MANILA, Philippines — The conglomerates seeking to rehabilitate and redevelop the Ninoy Aquino International Airport (NAIA) still plan to pursue the airport project despite the pullout of Metro Pacific Investments Corp. (MPIC) from the consortium.
“The rest of the consortium remains intact. We just need government to approve the terms,” said a member who declined to be named.
Another source said MPIC’s pullout does not mean the rest of the consortium will give up as well.
“It just means the risk and return assumptions are no longer in line with MPIC’s risk appetite given changes in its business environment,” the source said.
The consortium will have to do some recomputation and adjustments in light of MPIC’s decision, sources said.
MPIC has decided to withdraw from the seven-member NAIA super consortium of conglomerates because of unresolved issues with the government.
With MPIC out, the group is now composed of Aboitiz InfraCapital, Ayala’s AC Infrastructure Holdings Corp., Andrew Tan’s Alliance Global Group Inc., Lucio Tan’s Asia’s Emerging Dragon Corp., Gotianun-led Filinvest Development Corp. and JG Summit Holdings Inc. of the Gokongwei family.
The source said the consortium had planned on the possible exit of one partner and have put mechanisms in place for it early on.
One of the concerns raised by MPIC is the real property tax issue which would have a significant impact on the consortium’s expected returns for the massive rehabilitation project.
The consortium will have to negotiate with the local government units (LGUs) the real property taxes they have to pay since it is the LGUs that collects them.
MPIC also did not want to use the standards set by the Department of Transportation for the Clark International Airport in the NAIA template because of some provisions deemed risky, sources said.
In fact, MPIC backed out of an earlier plan to bid for the Clark Airport project because of such provisions in the contract.
In the end, the NAIA Consortium agreed to use the Clark template, but said the group would have to readjust its profitability expectations.
Transportation Secretary Arthur Tugade said the Clark Airport contract is deemed as the best template for the government as it assigned risks to the private sector.
The Clark project was bagged by Gokongwei-owned JG Summit, Filinvest Development and Changi Airports Philippines. JG and Filinvest are also members of the NAIA Consortium.
Tugade said if two of the members of the NAIA Consortium agreed to the Clark template, it means it is a viable contract.
The contentious issue in the Clark contract is the condition that would trigger compensation or support for the private concessionaire, otherwise known as a material adverse government action (MAGA).
Specifically in the Clark Airport project, the MAGA will cover only executive orders and not the impact of any change in future laws.
However, for the private sector, especially those in the infrastructure business, this was deemed a major risk.
The NAIA project supports the government’s Build Build Build program as it seeks to develop NAIA into a world-class facility and a regional air transport hub by upgrading its airside, landside, and air navigation support–building on the gains already achieved by the DOTr in terms of improving the traffic of aircraft movements on its runways.