DAVAO CITY—If the global credit crunch will raise costs further, the Aboitiz-owned Hedcor Inc. may abandon its plan to generate power from a northwestern river here, which was already delayed by a still-unresolved water rights in the area.

“Hopefully, nothing will happen [much worse] in the global perspective,” said Rene Ronquillo, president of Hedcor Philippines, which has formed a separate entity, the Hedcor Tamugan Inc., to oversee the entire construction and operation of the power-generation project here.

The project has a cost of P5 billion in barangay Tamugan, Marilog District, more than 40 kilometers northwest of downtown Davao City.

The project has clashed directly with another project in the area being pursued by the Davao City Water District (DCWD), which hoped to tap the Tamugan River water for the potable water needs of 30,000 households in Lasang to Bunawan districts, covering 25 barangays, in the eastern part of the city. These areas have been complaining of low water pressures. So Hedcor and DCWD are talking on how to resolve the conflict.

Ronquillo told reporters here over the weekend that it could speed up the construction of its project if marathon talks between Hedcor and DCWD this week would yield a final compromise agreement. “But we have to look also at what is happening in the global perspective.”

“If the cost would continue to rise, we might consider backing off from this project, the way the rising cost of materials has also forced us to close down our project in Suawan,” he said. Suawan is an upper northwestern barangay with a more voluminous river water that Hedcor has eyed to generate about seven megawatts of power.

The decision was also prompted by delays in securing the permits for environmental and water use.

He said its project in Tamugan was supposed to be started in June this year and was planned to generate 212 million kilowatt-hours beginning in August 2009, also the year that the Department of Energy has warned the onset of a national energy crisis.

He admitted that the company would incur losses for the delay but declined to give an estimate.

With the delay also, Ronquillo said it was likely that it would also delay its delivery of the added power supply to Davao Light and Power Co., also owned by the Aboitizes.

The DLPC already covered Davao City, with a population of 1.3 million, and has also added Panabo City and the municipalities of Carmen, Dujali, and Sto. Tomas in Davao del Norte. DLPC maintains a 54.7-megawatt standby diesel power plant, “operated as needed to stabilize voltage as well as augment the power supply of its primary generating sources,” its Internet website said.

In the last three months, the series of blackouts across Mindanao, either by trip-offs or bombings in Central Mindanao, forced the DLPC to operate the diesel-fired plant.

Ronquillo said the looming energy crisis in the next two years has also raised concern on the option to abandon the Tamugan power generation project. “We are also concerned about the coming energy crisis that the DOE warned about,” he said.

The DCWD has planned the Tamugan River Surface Water Development (TSWD) that would cost about P1.3 billion, but which the agency would hope to cut down sharply if they use the gravity fall method. This would involve dropping the water from the elevated portion of the river to the water treatment plant through a pipe system.

The method would cut cost of power by more P200 million a year, the amount that the DCWD currently pays the DLPC to extract its groundwater source.

The DCWD has rejected the Hedcor proposal that the water agency transfer its infiltration gallery and water treatment plant to another area. The DCWD said relocating these plants would incur them another P68.535 million to cover additional facilities and equipment, including pumping stations to boost water and pipelines.

The DCWD has made a counter suggestion that it be allowed to put up the treatment plant at the higher elevation than the proposed Hedcor plant. The proposal was also rejected and Ronquillo said it will cost them P625 million more.

But Ronquillo said both agencies have been optimistic that they could strike a final settlement or agreement.

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