City terminates contract with Kaltimex

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City officials extra-judicially terminated the Memorandum of Agreement (MOA) between the local government and Kaltimex Energy Philippines, Inc. on the proposed rehabilitation, upgrading, expansion, operation and management of the city-owned Asin minihydro power plants.

Under Resolution No. 442, series of 2021, signed by Mayor Benjamin B. Magalong, city legislators pinpointed the MOA provisions that the company failed to comply with which constitute valid grounds for the termination of the agreement dated January 30, 2015.

Among the identified violations of the company include its failure to take possession and make operational the power plants; its failure to pay rentals and remit the share of the city since 2017 and its failure to replace and update the performance bond.

The council stipulated that the termination of the agreement is without prejudice to any further legal actions which the city may take against Kaltimex.

Further, the city sought for the forfeiture of the performance bond posted by the company in favor of the local government.

The city government is the lawful owner of the three Asin minihydro power plants located in barangays Tadiangan and Nangalisan, Tuba, Benguet.

On July 17, 2014, as a result of the bidding conducted, a notice of award was issued by the city to Kaltimex which offered the highest complying bid.

On February 10, 2017, the council confirmed the MOA through Resolution No. 037, series of 2017.

Despite the issuance of the notice to proceed, the company failed to completely take over the premises of the plants to comply with its obligation to rehabilitate, upgrade, expand, manage and operate the power plants.

On January 16, 2020, to avoid protracted litigation, the city government entered into a compromise agreement with the company under revised terms and conditions.

On February 12, 2020, an order was issued by the Regional Trial Court Branch 60 of Baguio City directing the city to submit notice of compliance by the company as to its obligations to pay the local government the amount of P13.6 million liquidated damages and reimbursement of filing fees in the amount of P604,000.

The following February 14th and 21st, the city issued the notice to proceed to the company as provided for and the compromise agreement, the company shall take physical possession of the minihydro power plants within 3 days from issuance of the said notice.

On October 19, 2020, the mayor requested the city council to pass a resolution declaring the contract with the company extrajudicially rescinded or terminated for its failure to comply with its obligations as contained in the compromise agreement, particularly to enter and possess the 3 minihydro power plants that remain operational to date.

The local government has been incurring economic losses and loss of income by the continued failure of the company to comply with its financial obligations to the city. By Dexter A. See

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