CONGLOMERATE Metro Pacific Investments Corp. (MPIC) topped the auction for the multibillion-peso Cavite-Laguna Expressway (Calax) deal with a P27.3-billion premium bid, the highest single premium that the government received from a public tender thus far.
The bid edged out the P22.2-billion premium offered by San Miguel Corp. to win the deal. The food-to-infrastructure firm sought for the rebid of the contract last year.
Public Works Undersecretary Rafael M. Yabut was seen smiling all throughout the opening of the financial proposals on Wednesday. He said he was wowed by the turnout of the auction.
“It is worth waiting for, considering the discrepancy of the bids from the previous auction,” he said in bilingual, when sought for comment. “The results show that everything went well for the government and the country.”
Public-Private Partnership (PPP) Center Executive Director Cosette V. Canilao said the yearlong delay proved to be worth the wait for the government due to the multibillion-peso revenue it generated from the rebidding.
“They have more than enough time to sharpen their pencils. Had the other bidders participate in the rebid, maybe their bids will also be different, given more than a year to again [conduct] the due diligence and sharpen their numbers,” she said.
MPIC President Jose Ma. K. Lim agreed, saying the delay gave his group a fresh lead time to review the prospects of the greenfield project and submit a very competitive bid.
“We have been observing the population growth in both Cavite and Laguna, and we believe it is higher than the national average. There are about 3 million people in Cavite and 2 million in Laguna, so we did expect that, because of the delay, the traffic would probably start off at a higher level because of population growth,” he explained.
Commercial establishments and developments will also help spur traffic along the toll road, Lim added.
“In the meantime, we were able to do a more intense review of the cost estimates, which, we believe, went down—particularly steel and the petroleum-related components,” he said.
Yabut said the project is generally profitable, with a projected traffic of about 35,000 average daily vehicles passing through the expressway. “Calax will also spur development in potential growth areas. It is both a traffic and business generator,” he said.
These considerations, Lim said, allowed MPIC “to accept a slightly lower yield than” what it assumed in the previous bid.
At the first auction, MPCALA Holdings Inc. submitted an P11.33-billion premium bid, the second winning offer from Team Orion of Ayala Corp. and Aboitiz Equity Ventures Inc.’s P11.65-billion bid.
“The 20-percent bid premium is payable at the start and, therefore, the impact on overall profitability is somewhat muted by your aggressiveness of the bidding because it is spread out over 10 years basically,” Lim said.
Business groups congratulated the government for successfully generating revenues from the auction, but some are still doubtful and critical over the rebidding as a whole.
Philippine Chamber of Commerce and Industry President Alfredo M. Yao said the turnout just showed the government made the right decision when it launched the rebidding.
“I think it proved us right. Now, the revenues were doubled, which is good for the country,” he said in a phone interview.
For his part, American Chamber of Commerce Senior Advisor John D. Forbes called on the government to complete this project sooner.
“We congratulate the winner and urge that Calax be built as soon as possible. No more delays on this and other high-priority transportation infrastructure projects, please,” he told the BusinessMirror in a text message.
The project is expected to be fully completed by 2020. Segments of the thoroughfare, however, will be opened after they have been constructed. European Chamber of Commerce of the Philippines External Vice President Henry J. Schumacher said the rebidding was a clear win for the government, but a loss for the Filipino people.
“It is good for the government, but bad for Juan de la Cruz, who has to pay for the premium paid to government coffers. The bidding process used by the government is bad for the user of the infrastructure to be built,” he said.
Yabut defended the government’s decision, saying that the contract shields the common commuter from excessive toll rates that were earlier feared to be imposed due to the high premium requirement.
“The winner here is the Filipino people,” he said. “The initial toll rate was based on the study and is comparable to our existing expressways. The base is P4.65 per kilometer, which is at par with other toll roads.”
But Schumacher was not convinced.
“Getting the best technical deal from the lowest bidder would help reduce costs,” he said.
Lim said his group is happy with the turnout of the deal, which took two years to complete.
For his part, San Miguel President Ramon S. Ang said the results of the Calax bid is fine by him.
“There is no regret about losing the bid. I rarely regret making a losing bid,” he said.
The turnout of the rebidding was way above the first auction, which saw Team Orion topping the list of three qualified participants.
Ayala Corp. Managing Director John Eric T. Francia simply smiled when sought for comment.
His group decided not to participate in the fresh auction, signaling its dismay over the government’s decision for the rebid.
What went before?
The government launched the bidding for the P35.42-billion Calax in 2013 with the sole purpose of connecting the two Southern Tagalog provinces to decongest traffic and spur economic growth.
It was welcomed by the business community— particularly existing expressway operators— as the greenfield project showed great potential in the toll-road industry.
Four group were qualified to submit bids for the deal. They included: San Miguel Corp., Metro Pacific Investments Corp., Team Orion of Ayala Corp. and Aboitiz Equity Ventures Inc., and MTD Capital Bhd.
During the bidding process, Optimal Infrastructure Development Inc. was disqualified due to a defective bid security. Its risk guarantee was four days short of the required cover period.
The days went and the bids of the three technically compliant parties were opened. Team Orion topped the bidding with a P11.65-billion premium bid.
Metro Pacific’s MPCALA Holdings Inc. submitted a P11.33-billion premium offer, while MTD Capital Bhd. proposed to do the project at a P922-million premium fee to the government.
The process went smoothly, with government officials and business groups declaring the bidding “aboveboard” and “transparent.”
But, the food-to-infrastructure firm would not back down. Ang sought the intervention of Malacañang, declaring that its bid was way above the others at P20.1-billion premium.
It took the government quite some time before finally deciding on the matter. Several petitions from Team Orion and Optimal reached the PPP Center, the Palace, and the public works department, both seeking to contradict each other’s position.
The two parties, however, came to a consensus that the road network was a pressing necessity, hence, Mr. Aquino should come to a conclusion.
He did. The Chief Executive called for the rebidding, voiding the clean and transparent tender that was launched in 2013. It now carried a floor price of P20.1 billion in premium.
This move received both the cheers and jeers of investors.
Four parties were interested in the rebidding of deal: San Miguel, Metro Pacific, and two others represented by different law firms.
The auction was met with a low turnout of bidders with only Optimal and MPCALA Holdings submitting their proposals.
Two other parties decided against the auction.
Calax is a 47-kilometer thoroughfare that will link the Manila-Cavite Toll Expressway and the South Luzon Expressway aimed at enhancing trade and socioeconomic activities in the region.
The private partner will take on the financing, design, construction, and operation and maintenance of the entire four-lane toll road.
The project will also include the construction of centralized toll plazas, a toll-collection system, viaducts and bridges. The road should be operational by 2019, based on an indicative timeline.
The government has awarded nine contracts since the infrastructure program’s inception in 2010.