SMC: We did our homework in Laiban

By Miguel R. Camus, Business Mirror

Posted at Jul 15 2009 09:44 AM | Updated as of Jul 16 2009 03:44 AM

MANILA - San Miguel Corp. chairman Ramon Ang on Tuesday hit back at critics of a proposed deal for the construction of a dam said to provide water security for the nation’s capital for the next 50 years.

Critics of the Laiban Dam deal between Metropolitan Waterworks and Sewerage System (MWSS) and San Miguel Bulk Water Co. Inc. (SMBWCI), a wholly owned subsidiary of the diversified conglomerate, allege there is too much secrecy surrounding the project.

As such, all documents pertaining to the $1-billion project have been requested by several parties, including the National Economic and Development Authority (Neda).

“It is only a secret in the sense that we cannot give our technical and financial studies,” said Ang, following the shareholders’ meeting of San Miguel Brewery Inc. “Since the 1970s [people] have been saying that Laiban Dam is not financially viable, but San Miguel went ahead and made its own study.”

“Is San Miguel willing to share its study? Of course not,” added the San Miguel official.

Ang explained that the firm has been conducting feasibility studies for the dam for the past two years, spending a considerable amount of funds in the process. He acknowledged that SMBWCI has a Japanese partner for the project.

He said the firm is still unable to share its results with the Neda because San Miguel is still awaiting a response from MWSS regarding its unsolicited proposal submitted earlier this year.


“We are still waiting for MWSS. It has been more than a year since we have been in talks with them. [Regarding our proposal] so far no response,” said Ang.

San Miguel said the project is in line with its direction to invest in strategic industries.

Before San Miguel, east zone water concessionaire Manila Water Co. had signified interest in bidding for the Laiban Dam.

The project aims to supplement the long-term water-supply requirements of Metro Manila by constructing a dam using the Kaliwa River Basin in Tanay, Rizal.

The dam will provide an average yield of 21 cubic meter/second or 1,830 million liters per day of water supply and approximately 25 megawatts for hydropower generation.

It intends to serve an estimated population of about 5.50 million, or equivalent to 690,000 households, and serve the areas of Rizal province and southern Metro Manila, and improve the services and supply of the existing service areas.

Critics of the deal, meanwhile, are not letting go of the matter. Party-list legislator Rafael Mariano warned on Tuesday the “sweeteners” behind the joint- venture agreement between San Miguel and the MWSS could turn out to be another “bitter pill” for the people.

Mariano, of Anakpawis, demanded for the full public disclosure of what he described as a “sweetheart deal,” referring to Cojuangco’s SMC bagging the contract with MWSS to build the Laiban Dam, in Tanay, Rizal, for $2 billion and supply water to its concession area for 25 years.

“It is the people’s right to know the nitty-gritty of this deal. The deal is an attempt to circumvent the build-operate-transfer [BOT] law so the proponents and the Arroyo administration can squeeze the most out of the government project,” said Mariano in a statement.

Mariano said under the BOT law, especially when it is an unsolicited bid proposal, there should be no direct government guarantee, subsidy, or equity required.

“SMC and MWSS are circumventing the law,” Mariano said.

The contract reportedly requires government financial guarantees for the project, which means that any outstanding obligation resulting from revenue shortfall will be shouldered by taxpayers, including even those not using a drop of the water.

According to Mariano, the draft agreement between SMBWCI and the MWSS also reportedly contains a “take-or-pay” provision, which may either charge the government and/or consumers for unused water.

The said provision is the very same arrangement that allowed independent power plants in the 1990s to charge consumers for electricity they didn’t use, he said.

“This water privatization stunt by the Arroyo administration is another bitter pill for the people. It is the people who will surely shoulder the anticipated water-rate hikes,” Mariano said.

He noted that under the “take-or-pay” provision, which is tantamount to a government guarantee, MWSS is committed to buy over 710 million cubic meters of water for 25 years at a cost of over P391 billion with Philippine government guarantee. This assures the contractor a return on its investment of over 20 percent.

“This latest sweetheart deal by the Arroyo government with Danding resembles the multibillion-peso coco- levy fund scam during the Marcos regime. The taxpayers’ money and the nation’s coffers will again be raided,” he said.

Mariano said that “from controlling SMC, the country’s top food and beverage conglomerate, using small coconut farmers’ money, Cojuangco expanded his empire to strategic industries like mining, energy, telecoms, and now water.”