'Private sector remains interested in PPP'
MANILA - Transportation Secretary Joseph Emilio Abaya disagreed with the views of JPMorgan and Deutsche Regis Partners Inc. that private investors are probably skeptical of the administration’s Public-Private Partnership (PPP) Program because of the recent decision of the Metropolitan Waterworks and Sewerage System (MWSS) ordering the water concessionaires in Metro Manila to cut their charges in the next five years.
For instance, Abaya said, none of the groups that prequalified for the Mactan-Cebu International Airport project bidding has backed out.
“I know we have seven big Filipino firms with foreign partners bidding for the Mactan-Cebu PPP and five bidders who prequalified in the AFCS [Automatic Fare Collection System] project. No one has hinted that their interest in the project has been affected,” Abaya said in a text message.
The Department of Transportation and Communications has set the bidding for the P17.5-billion Mactan-Cebu International Airport project for November 15.
JPMorgan has said the MWSS decision probably doused the interest of private groups in the PPP program.
The MWSS has ordered East Zone concessionaire Manila Water to reduce water charges by P7.24 per cubic meter and West Zone concessionaire Maynilad to cut rates by P1.46/cubic meter in the next five years.
“While we were turning slightly more constructive in recent weeks on the infrastructure bidding outlook, we see this tariff cut as a key negative event for confidence building in PPP and expect the two stocks to remain week in the near term,” JPMorgan said in its September 13 report.
For its part, Deutsche Regis said: “We note that the OCP [opening cash position] approved by the regulator for Manila Water is actually even lower than the company’s net debt. If it stands, the decision suggests Manila Water’s East Zone could be worth close to nothing after adjusting for debt,” it said in its September 13 report.
But Abaya said the fact that the Mactan airport project is progressing shows that the PPP program remains viable.
The DOTC is now seeking the approval of the National Economic and Development Authority (Neda) to make certain changes in the terms of the project, such as extending the concession period from 20 years to 25 years, and transferring the liability for the payment of certain real-property taxes to the government.
These changes were prompted mainly by the results of the one-on-one meetings conducted by the transport agency’s Special Bids and Awards Committee (SBAC) over the past few months.
Based on the active participation of all seven prequalified groups in the one-on-one meetings, the transport agency anticipates that the bid proposals would be more competitive, resulting in better bid offers to the government.
Abaya said bidders would not pursue their interest in a project if they felt the terms of the contract were not viable enough for them to recoup their investments.
“There are default and penalty provisions in the contract. Private proponents would definitely make sure they are protected when government defaults on its obligations. If you think about it in a 25-year concession, the bulk of the contract would be supervised by the next four presidents. The current President and the current DOTC won’t be around by then. Thus, it is important that the contracts are crafted well to the comfort and satisfaction of the private bidders,” the DOTC official said.
In a related development, the DOTC also disclosed that the injunction case filed by a certain Danilo Cruz in connection with the Mactan-Cebu airport project has been dismissed. Filed last month, Cruz’s petition questioned the conduct of the one-on-one meetings and sought to halt the bidding process on that ground.
According to the Office of the Solicitor General, which acted as legal counsel for the transport department in that case, the Regional Trial Court in Mandaluyong City dismissed the suit due to lack of jurisdiction.