February 20, 2014

MPI to oppose Swiss challenge to SCTEx deal

Various newspapers today reported that Metro Pacific Investment Corp’s (MPI) tollway unit will oppose plans to have its proposed contract to operate the Subic Clark Tarlac Expressway undergo a Swiss challenge. Manila North Tollways Corp won an auction for the contract in 2010 under the Arroyo administration.

However, its implementation was suspended by the Aquino government pending issues on the revenue sharing provisions. The company has agreed to revise the proposal thrice, with the last revision reportedly being endorsed by the Finance secretary for the President’s approval. The company believes that a Swiss challenge will be unfair and has no legal basis.

Our Take: This is another setback for the company and may offset the positive sentiment generated by a recent string on positive news flows, including winning a PPP contract, a deal to proceed with its own connector road for the North and South Luzon expressways, and the recent completion of the panel that will finally start arbitration proceedings on the power rate hike application of its water utility unit.

We view the SCTEx as key to ensure connectivity of MPI’s toll way assets from Cavite to many parts in north Luzon to achieve better efficiencies and profitability. Clinching this contract will make MPI the biggest tollroad operator in the country. – WealthSec