Kaltimex Asin contract terminated

CITY COUNCIL CHAIR, vice mayor Faustino Olowan. NCO / PIO

The Baguio City Council on Monday finally rescinded the Memorandum of Agreement (MOA) the city government entered to with Kaltimex Energy Philippines, Inc. (KEPI) allowing the latter to run the Asin Hydro in Tuba, Benguet.

In a resolution approved during Monday’s regular session, the City Council’s Committee on Laws, Human Rights, and Justice cited violations of Kaltimex on both the provisions of the MOA and the Compromise Agreement the two latter signed.

The committee cited failure to take possession and make operational the power plants which violated Item 5 of the Compromise Agreement.

Likewise, the company failed to pay rentals and remit the share of the city government since 2017, which is provided for by the 2015 MOA. Kaltimex owes the city PhP86,325,471.77 in back rent according to the Local Finance Committee’s financial report.

The committee’s report stated, “Even assuming but without conceding that KEPI entered the subject premises within the required period, it failed to pay the current monthly rentals to the city government every third week of each month without any extension, as stated under Item D.3. of the MOA.”

Furthermore, Kaltimex failed to replace and update the performance bond secured from a bonding company which is acceptable to the city government, as contained in Item 4 of the Compromise agreement. Item 6 stipulates that KEPI shall faithfully comply with the provisions of the compromise agreement and abide by the terms and conditions of the 2015 MOA.

The committee stated that the city government has been incurring income losses due to the continued failure of KEPI to comply with its financial obligations.

According to the records, the operation of the Asin Mini-Hydro Power Plants I, II, and III generated revenue. During its operation from 2007 to 2012, the city government collected a total amount of PhP142,636,354.79.

However, instead of generating income from the operation of the power plants, the city government has been incurring additional expenses in the maintenance of the facility and payment of salaries and wages of security guards assigned in the facility’s premises. The same observation is contained in COA’s reports in the succeeding years, the Commission on Audit through AOM No. 17014 dated March 10, 2017 stated.

The committee said the company has no financial capability for the rehabilitation and operation of the power plants.

Kaltimex earlier said in order to have the facility operational, it must secure loans. But in its letter to the city on November 23, 2020, the company said that “the COVID-19 pandemic will affect the securing of a loan from the financing institutions.”

In 2018, the city government through then Mayor Mauricio Domogan, sued Kaltimex due to the latter’s failure to fulfill its obligations as contained in the MOA.

But the parties reached a compromise agreement that was signed in February 2020.

It was agreed that Kaltimex paid the liquidated damages worth PhP13.6 million and reimburse the city government’s filing fee of PhP605,000.00.

Kaltimex was able to secure a Notice to Proceed also on that period.

Kalitmex, however, failed to pursue the project.



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