SMC wants government to fund part of P52-billion Laiban Dam project

MANILA, Philippines - San Miguel Corp. (SMC) wants the government to finance part of the proposed P52-billion Laiban Dam project with state-owned Metropolitan Waterworks and Sewerage System (MWSS) if the Department of Finance (DOF) will not issue a performance undertaking for the venture.

In a chance interview, SMC consultant Alan Ortiz said MWSS should negotiate with the government for other options in case the DOF will not provide a performance undertaking for the joint venture deal.

A performance undertaking is essentially a government commitment that the state agency involved in the project will comply with all of its obligations to the contractor.

Ortiz said a government-issued performance undertaking for the project would make it easier for SMC to tap creditors.

 “That is important for our creditors,” he said, adding that the Laiban Dam deal would be MWSS’ biggest project so far.

Ortiz said that if the DOF would not issue a performance undertaking for the project, the state-owned water regulator should be ready with other options.

“We will negotiate with MWSS on the proper alternative. One alternative is that government can finance part of the project,” he said.

Finance Undersecretary Rosalia de Leon, for her part, said the DOF has yet to decide if it would provide the performance undertaking.

She said there has been no request yet from any party including MWSS and SMC.

As a matter of policy, the government can issue a performance undertaking if it is justifiable.

However, if the agency involved in the project fails to meet its obligations, the government would have to assume the debts or allot huge budget subsidies to that agency.

This could mean bigger financial risks for the government if the project fails.

The DOF is the agency that issues performance undertakings for projects, upon the recommendation of the interagency Investment Coordinating Committee (ICC).

The ICC is chaired by the Finance department while the National Economic and Development Authority (NEDA) is the secretariat.

The Laiban Dam project involves the construction of a dam and water treatment facility in Tanay, Rizal, aiming to address a projected water shortage in Metro Manila by 2015.

SMC, through its unit San Miguel Bulk Water Co. Inc. (SMBWCI) has submitted an unsolicited proposal for the project.

Ortiz said SMC is waiting for the decision of MWSS on its proposal.

“We are waiting for it. Hopefully, it will be out this month,” he said.