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Press Releases

30

April 2004

ICC GRANTS FIRST-PASS APPROVAL TO AYALA’S CARMEN WATER SUPPLY PROJECT

The Cabinet Committee of the Investment Coordinating Council granted first-pass approval to the Carmen Water Supply Project in its meeting on April 29.

The P1.9-billion Carmen Water Supply Project proposes to supply an average of 50,000 cubic meters per day to the Metro Cebu Water District (MCWD) from Luyang River in Carmen, Cebu. A consortium of Ayala and Stateland, Inc. submitted the unsolicited Build-Own-Operate (BOO) proposal.

The Carmen project is expected to boost Cebu’s supply level by as much as 35 percent. Cebu currently receives about 275,000 cubic meters of water per day from MWCD and private deepwells.

Said MCWD chairman Ruben Almendras, “The Carmen project will increase MCWD’s water supply by 26 percent and address the underserved demand for water connections, which we receive at the rate of 1000 applications per month.”

Metro Cebu is expected to benefit most from the project. Experts familiar with Metro Cebu’s water situation observe that the Carmen project can stem the demand on Cebu’s battered aquifer, which provides 90 percent of the total water supply. The aquifer is overmined by an estimated 95,000 cubic meters per day, or more than a third of its current production, resulting in increased water salinity. At this rate, Cebu may experience dry taps in 10 years and irreversible ecological damage by 2025.

Almendras noted that after studying available options, the Carmen project was identified to have the shortest timetable in terms of delivery and most cost-effective means in developing sources of surface water. The project, if approved, is expected to be operational in 2007.

Analysts see the project as part of Ayala’s expansion in the water business. Ayala is the biggest shareholder of Manila Water Company (MWC) which is the current the concessionaire of the East Zone in Metro Manila. Since it won the concession a privatization bid in 1997, MWC has decreased systems loss from 68 percent prior to privatization to 51 percent in 2003. It also increased connections to 515,000 households. From only 26 percent in 1997, about 83 percent of its households now enjoy uninterrupted water flow 24 hours a day. In 2003, MWC’s net income rose to P1.2 billion due to improved billed volumes and cost efficiencies.

Ayala managing director Antonino T. Aquino said, “The additional supply addresses a very frequent complaint of Cebu’s business sector which is lack of water. It will enhance development of Cebu’s economy as the project reduces overmining by 50 percent and buys Metro Cebu time to develop other sources of water. In addition, having connections to MCWD will allow the less fortunate sector to save on water expenditure as they cut off dependence from ambulant vendors.”

Following the ICC’s first approval, the consortium of Ayala and Stateland, Inc will finalize its agreement with MCWD through a draft contract. MCWD will then conduct a public hearing and will subject the contract to a review by the ICC and the Presidential Legal Team. Once approved, the agreement will be subjected to a price challenge before the final award.