Finance Secretary Carlos Dominguez III said Monday San Miguel Holdings Corp., the infrastructure arm of conglomerate San Miguel Corp., is not financially capable of constructing the P735.6-billion international airport in Bulacan province.
San Miguel Holdings is the proponent of the New Manila International Airport in Bulakan, Bulacan.
“The proposal was submitted under San Miguel Holdings. But how can a P60-billion company finance a P700-billion airport project,” Dominguez said in a Senate hearing on airport projects.
“I suggested earlier that when they come, they come with the corporation [San Miguel Corp.],” Dominguez said.
Dominguez said there was no guarantee agreement yet between the proponent and San Miguel Corp.
Dominguez said the proponent company should be the one evaluated and not the parent company when it comes to the financial capability of the proponent of the airport project.
He said the Department of Transportation initially reported that San Miguel Holdings had a total equity of P60 billion in 2016.
Dominguez said based on the usual financing mix of 70 percent debt and 30 percent equity in a public-private partnership project, the construction of the Bulacan airport would require San Miguel Holdings to infuse around P200 billion in equity, “which we are not sure is going to happen.”
“We wanted to know whether the proponent, San Miguel Holdings Corp., actually had the financial capacity to undertake the project,” he said.
San Miguel Corp. earlier said it tapped Standard Chartered Bank and Sumitomo Mitsui Banking Corp. as co-financial advisors for the planned airport.
“SMC has appointed SCB and SMBC as co-financial advisors as we continue to progress through the next stages of approvals and process,” San Miguel said in a statement. Julito G. Rada
Dominguez said the Finance Department was not causing the delay of the project, adding that the department expected to soon review the project before the conduct of a Swiss Challenge.
“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 DOTr was to require the execution of a joint and several liability agreements, which would make San Miguel Corp., the parent company, stand behind San Miguel Holdings, the private proponent, which is financially at this point incapable of undertaking a P700-billion project,” he said.
He mentioned the draft minutes of the meetings of April 25, 2018 6th National Economic and Development Authority board meeting, where a representative from the Office of the President stated that “the financial capacity of the proponent corporation should be the one evaluated and not the financial capacity of the mother company backing the proponent corporation.”
“By law, the DoF will come up with a recommendation after the negotiations. We are the ones to review at the end of negotiations between the implementing agency (DOTr) and SM Holdings,” Dominguez said.
He said meticulous evaluation of the project was necessary as in several instances, projects that were approved in the past by the Neda Board were more profitable than projections during the appraisal stage.
Dominguez noted the case of Mactan-Cebu International Airport which was actually earning more profit than projected. In 2017, it registered a net income of P1.1 billion. He said this was 48 percent higher than the P752 million forecasted in the financial model of the project.
“This indicates that the actual returns of the concessionaire will be significantly larger than what was originally estimated. And yet, government still made the commitment that there will be no other competing airports in Mactan and Cebu,” he said.
Transportation Secretary Arthur Tugade said the construction of Bulacan airport project could commence once the Swiss Challenge was completed.