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BIZ BUZZ: Threatened by Megawide?

/ 04:01 AM December 01, 2021

Who is threatened by Megawide Construction Corp.?

Since its initial public offering in 2011, the young contractor set out with big dreams in the infrastructure space.

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It found its stride during the Aquino administration’s Public Private Partnership (PPP) program, winning a string of projects by blending engineering expertise with audacious offers that stunned the country’s elite.

By the end of the administration, it had won PPP projects to build thousands of public school classrooms, the Parañaque Integrated Terminal Exchange, and its biggest project yet, the modernization of the Mactan Cebu International Airport (MCIA) with partner GMR Infrastructure of India.

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Megawide’s team had much to prove and these projects were all completed. The MCIA, in fact, became a multiawarded venture that helped grow passenger volumes and consequently, the country’s economy, with help from the international expertise of its partners.

Even during the Duterte administration, Megawide kept its aggressive streak but some pushback was starting to show.

The Megawide-GMR tandem won the bid to build the new Clark International Airport terminal but was not qualified to bid for the coveted operations and maintenance contract due to a technicality.

Years later, its unsolicited offer for Manila’s Ninoy Aquino International Airport (Naia) was rejected, also over technical grounds.

Last week came the shocking news that Megawide officials, led by chair and CEO Edgar Saavedra, were served arrest warrants following alleged Anti-Dummy Law violations.

This stemmed from a Sept. 3, 2020 complaint filed by lawyer Larry Iguidez Jr. before the Office of the Ombudsman, alleging Megawide subsidiary GMR Megawide Cebu Airport Corp. (GMCAC) was being operated by foreigners.

The Anti-Dummy Law is a criminal statute that penalizes individuals who violate foreign equity restrictions in regulated industries.

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This was despite GMCAC being 60-percent owned by Filipinos and majority of the board being Filipino citizens.

Among the odd violations raised was the appearance of the company’s foreign advisors during awards ceremonies and press briefings.

Even more odd was how swiftly the courts moved and how, at every step, the case appeared prejudged to conclude the Megawide directors were guilty as charged.

Megawide said attacks against the company ramped up after its Naia bid. Now, it seems unseen players are going for its Cebu airport concession, whose bidding was once lauded for its transparent process.

Apart from focusing on the economy’s recovery and reviving air traffic to Cebu, GMCAC directors have vowed to fight the allegations after recently posting bail.

“The case is now in court. With the help of our legal team, we can finally clear our names and disprove all the baseless allegations against us,” the directors said in a statement.

—Miguel R. Camus

Solar pure-play

Solar Philippines Nueva Ecija Corp. (SPNEC), the first company to debut on the Philippine Stock Exchange under the renewable energy (RE) listing framework, is one of the few issuers that have been able to price its initial public offering (IPO) right at the maximum price target. This was reminiscent of last year’s IPO of Edgar “Injap” Sia II’s MerryMart Consumer Corp., which raised the curtain during this pandemic.

SPNEC’s pricing at the maximum of P1 per share (for a total offering size of P2.7 billion) was apparently achieved due to strong demand from qualified institutional buyers at the book-building last week. RE is in these days, in line with the “greening” of capital around the world.

Based on its prospectus, SPNEC expects to start delivering positive operating cash flows in late 2022 after the commissioning of its first 50 megawatts. To date, the company led by 28-year-old entrepreneur Leandro Leviste is not yet making money as its 500-MW solar farm is still at the preoperating stage.

Under SPNEC’s phase 1 development: 50MW (phase 1A) is targeted for commissioning in the middle of 2022, and additional 175MW (phase 1B) by late 2022, seen to boost Luzon grid’s thinning reserves and help prevent rotating electricity outages.

An industry source familiar with the solar farm business estimated that for every 50MW of capacity that’s up and running, SPNEC could generate annual net profits ranging from P150 million to P250 million. The range is wide as actual earnings will depend on the price at which the company is able to sell its output. Unlike Solar’s first solar farm in Calatagan, Batangas, SPNEC is no longer subject to the feed-in-tariff regime.

The prospectus also states that the shares of parent company Solar Philippines in SPNEC have been pledged to AC Energy Corp. (Acen), presumably in relation to a P1-billion loan extended in mid-June. The loan covenant allows the prepayment of the loan to Acen at any time, or to negotiate for the change in collateral. Addressing this loan is what Leviste has committed to do once the IPO unlocks a market valuation of about P8.1 billion.

—Doris Dumlao-Abadilla INQ
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