Ayala expects NEDA nod for Carmen water project

The Ayala-led consortium is confident that it would get the approval of the National Economic Development Authority for its proposed P2 billion Carmen Bulk Water Supply project.

This as another big local firm, Vicsal Development Corporation, owned by the Gaisano family, yesterday signed a memorandum of agreement to join Manila Water, an Ayala subsidiary, and Stateland Equity Venture Inc. that composed the Northern Waterworks and River of Cebu consortium.

Sherisa Nuesa, Manila Water's chief finance officer, said that they are also in the process of finalizing an agreement with an international company, which is also interested in the venture.

With the coming in of Vicsal, Nuesa said that they expect the consortium to be more strengthened and capable to carry on the proposed project.

"We agreed on every detail of the project and it is now approved on the first pass approval," she stressed, adding that they can get NEDA's second pass approval because the project has been reviewed and scrutinized several times during their four years of negotiation with the Metro Cebu Water District.

Nuesa explained that the Carmen Bulk Water is the first major water project lined up for 2006 and one of the fastest and cheapest project to develop.

The consortium has proposed to develop the Carmen Bulk Water Supply Project by tapping water from the Luyang River in Carmen town under the build-operate-transfer (BOT) scheme.

Last May 17, MCWD and Ayala consortium ended their three-year negotiation on the Carmen Bulk Water Supply project by signing a memorandum of agreement.

Under the MOA, Ayala will deliver up to 46,000 cubic meters of potable water to MCWD through a 40-year build-own-operate-transfer (BOOT) arrangement. The project is expected to increase the water district's current production capacity by about 26 percent, addressing the severe water shortage in Metro Cebu.

The price of water between 28,000 and 39,000 cubic meters would be P25.55 per cubic meter at 2007 prices, and excess water up to 46,000 cubic meters would be fixed at P12 per cubic meter. With this, the expected average tariff for treated water is P24.49, subject to adjustment for inflation.

Northern Waterworks is expected to start with the construction of the project in 2007, and it is targeted to be operational by 2009.

The project will include the construction of an intake dam structure and a water treatment plant with a maximum capacity of around 46 million liters per day. The water, which will be sourced from Luyang River, would be brought to Metro Cebu franchise areas via a 30-kilometer transmission pipeline.

In accordance with the BOT law, the project would be subjected to a price challenge after the NEDA publishes it. But as of now, several possible challengers, including the Lhuiller-led consortium, have signified interest to challenge the price of Northern Waterworks.

If the challengers offer lower price, she added that "we have the right to match it" as allowed in the BOT law.

For her part, Margaret Gaisano-Ang of Vicsal said that they are keen to invest in the water project and to take part in helping solve the water problem in Metro Cebu. She added they negotiated with Ayala for two years before they joined the consortium.

She said that they decided to invest in the consortium because the Ayala corporation has conducted thorough study of the project and that it has a good track record, especially in developing water source like in case of Manila Water. - Wenna A. Berondo