Outgoing Baciwa
board rejected details

One does not actually need to study hard why we should take a position proposed to the Baciwa Board directing chairman Lawrence Villanueva to undertake an unsolicited proposal from Miya-Manilad despite the previous rejection by the outgoing board in favor of the in-House loan proposal by Baciwa.

I had earlier promised a point-by-point analysis of the position paper by the Baciwa Employees Union. But on second thought, that was very clear that the conclusion bore no other than the need to cancel or abrogate what the three-man new board recently approved.

In short, it is clear that we could all end up with our future generation in hock to the Miya-Manilad and the recently formed new corporation – JVC. The latter will be capitalized as only Joint Venture Company. It will require no SEC registration only a joint venture with private proponent.

From the very start, that per se is problematic. It means that the JVC will require no outlay (cash or etc.) but just simply present its agreement with the private proponent on how it could generate the funds for its operation.

Anyway, what is important is that the previous board, headed by Pompeyo Querubin, rejected the Maynilad proposal. And that was confirmed by members of the Joint Venture Selection Committee.

The new members of the Baciwa board are chairman Lawrence Villanueva, vice chair Lorendo Dilag, and secretary Marichi Ramos.

The new board then, justified its decision to accept the Miya-Maynilad unsolicited proposal on the following grounds:

1. Baciwa incurred losses of P2,002,843,064.42 while having a net income of P283,435,864.76 from 2003 to 2013.

2. The Miya-Maynilad’s proposal has an expansion component considered as “Masterplan”.

3. No initial cash outlay for BACIWA and the board does not want additional  borrowing.

4, Miya-Maynilad proposal will result to efficient service and lower water rates.

5. BACIWA has no technical capability to undertake the program of its own.

6. The Board has the sole option to choose the JV project, and the mode in which the  project will be implemented.

The objections by the management and the outgoing board center on the following:  Baciwa’s statements of income and expenses from 2003 to 2013 as audited  by COA does not show losses in the 2008 or 2012 finances.

The truth  is that Baciwa generated a total net income of P283,435,864.76 from 2003 to 2012. What the board perceived as losses is the quantification of the loss in peso value or in business terms referred to as opportunity loss. Chairman Villanueva had instructed Kristin Ann Polana, OIC Baciwa finance department, to compute the volume of water losses attributable to pilferage, illegal connections, visible and non-visible leaks, operational uses such as flushing, fire fighting, installation, repair and projects.

Thus, if the formula is applied to Maynilad for comparison purposes, the monetary value in the span of four years will be P10.5-billion and P2.8 billion in 2009 alone.

Other pertinent points: Its proposal for JV company will not have initial cash outlay and would result to lower water rates, the initial evaluation by the JVSC and the management dispute all these based on the NEDA guidelines;

Legal: the nationality and investment distribution of Miya and Maynilad Water Service Inc. is not clear. The JV company will be a contractual JV and need not be registered with SEC under Philippine laws.  This is not in compliance with the 2013 Revised Neda Guidelines on joint venture under 6.) General Guidelines.

MWCI was the first to submit a new proposal for Baciwa and also wrote a letter dated April 29, 2013, addressed to the BOD reiterating it proposal but not given attention by the board.

The proposed areas for expansion are subdivision (East Homes 3, San Lorenzo, Country Homes, Mandalagan and Alijis, Manville Royale, La Salle Ville, Riverwalk, Marapara Heights, Glenndale, Relocation sites, Abada and Vista Alegre. The water system has already been turn over.

Under the proposal, the expansion area shall be owned by the JV with an option for Baciwa at the end of 15 years of the project. Baciwa may lease and operate the expansion area.

If Baciwa divests itself of any interest in the JV, the private firm will attain a shortcut to privatization. According to lawyer Jovim Entila, this will affect the market share of Baciwa.

I shall discuss more details of the objections to the various facets of the Maynilad proposal for guidance of the Baciwa consumers. This is vital because we may find ourselves later deprived of our water and paying through the nose for what we own.*

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