Megawide sets rail foray
MEGAWIDE Construction Corp. — which had been an active competitor for public-private partnership (PPP) deals in the previous administration — is venturing into railways with its acquisition of a stake in a consortium that aims to build an elevated 9.77-kilometer line between Diliman in Quezon City and Lerma in the City of Manila.
“Megawide has acquired the right to participate in the Philippine National Railways’(PNR) East-West Railway Project (EWRP) from the project consortium composed of East-West Rail Transit Corporation and Alloy MTD,” Megawide said in a regulatory filing on Thursday, confirming an earlier disclosure of A Brown Company Inc., one of the members of the East-West Rail Transit Corp (EWRTC) consortium together with Netcore Dev’t. Ltd. and Venere Holdings Ltd.
“Megawide has the option to buy up to 60% of the equity of the special purpose company that will be incorporated for the project.”
A. Brown had said in its July 12 regulatory filing that the consortium of EastWest Rail Transit Corp. has given Megawide the right to participate in the PNR East West Railway Project as an additional consortium member and the project consortium will now be composed of EWRTC, Alloy MTD and Megawide.
The EWRP, which will run along Quezon Avenue and España Boulevard, will have 11 stations and provide interconnecting facilities with neighboring railways, according to the PPP Center’s Web site.
It has yet to bag approval of the Investment Coordination Committee of the National Economic and Development Authority (NEDA) which is the penultimate green light needed before final approval by the NEDA Board that is headed by President Rodrigo R. Duterte.
DIVERSIFYING FURTHER
Sought for details yesterday, Megawide President and Chief Operating Officer Edgar B. Saavedra said the development is part of the company’s move to diversify its portfolio.
“Part of our diversification program is to invest in transportation infrastructure such as airport, transport terminal, roads and rails wherein we can leverage on our engineering expertise in building efficient infrastructures and operating experience in airport,” Mr. Saavedra said.
“We’d like to replicate our success and learnings from operating the MCIA (Mactan-Cebu International Airport) into rails.”
Megawide and Bangalorebased airport operator GMR Infrastructure Ltd., won in April 2014 the contract for the P17.52billion MCIA project under PPP program of the government of former president Benigno S. C. Aquino III.
“For now, we’re just confirming our participation following A. Brown’s disclosure. It’s still [subject] for NEDA approval and the design also will still be finalized so we can expect numbers like cost and acquisition to keep moving,” Mr Saavedra said.
The Duterte administration has veered away from relying only on PPP, arguing that it took an average of three years from conceptualization for a project to start construction under that framework.
Instead, it is pushing a “hybrid” framework that will rely on national government or official development assistance ( ODA) funding for the construction phase and PPP for operation and maintenance. Some businessmen have questioned the wisdom of that shift, arguing that the government lacked competence for such major projects and that state debt could unduly balloon in the ODA route.
In its disclosure to the Philippine Stock Exchange, Megawide said its entry into the project is a “testament to its deep experience” as an engineering, procurement and construction contractor.
“Megawide supports the Duterte administration in its push for reliable, sustainable transport infrastructure,” Mr. Saavedra was quoted as saying.
“A solution is needed for Metro Manila’s worsening traffic congestion and we believe efficient mass transportation is the answer,” he added.
“Engineering and construction are vital components in any infrastructure project; in fact, they are the basis of Megawide’s capability in infrastructure development. This will guide our participation and vision for EWRP.”
Aside from the MCIA contract, Megawide was awarded the PPP for School Infrastructure Project ( PSIP) Phases 1 and 2 that entailed the construction of almost 10,000 classrooms across Luzon and costs P9.89 billion and P3.86 billion respectively; and the P2.5billion Southwest Integrated Transport System, the country’s first integrated transport hub.
Construction of PSIP’s first phase — consisting of 9,296 classrooms in the Ilocos Region, Central Luzon and in the Cavite-LagunaBatangas-Rizal- Quezon region immediately south of Metro Manila — was completed on Dec. 4, 2015.
Sought for comment, Luis A. Limlingan, business development head at Regina Capital Development Corp., said: “All companies need to diversify their portfolios.”
Summit Securities, Inc. President Harry G. Liu for his part said the move could be a “long-term vision” of Megawide given “increasing number of rail projects” in the government’s pipeline.
“[They] want to participate in infrastructure developments to ease traffic,” he noted.
Megawide saw its consolidated net income dip four percent in the first quarter of the year to P549.01 million from the P573 million it made in 2016’s comparable three months as its construction business slowed, even as returns from its MCIA operations continued to grow.
The listed builder attributed the slight decline to the “cyclicality of the construction industry” in that period, while noting that construction is expected to ramp up this semester and enable the firm to meet its targets.
The construction business contributed 88% to total consolidated earnings in the first quarter, while its MCIA operations accounted for 12%.
Earlier, Megawide expressed its interest to participate in the various airport projects of the government.
Megawide, along with GMR Infrastructure Ltd., said it is open to joining the bidding for the P12.55-billion Clark International Airport Expansion Project which the government will offer to investors.
Megawide shares gained eight centavos or 0.44% to end Thursday’s trading at P18.26 each, outdoing the industrial sectoral index — under which its shares are listed — which fell by 0.12%.