DOF chief raises concerns on airport plan

The head of the Duterte administration’s economic team on Monday expressed reservations on the proposed P735.6-billion “aerotropolis” project in Bulacan province as it would not only be in conflict with the government’s development of another airport hub at the Clark Freeport Zone but also may prove to be unviable as its proponent was deemed financially “incapable” to build it.

During a joint public hearing of the Senate public services and economic affairs committees on the Ninoy Aquino International Airport’s (Naia) operations and management, Finance Secretary Carlos G. Dominguez III responded to allegations raised during the previous hearing that the DOF was allegedly hampering or delaying other airport projects, including the San Miguel Corp.-led airport project in Bulakan town.

“We take this opportunity to categorically say we have not caused the delay in the Bulacan airport,” Dominguez said during the hearing led by Sen. Grace Poe.

“As a matter of fact, we are even providing assistance to accelerate the approval and implementation of the project. One of the helpful suggestions we made to the Department of Transportation 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 Corp., the private proponent, which is financially at this point incapable of undertaking a P700-billion project,” Dominguez added.

The finance chief noted that in 2016, San Miguel Holdings had only P60 billion in total equity, citing a DOTr report.

“Considering the usual financing mix of 70-percent debt and 30-percent equity in a public-private partnership (PPP) project, the construction of the Bulacan airport will require San Miguel Holdings to infuse around P200 billion inequity, which we are not sure is going to happen,” Dominguez said.

San Miguel Corp. yesterday replied that it would abide by the demand of Dominguez for the conglomerate to financially guarantee the activities of its subsidiary.

In a statement, the country’s biggest conglomerate said it had already indicated—as early as May of this year, after the project cleared Cabinet-level scrutiny—that it would sign an undertaking to back up San Miguel Holdings Corp. once the terms of the concession agreement have been finalized by the government.

“San Miguel agrees with Secretary Dominguez on his position that both SMC and San Miguel Holdings Corp. should undertake a joint and several liability agreement for the New Manila International Airport project in Bulacan,” the company said.
The conglomerate said that, “given the importance, impact and urgency of building a modern, world-class airport to the nation and the Filipino people, San Miguel and SMHC will abide by the demands of the Department of Finance to ensure the project takes off.”

San Miguel stressed that it was “more than capable” of handling the airport project, pointing to its historical performance in completing large infrastructure deals. It cited its strong balance sheet, consistent profitability and sustained growth, as well as liquidity to support its expansion and acquisition activities.

Also, Dominguez disclosed that the Department of Finance, during a National Economic and Development Authority-Investment Coordination Committee (Neda-ICC) meeting last January, raised its concern that the Bulacan airport might affect the development of the Clark International Airport and the freeport as a whole.

At the start of the Duterte administration, it began the rehabilitation of the Clark International Airport “to partially address the Naia capacity problem,” Dominguez noted.

“All airport projects are real estate projects. The real estate value of the New Clark City is currently $14 billion and the government has committed an additional P12 billion. We wanted to know how the Bulacan airport, which is just 65 kilometers away from Clark, will affect the value of the New Clark City, which is, by the way, the property of the Filipino people,” Dominguez said.

In April, when the project was eventually approved by the Neda Board chaired by President Duterte, the DOF just “compiled the issues discussed at the Neda-ICC and Board meetings” as it would be a conflict of interest for the DOF to comment, citing that the Build-Operate Transfer Law provided that the agency was mandated to review the draft contract upon completion of negotiations between the implementing agency and the project proponent.

In this case, DOTr is the implementing agency while San Miguel Holdings is the proponent.

At present, negotiations are ongoing between the DOTr and San Miguel Holdings for the final terms of the concession agreement, before it is subjected to Swiss challenge.

Under a Swiss challenge, other companies can bid for the project, after which the original proponent that submitted the unsolicited proposal will be allowed to match or submit a better bid before the project is awarded.

The proposed new international aerotropolis, or a metropolis revolving around an airport, would involve a massive complex to be built at a 2,500-hectare location along Manila Bay in Bulakan town.

The airport project, which had been awarded an original proponent status by the DOTr, would have an initial capacity of 100 million passengers or over three times that of the Naia, the country’s gateway to Manila.

Under the project, SMC would also build an 8.4-kilometer toll road that would link the airport to the North Luzon Expressway.

SMC had said that it plans to complete the project within six years.