MVP hits increasing regulatory risks

Manuel V. Pangilinan  AP FILE PHOTO

MANILA, Philippines–First Pacific Co. Ltd., the Hong Kong-listed holding company that Filipino businessman Manuel V. Pangilinan leads, is not slowing down on investments although it said more emphasis would be placed on diversifying what it described as regulatory risks in the Philippines.

The company, controlled by Indonesia’s Salim family, discussed in its 2014 annual report, which was released late Wednesday, some of the strategies to be undertaken by its portfolio companies, mainly in food, infrastructure and mining, across the region and Australia.

First Pacific’s presence is significant in the Philippines. It remains a major shareholder of dominant telecommunications firm Philippine Long Distance Telephone Co. (PLDT) and via Metro Pacific Investments Corp., it controls toll roads, water utility Maynilad Water Services and the country’s biggest electricity retailer, Manila Electric Co.

It is in its regulated businesses in the Philippines that the company has been facing long-running challenges.

“The sanctity of contracts is under question arising from regulators which seem unable to appreciate and adhere to the contracts and their terms — whether these refer to our water concession in Maynilad or our toll road operations in MNTC,” Pangilinan said in his message to shareholders. MNTC, or Manila North Tollways Corp., is the operator of the North Luzon Expressway.

Pangilinan was referring to the government’s decision to not yet act on an arbitration award relating to Maynilad’s tariff increase as well as multiyear delays on applications by tollroad operators for a rate increase.

Pangilinan noted that Metro Pacific was still keen on investing in the Philippines, although future deals would focus on “new business opportunities to diversify regulatory risk in the Philippines.”

Maynilad, for example, would pursue new water projects outside Metro Manila, First Pacific’s annual report showed. The company’s tollroad unit, Metro Pacific Tollways Corp., has been making significant investments overseas such as Thailand and Vietnam.

In Vietnam alone, the company has about 16 kilometers of CII Bridges and Roads under construction and another 39 km are planned, its annual report showed.