China Eximbank provides $116.6 million preferential buyer's credit loan for Phase 2 of Angat Water Utilisation and Aqueduct Improvement Project

Project narrative

On January 7, 2010, China Eximbank and the Metropolitan Waterworks and Sewerage System (MWSS) — a government agency that is in charge of water privatization in Metro Manila in the Philippines — signed a $116.6 million preferential buyer's credit (PBC) agreement for Phase 2 of the Angat Water Utilisation and Aqueduct Improvement Project (AWUIAP). The estimated borrowing terms of the PBC are as follows: 20 year maturity, 5 year grace period, and 3% interest rate. The final maturity date of the PBC is January 21, 2030. Semi-annual loan repayments were scheduled to begin on January 21, 2015 and end on January 21, 2030. The loan entered into force on May 7, 2010. The proceeds of the PBC were to be used by the borrower to finance 95% of the cost of a commercial contract between MWSSS and China International Water and Electric Company (CWE), which was signed in mid-2009. The purpose of the project was to transport raw water from Angat Dam to the La Mesa Dam and then onward to a set of water treatment plants in La Mesa and Balara (by repairing a leaky, 15 km irrigation canal called Aqueduct No 5). Upon completion of the project, it was expected that Rizal, Cavite, and Bulacan provinces in Quezon City would have greater access to clean water and MWSS would recover an estimated 394 million liters of water that was being lost each day because of the leaky aqueduct. CWE received a construction start order from MWSS on March 16, 2010. Construction commenced on March 17, 2010. The EPC contract went into effect on May 9, 2010. A formal groundbreaking ceremony took place on July 28, 2010. The project was originally scheduled to be completed in March 2013 but it was completed eight months ahead of schedule and officially inaugurated on July 17, 2012. The project was issued a temporary completion certificate on September 10, 2012. A final project completion certificate was issued on September 25, 2013. However, this project was also a source of local controversy. In February 2011, the Philippine Large Diameter Pressure Pipe Manufacturers Association urged the new MWSS board members appointed by President Aquino to rescind the commercial contract that was issued to CWE. It alleged that limiting the bidding among three Chinese state-owned firms violated the country’s procurement law. The Philippine Large Diameter Pressure Pipe Manufacturers Association also said the contract price was excessive compared to the cost of the Phase 1 of the Angat Water Utilisation and Aqueduct Improvement Project, which was carried out by three of its members. The MWSS board, however, did not act on the association’s recommendation to rescind the contract.