Issue of September 12, 2021
Mt. Province

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City council okays rescission of contract with Kaltimex
by Hanna C. Lacsamana

The city council has approved the termination of the contract between the city government with the company that was supposed to rehabilitate, develop, and operate the city-owned Asin hydro plants in Tuba, Benguet.

In its Sept. 6 regular session, the city council, voting nine in favor and three abstentions, approved a resolution rescinding the contract with Kaltimex Energy Philippines Inc., adopting the grounds as stated in the report of the council committee laws, human rights, and justice chaired by Councilor Betty Lourdes Tabanda.

The committee stated the city has been incurring losses due to the developer’s continued failure to comply with its obligations as spelled out in its memorandum of agreement and in the subsequent compromise agreement with the city.

It also expressed doubt on the company’s financial capability to rehabilitate and operate the three power plants.

In 2018, the city under then Mayor Mauricio Domogan sued Kaltimex for its failure to fulfill its obligations. It was given a chance to comply with the terms when the city agreed to a compromise agreement in 2020, where Kaltimex paid liquidated damages and reimbursed the city government the filing fee for the case.

However, Kaltimex again failed to pursue the project when it did not take possession and operate the plants, among other violations, after it was issued a notice to proceed.

It also failed to pay rentals and remit the city’s share since 2017.

Under the compromise agreement, failure or refusal of Kaltimex to fulfill its obligations shall entitle the city to extrajudicially rescind the MOA without prejudice to further legal actions which the city may take against Kaltimex. 

Mayor Benjamin Magalong wrote the council three times requesting the body to pass a resolution declaring the contract with Kaltimex extra-judicially terminated/rescinded. The first letter was sent on Oct. 19, 2020, which was followed up on Jan. 19, and reiterated on June 11.

Kaltimex on Nov. 23, 2020 admitted its plan to finance the operation of the power plants by securing a loan through credit lines will be affected by the Covid-19 pandemic, which the committee said presented uncertainty that may affect its ability to carry out the project.

In abstaining from voting, councilors Isabelo Cosalan, Benny Bomogao, and Art Allad-iw said due process should be observed as Kaltimex wrote the city and requested for a joint inspection. The city did not respond to the letter.

Allad-iw said the side of Kaltimex should be heard before the termination of the contract.

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