April 02, 2014

Gov’t defers auctionsfor two IPP projects by a month

Various newspapers today reported that the government will be deferring by a month the bidding for two big-ticket projects under the Public Private Partnership program. The P64.9-billion LRT1 Cavite Extension Project auction will be moved to May 28 reportedly to incorporate a common station linking the LRT 1 and MRT3 rail networks.

Meanwhile, the P35.4b Cavite-Laguna Expressway (CALAX) bidding will be moved to May 21 upon bidders’ requests for more time to consider issues on the changes in the proposed concession agreement, including those pertaining to bid parameters which can be based either on government subsidy (through the lowest viability find gap) or highest concession fees. Among the prospective bidders for the LRT1 Cavite Extension project are the tandem of the

Ayala-Metro Pacific groups, the San Miguel Corp Infrastructure Resources, Globalvia Inversiones of Spain, Megawide Construction Corp, DMCI Holdings and MTD Phils (which has reportedly invited SMRT Corp of Singapore as a potential partner). Meanwhile, SMC Infrastruture, Team Orion (led by Ayala Corp and Aboitiz Land), Metro Pacific and MTD Phils also lead the key bidders for the CALAX project.

Our take: While we believe that the market will view negatively any further delays in these key items, government’s flexibility in accommodating more feasible terms for the projects may be taken positively by prospective bidders. At any rate, the government is sticking to the original completion schedules notwithstanding the auction delay. – WealthSec