DOF raises concern on funding for SMC-led Bulacan airport

MANILA, Philippines — The Department of Finance (DOF) yesterday raised concern over the capability of San Miguel Holdings Corp. (SMHC) to fund the construction of its proposed international airport in Bulacan and has asked its parent company, San Miguel Corp. (SMC), to back up the project.

During a joint hearing of the Senate Public Services and Economic Affairs committees, Finance Secretary Carlos Dominguez expressed doubt on the capability of SMHC to fund the P735.6 billion airport project given that its equity was recorded at only P60 billion in 2016.

“We wanted to know whether the proponent, San Miguel Holdings Corp., actually had the financial capacity to undertake the project,” Dominguez said during the Senate hearing, which touched on the modernization of the country’s airports.

“Initially, the Department of Transportation reported that San Miguel Holdings has a total equity of P60 billion in 2016. Considering the usual financing mix of 70 percent debt and 30 percent equity in a public-private partnership project, the construction of the Bulacan airport will require San Miguel Holdings to infuse around P200 billion in equity, which we are not sure is going to happen,” he said.

To address this issue, Dominguez said the DOF has asked San Miguel Corp., the parent company of SMHC, to guarantee the project.

“One of the helpful suggestions we made to the DOTr was to require the execution of a joint and several liability agreement, which would make San Miguel Corp., the parent company, stand behind San Miguel Holdings, the private proponent, which is financially at this point incapable of undertaking a P700 billion project,” the finance chief said.

However, Dominguez also cited a comment from a representative of the Office of the President, who stated that “the financial capacity of the proponent corporation should be the one evaluated and not the financial capacity of the mother company backing the proponent corporation.”

In response to this, SMC in a statement said it agrees with the position of Dominguez that the company should forge joint and several liability agreements with its subsidiary for the Bulacan airport undertaking.

“In fact, as early as May 18, following the approval of the project by the NEDA Board, SMHC conveyed to the DOTr its willingness to execute the agreement as soon as the terms of the concession agreement are finalized with the government. The final CA will form the basis of what SMC will be guaranteeing and jointly liable for,” the SMC said.