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Questions on NAIA expansion project

Questions on NAIA expansion project"The law sets some standards."

 

 

During the deliberation of the House of Representatives on the budget of the Department of Transportation, party-list Congressman Jericho Nograles of the Puwersa ng Bayaning Atleta raised questions on the P107-Billion Ninoy Aquino International Airport expansion project which was awarded to Megawide Construction Corporation. 

Nograles is the same feisty congressman who exposed the anomalous maintenance service contract entered into by the DoTr and the Korean firm Busan Universal Rail Inc. (BURI) which caused constant breakdowns of the MRT 3 in the past. This prompted the eventual termination of the contract.

During the hearing, Nograles revealed that Megawide, was red-flagged by the Investment Coordination Committee of the National Economic Development Authority  because the company is not only non-compliant with the documentary requirement for a multi-billion PPP, but is also incapable of proving that  it has the capital to carry out the project.

This was compounded by the fact that GMR, which is an Indian infrastructural conglomerate, has already backed out from its partnership with Megawide Construction Corporation.  GMR has pulled out of the project and is no longer investing a dime for the NAIA expansion.

In the hearing, Nograles asked Secretary Arthur Tugade on why the DoTr is giving favorable concessions to Megawide even with clear knowledge that the company does not have the money to guarantee the completion of the project. 

A week before that, Nograles wrote Tugade a letter expressing his concern on the “continuing consideration of Megawide’s unsolicited proposal for the expansion of the Manila International Airport.”

“It is therefore very alarming that your office negotiated and approved that there will be no minimum equity requirements on the part of the project proponent. This accommodation was not extended to the previous mega-consortium and may be considered in violation of Republic Act 3019, otherwise known as the Anti-Graft and Corrupt Practices Act for giving unwarranted benefits, advantage, or preference to a private party,” Nograles reminded Tugade in his letter. 

Republic Act 6957 or the BOT Law as amended by RA 7718, clearly requires private sector project proponents to have an “adequate financial base to implement said project consisting of equity and firm commitments from reputable financial institutions to provide, upon award, sufficient credit lines to cover the estimated cost of the project.” 

Rule 5, Section 5.4.c of the Implementing Rules and Regulation of Republic Act 6957 clearly states that  “the prospective Project Proponent must have adequate capability to sustain the financing requirements for the detailed engineering design, Construction and/or operation and maintenance phases of the project, as the case may be.”

It also states that the Agency/LGU concerned shall determine on a project-to-project basis, and before pre- qualification, the minimum amount of equity needed. For purposes of pre-qualification, this capability shall be measured in terms of proof of the ability of the prospective Project Proponent and/or the consortium to provide:

For the equity, RA 6957 requires:

(a) a minimum amount of equity to the project measured in terms of the net worth of the company, or in the case of consortia, the net worth of the lead member or the combined net worth of members, or 

(b) a set-aside deposit equivalent to the minimum equity required.

But in its public disclosures of its present financial state, Megawide is clearly in the red which could have been the cause of worry for the ICC. Megawide disclosed for the first half of 2020 alone, it has suffered losses amounting to P398 million.

Its consolidated revenues had dipped by a whopping 21 percent. 

For a company that has a net worth of only P 17.998 billion, the ICC and the PPP Center has determined that Megawide is financially incapable for the P 107-billion NAIA expansion project. Not only that, despite questionable liquidity, Megawide managed to bag other multi-billion PPP projects. 

These projects include the Philippine National Railway’s P18-billion Manila-Clark railway project, the P90.1-billion Mactan-Cebu airport project, the P12.5-billion Clark airport project and the P12.8-billion project with the Department of Education. 

Megawide is undertaking all these multi-billion PPP projects with just P17.998-billion net worth. In short, Megawide is too broke and its resources spread too thin but the DoTr awarded the NAIA expansion project to them anyway. 

Just few days ago, Megawide chairman and CEO Edgar Saavedra announced that they are tapping into the capital market, hoping to raise up to P8 billion in fresh capital “to fund its growth program which includes the redevelopment of the Ninoy Aquino International Airport.”

Megawide said it is targeting to raise P3 billion from the issuance of new preferred shares with an oversubscription option of up to P5 billion.

This announcement made by Megawide could be seen as proof that the company managed to secure PPP contracts without the actual requirement that is prescribed under the BOT Law and the Government Reform and Procurement Act. 

Responding to Nograles on behalf of Tugade during the House hearing, DoTr Undersecretary for Planning and Development Ruben Reinoso admitted that Megawide is non-compliant with the needed documentary requirement which could prove that the company is financially capable to pursue the airport expansion project.

“We are still awaiting the compliance of the consortium on the requirement of ICC (NEDA Investment Coordination Committee) so that we can review them and submit them to the ICC for their own appreciation and evaluation if it is compliant with the requirement of the ICC,” Reinoso admitted.

Reinoso said that Megawide submitted some documents but did not satisfy the requirement of the ICC. 

Why was the project awarded to Megawide then? Clearly, this statement of Reinoso could be interpreted as an admission that the DoTr committed something illegal that is tantamount to graft. The law requires that a contract must be awarded only to a proponent which has already fully satisfied the prescribed documentary requirement. 

And while Megawide is harping about its past projects that include the Mactan International Airport, this cannot be used to justify the awarding of a PPP contract without compliance to the standards set by law.  

This project would ultimately turn the NAIA into privately run airport for the next 25 years as stipulated in its contract, and this would mean higher terminal fees and higher cost of other airport services.

This writer tried to reach out to DoTr and Megawide and would welcome clarifications from them should they feel the need to reply.

Topics: House of Representatives , Department of Transportation , Jericho Nograles
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