," Ang said. Ang earlier announced that SMBWCI will be partnering with two Japanese groups to construct the estimated $1-billion dam project. One group will be in charge of the Laiban Dam’s technical aspect while the other will handle the project’s financial requirements. “We have Japanese partners, but the sharing [and the partnership structure] is not yet finalized," Ang said. The executive also allayed concerns regarding the project, which is covered by a draft agreement between SMBWCI and the MWSS. Any provision in the agreement it will have with the regulator will still be a subject of lengthy discussions, he said. - GMANews.TV