MetroPac’s gamble and MWSS anomaly

Metro Pacific Investments Corp., the infrastructure arm of the Hong Kong-based First Pacific Group, has expected itself to crunch numbers given the huge cost of constructing the 45.5-kilometer Cavite-Laguna Expressway project, or Calax.

But one obvious factor made it easy for Metro Pacific to bid higher on the biggest Public-Private Partnership project of the government to date. Cavite and Laguna have a big growing population that will support the traffic volume of the new expressway

MPIC president Jose Maria Lim told the media earlier the conglomerate decided to offer a much higher premium after carefully studying several factors, including the volume of traffic and higher population growth of Cavite and Laguna, which have 3 million and 2 million people, respectively.

“So we did expect that because of the delay, the traffic would probably start off at a higher level because of the population growth,” Lim says. “There have also been commercial establishments and developments that helped traffic start off at a higher rate.”

Lower oil and steel prices have also favored the construction of the infrastructure project and prompted Metro Pacific’s unit, MPCALA Holdings Inc., to submit an aggressive offer of P27.3 billion against San Miguel Corp.’s bid of P22.2 billion

Metro Pacific chairman Manuel V. Pangilinan said his company would spend no less than P50 billion to build the tollway from Manila-Cavite Toll Expressway, or Cavitex, to Laguna.

“This will spur growth in NCR [Metro Manila] and Calabarzon [Cavite-Laguna-Batangas-Rizal-Quezon corridor], and create jobs,” said MVP. “It will improve traffic, and property values. Tourism will rise in the area. Overall, we become a better nation.”

Calax, meanwhile, is a logical project for Metro Pacific because of its interests in other toll roads. Metro Pacific through its subsidiaries is operating the North Luzon Expressway, Subic-Clark-Tarlac Expressway and Cavitex.

It has proposed the construction of a connector road linking NLEx to the South Luzon Expressway and is aiming to bid for other PPP road projects on the auction block, like the Central Luzon Link Expressway that will extend SCTEx eastward to Nueva Ecija province.

MPIC’s Metro Pacific Tollways Corp. is embarking on simultaneous ventures to expand NLEx from Bulacan to Caloocan and Manila’s port area through several Harbor Link sub-projects; a separate one extending NLEx to Commonwealth Avenue in Quezon City; and another project integrating NLEx and SCTEx with the Tarlac-Pangasinan-La Union Expressway of San Miguel in the north.

“Once completed, CALAx will integrate with Cavitex and will feature the same modern facilities of MPTC’s existing toll roads,” said MPTC president Ramoncito Fernandez. “This is in line with our vision of eventually linking all our expressways—including the soon to be integrated NLEx-SCTEx, Harbor Link—providing seamless travel experience to motorists.”

“The project [Calax)] is expected to directly generate more than 3,000 new jobs during the construction,” said Fernandez. “This does not include the thousands of new jobs from the expected new investments along the Cavite-Laguna corridor from the improved infrastructure.”

MPCALA Holdings on July 10 handed over to the Public Works P5.46 billion representing the 20 percent upfront payment of the premium offer of P27.3 billion. The balance of the concession fee is payable over nine years from the contract signing, or until July 2024.

Metro Pacific is set to spend a total of P62.7 billion on the project connecting Cavitex to SLEx, which is operated by the consortium of San Miguel with Citra Metro Manila Tollway Corp.

Water mess

In contrast with Calax, the water sector is a case of privatization going awry.

Maynilad Water Services Inc. and Manila Water Co. Inc. are grappling with what appears to be a convoluted policy from the  Metropolitan Waterworks and Sewerage Authority.

An arbitration panel upheld Maynilad’s position that it would remain a contractor and agent of MWSS be allowed to recover its corporate income taxes.

Manila Water, meanwhile, was classified a public utility, like Manila Electric Co., and barred from including corporate income taxes in the computation of its tariff.

The ruling on Manila Water marked a big change in the rules and regulations in the concession agreement, which both parties agreed upon prior to the bidding in 1997.

“By the very nature of their partnership with the MWSS, both companies were true to their promise—Manila Water and Maynilad have assumed their positions as contractors and agents for the operation and maintenance of water within their respective service areas with MWSS remaining as the public utility,” a lawyer said.

“Such situation not only questions Manila Water’s new accountabilities and obligations, but now questions the new mandate of MWSS as the government agency in charge of the regulation and water source development,” he added.

Maynilad also cannot implement its new tariff because MWSS must exercise regulatory equality between its two providers.

The sudden change of rules in the midst of the concessionaires’ progressive state challenges the credibility of the government’s PPP program and the sanctity of its contracts.

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