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Mystery loves company

Do you think that the mystery-loving Megawide construction group is loaded?

For the past two years, the group has been guarding well its secrets on how to “win” multibillion-peso government projects under our leader Benigno Simeon, aka BS.

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Just recently, the government—through our beloved one and only Department of Transportation and Communications—supposedly won again the bid for the project known as Integrated Transport System.

That was the project nicknamed ITS in the jargon of the PPP program of the Aquino (Part II) administration. It involves the 5-hectare terminal for provincial buses near the Cavite coastal toll road, covering a concession period of 35 years.

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Guess what? The estimated project cost of ITS at the time of the bidding last month was at least P2.5 billion.

Counting ITS, Megawide construction group thus managed to bag four projects under the PPP program of this administration, out of the only nine—again, nine—projects so far awarded to private groups.

As of last count, therefore, the Megawide group already secured the contracts for the PPP projects, courtesy of the Aquino (Part II) administration, with total cost of at least P30 billion.

That would be more than the projects bagged by any other group in the country, including huge conglomerates like the MVP group, the Ayala group, the San Miguel group, the Aboitiz group, or Filinvest.

Anyway, one of the PPP projects awarded to Megawide—after a controversial bidding done by DOTC—was the Cebu-Mactan international airport project with an estimated cost of P17.5 billion.

The DOTC awarded the project to the joint-venture of Megawide and an Indian company called GMR Infra, covering a 25-year concession for the Cebu airport. The facility is projected to serve some 125 million passengers a year.

In other words, the project would be in the hands of the Megawide-GMR combine for a mighty long time, and millions upon millions of passengers would have to depend on the group to deliver the public service.

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Another high profile PPP project won by the Megawide group was the so-called modernization of the Philippine Orthopedic Center—a hospital construction project with a cost of at least P5.7 billion.

But the very first PPP item awarded by the Aquino (Part II) administration to the Megawide group was the “classroom construction” project of the Department of Education with a total cost of P3.8 billion. For which, of course, the proponent would stand to triple the initial cost.

In all, anyway, the cost of the four PPP projects of the group should amount to about P30 billion easily.

Now, from what I gathered, the math geniuses in the domestic banking system sharpened their pencils to analyze the risks involved in their banks’ possible lending to the Megawide group.

As we all know—except perhaps those senators who were busy in the cover-up hearing on the Mamasapano massacre—the Megawide group has been in the domestic loan market in the past couple of months.

In fact, Megawide even received the textbook endorsement of a loan from the multilateral institution Asian Development Bank.

With screaming headlines, it was reported that ADB backed the Megawide group with a P3.3-billion loan for the controversial Cebu-Mactan airport project.

By the way, notable present during the occasion when the ADB endorsement was announced was one of the top Transportation undersecretaries by the name of Rene Limcaoco, who was said to have figured prominently in the bidding conducted by the DOTC for other similarly controversial projects.

To our contacts in banking, anyway, while the ADB loan to the Megawide group could only cover less than 20 percent of the total cost of the airport project, it would in effect serve as a big “comfort” for other local banks.

From what I gathered, the Megawide group has been trying to raise an additional P20 billion in loans from local banks for the airport project.

Look at that: The Megawide group wanted to raise P23.3 billion in loans for a project initially estimated to cost P17.5 billion.

Reports also indicated that the group already asked the Securities and Exchange Commission for license to issue P10 billion worth of preferred shares, which were actually hybrid stocks with fixed yearly costs—similar to the interest on bank loans.

This was the same group that, as I said, partnered with GMR Infra of India—the same company that attracted the ire of Senator Sergio Osmeña, who got a lot of flak from his fellow Cebuanos, simply because he questioned the financial capability of the Megawide-GMR combine, pointing out the cash-flow problems of the Indian company.

He noted that GMR incurred operating losses in its airport operations in New Delhi and the Maldives, which forced the company to impose charges and fees that were not authorized by the Indian government. Eventually it had to settle the penalties for the infractions.

Anyway, among the local banks that signified their participation in the P20-billion syndicated loan being arranged by the Megawide group were Bank of the Philippine Islands), Metropolitan Bank and Philippine National Bank.

Oh, and by the way, two other banks seemed to have joined the syndicated loan—Land Bank of the Philippine and Development Bank of the Philippines, which happened to be both government banks.

Interestingly, these two state-owned banks, already agreed to cover the cost of the Megawide group’s newly won project, which was the ITS bus depot.

Land Bank and DBP also agreed to lend the group some P2.9 billion to cover the cost of the project that was originally estimated at P2.5 billion.

A pattern thus emerged: The Megawide group arranged loans much bigger than the project costs, such as the P23.3-billion loan for the P17.5-billion Cebu airport, or the P2.9-billion loan from government banks for the P2.5-billion bus depot.

Question: Would the group have any capital to risk in all those PPP projects awarded to it by the Aquino (Part II) administration?

Another question: Who were behind the group in the first place?

Reports claimed that the “family” of taipan Henry Sy of the SM conglomerate was behind the Megawide group, although our contacts in the conglomerate denied the reports.

Bankers noted that the Megawide group never provided financial statements on its website, (I checked and they were right), although it listed as its biggest stockholder another company called Citicore.

And so who are the mysterious investors behind Citicore?

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TAGS: Benigno Simeon Aquino III, Construction, integrated transport system, Megawide, Megawide group, PPP projects
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