MANILA, Philippines - Financial terms required by the government agency bidding out the contract to operate the country’s longest tollway are “unrealistic,” according to businessman Manuel V. Pangilinan.

Traffic volume at the Subic-Clark-Tarlac Expressway (SCTEx) remains small and whoever wins the operation and management or O&M contract will have to shell out a huge sum for subsidies, he said in an interview last Friday.

State-owned Bases Conversion and Development Authority (BCDA) is considering the financial offer of Manila North Tollways Corp., a unit of listed Metro Pacific Tollways Corp. which is part of the Pangilinan-led Metro Pacific Investments Corp., for the 94-kilometer SCTEx.

The BCDA had actually rejected the financial offer of Manila North Tollways, although it passed technical requirements. Another bidder, Northlink Toll Management, Inc., a joint venture between San Miguel Corp. and Star Tollways Corp., was declared “ineligible” for failing to comply with the technical requirements. Both firms are appealing the BCDA’s decisions.

Under BCDA’s terms, the winning bidder must bear the “operational funding requirements for the management, operations and maintenance of the SCTEx including periodic maintenance works, special/major/emergency works and all other additional works, and insurance.” The winner must also provide management services, toll collection, traffic safety and security management, tollroad maintenance including greenery and landscaping, and other related services.

The BCDA wants a semiannual lease or concession fee amounting to either the peso equivalent of the yen-dominated loan taken out by the government to finance the tollway’s construction as well as all financing charges; or 20% of audited gross revenues, whichever is higher.

Mr. Pangilinan, who is also chairman of Philippine Long Distance Telephone (PLDT) Co., said the BCDA’s requirements were “unrealistically high.”

“Let me put it this way. The traffic and the revenues that are being generated by SCTEx are not sufficient to service that loan, period.”

“So the concessionaire will have to subsidize and incur a loss. But who will do that for a number of years? Who would want to lose money?” he asked.

BCDA officials could not be reached for a comment.

The BCDA had estimated the annual loan payments to Japanese creditors at P1.2 billion starting 2011. The loan for the SCTEx project amounted to P26 billion.

“I think their financial terms are unrealistic in relation to the projected traffic. The conces-sionaires will have to lose money in the first year,” Mr. Pangilinan said.

Last year, more than 18,000 vehicles used the SCTEx daily on average. The original projection was an average of 35,000 vehicles daily in the first year of operation.

The tollway is being operated temporarily by Tollways Management Corp., which is 46% owned by Metro Pacific Tollways.

Manila North Tollways operates the North Luzon Expressway (NLEx), which is connected to SCTEx in Pampanga. It hiked profits by 16% to P1.17 billion on revenues of P4.07 billion from January to September 2009, when an average of 149,164 vehicles passed through NLEx.

Metro Pacific is the Philippine unit of Hong Kong’s First Pacific Co. Ltd., which partly owns PLDT. Mediaquest Holdings, Inc., owned by the Beneficial Trust Fund of PLDT, has a minority stake in BusinessWorld.

Shares in Metro Pacific stayed at P2.22 apiece yesterday after shedding 4% on Friday.

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