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[av_heading heading=’ANOTHER OBSTACLE TO MEGA DAM’ tag=’h3′ style=’blockquote modern-quote’ size=’30’ subheading_active=’subheading_below’ subheading_size=’18’ padding=’10’ color=” custom_font=” av-medium-font-size-title=” av-small-font-size-title=” av-mini-font-size-title=” av-medium-font-size=” av-small-font-size=” av-mini-font-size=” admin_preview_bg=”][/av_heading]
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February 20, 2018
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Korean contractor in corporate turmoil
ILOILO City – The multibillion-peso Jalaur River Multipurpose Project (JRMP) Phase 2 in Calinog, Iloilo may face another obstacle. The winning bidder, Daewoo Engineering & Construction, is in the middle of corporate turmoil.
It is feared that the project, the biggest dam outside Luzon, could end up being substandard.
Daewoo tendered the lowest bid – P9 billion – for this project that the government estimated to cost P11.2 billion.
Backed by Korean Development Bank, Daewoo was supposed to be acquired by a much smaller Korean construction firm, Hoban Construction, Korean sources disclosed.
After due diligence, however, Hoban discovered that Daewoo had incurred financial problems from multibillion projects in other countries, sources said.
For instance, Daewoo incurred losses amounting to 308.4 billion won from its power plant project in Safi, Morocco due to defective materials.
“This might not be the end of the story. It is feared Daewoo could experience further unexpected losses in other Asian and African countries,” a news report from South Korea, written by Park Jae-hyuk, stated.
The mega dam project involved the construction of three dams, a 6.6-megawatt hydropower plant and an 81-kilometer canal. But it hit a legal snag in 2016. The Regional Trial Court, Branch 84 in Quezon City stopped the Bids and Awards Committee from conducting a rebidding after declaring the first one a failure.
Late last year, National Irrigation Administration (NIA) regional manager Engr. Gerardo Corsiga said the dam’s construction would most likely start by the first quarter of 2018.
The NIA Bids and Awards Committee already concluded the post-qualification process for the project contractor in South Korea, he said.
Because of Daewoo’s financial condition, “Hoban walked away from a 1.6 trillion won ($1.5 billion) bid to acquire a sizable shares of stocks of the financially distressed construction firm,” according to Korean sources.
“Hoban, the preferred bidder, had pulled out of the deal, citing concerns about Daewoo’s losses,” Korean sources said.
The Jalaur mega dam was a priority project of the previous Aquino administration. Ilonggo senator Franklin Drilon lobbied for it. The Jalaur River would be harnessed for irrigation and power generation.
“Both Daewoo and Korea Development Bank, Deawoo’s main creditor, remained mum about overseas deficit until the fourth quarter reports released Wednesday,” the same Korean sources said.
After Hoban aborted the deal, Daewoo’s share price plunged 8.8 percent on Thursday to 5,180 won, a 52-week low.
Under the initial deal, Hoban would have bought a 40 percent stake in Daewoo and acquire the remaining 10.75 percent stake two years later.
The bank bought the company from Kumho Asiana Group in 2010 to help the debt-ridden builder restructure its finances.
But Kumho Asiana Group failed to see any profit from Daewoo after purchasing it in 2006, instead suffering a liquidity crunch.
The implementation of JRMP was mandated under Republic Act 2651 enacted by Congress in 1960. Phase 1 of the project, which consisted of rehabilitating the irrigation systems with an area of 22,340 hectares, was completed in 1983.
Phase 2, however, was never implemented since 1988 due to lack of funds.
JRMP is intended to augment agricultural production, stimulate agri-industrial activities, spur the local economy and the eco-tourism industry, increase employment opportunities and contribute to the development of the province of Iloilo in particular and Western Visayas in general. (DGF/PN)
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