Salim brought in zero funds to capture Meralco

Second of a series on the Salim Empire in the Philippines
ONE compelling economic justification for foreign investments is that a capital-deficient developing country like ours needs capital from abroad, which developed countries with capital-surpluses can provide.
This is not the case, though, in the accumulation of the controlling stocks in Manila Electric Co. by firms controlled by the Indonesian magnate Anthoni Salim.  It is a cautionary tale proving that the presence of foreign business does not necessarily entail capital inflows into the country.
According to publicly available data, Salim’s firms acquired what now makes up the 50 percent controlling stocks of   Meralco —now under the corporate vehicle Beacon Electric Assets Holdings— through the following two main avenues.
First, was a clever, but I would say questionable, scheme that involved the funds of the Beneficial Trust Fund of Philippine Long Distance Telephone Co., the giant telephone firm which Salim also got to control in 1998.
The Fund was used in 2009 to purchase 10 percent of Meralco shares —which made up, as it were, the Indonesian tycoon’s first beachhead in this capture of Meralco.
And second, domestic borrowings, both short- and long-term, from local banks totalling at least P30 billion, financed the rest of the purchase of the Meralco shares, collateralized by those very stocks.
In effect the savings of thousands of Filipinos, both small depositors and corporate investors. financed the acquisition by an Indonesian magnate of our biggest power firm.
PLDT Beneficial Trust Fund
PLDT’s Beneficial Trust Fund in February and March of 2009 had quietly bought Meralco shares totaling for 10 percent of its shares.  To this day, the cost to the Trust Fund of its purchases had not been disclosed, as the price during that period ranged from a low of P90 per share to a high of P123.
However, PLDT’s 2009 reports to the Philippines Securities and Exchange Commission as well as to its US counterpart, did not report the Fund’s purchases of  Meralco shares. The Fund had assets of over P20 billion at that time, accumulated through contributions both by the company and its staff, as required by various agreements with its labor unions and as part of its compensation scheme.
It is run by a board of trustees, which although theoretically independent, has been controlled by PLDT management, which is in turn is appointed by its controlling stockholders—since 1998, Salim’s firms.
The fund’s chairman when it bought the Meralco shares was now Foreign Secretary Albert del Rosario, who had been a board member of the PLDT ever since the Salim Empire got to control it in 1998.  He was also a director of First Pacific, Salim’s flagship for his Asian empire since 2003—even when he was Philippine Ambassador to the US from 2001 to 2006—until 2011, when he was appointed Foreign Affairs Secretary.
“Del Rosario is not MVP’s man, but Salim’s,” an investment banker explained. “He opened the doors in Manila’s business world for MVP, who then was an obscure investment banker in Hong Kong.”
“MVP” is Salim’s chief executive in Manila, the face of his empire here, who chairs most of the Indonesian magnate’s main companies here. “That’s how well connected the Salim Empire here has been,” the banker said.
One of Pangilinan’s top executives, Ray Espinosa, who has been vice chairman of the fund from that time until now, claimed then that the fund’s Meralco shares were merely portfolio investments it bought just like shares of other listed firms.
However, seven months later, in October 2009, Salim’s holding firm in the Philippines, Metro Pacific Investments, bought all of PLDT Beneficial Trust Fund’s Meralco shares, for a purchase price of P14.2 billion, or P126 per share.
But Metro Pacific didn’t pay the pension fund cash.
Metro Pacific swap
Payment was in the form of new shares in Salim’s flagship in the Philippines, Metro Pacific Investments Corp, which it issued and valued at P9.5 billion.  It cannot be determined how much the Fund gained or lost, since it had not disclosed how much it spent in buying the shares in the market early in October.
The Fund though got to turn those shares into cash only a year later, when it sold these in the stock market, in tranches in April and October for a total of P12.9 billion—lower than the P14.2 billion sale price of its Meralco shares.


Apparently encouraged by the role of PLDT Beneficial Trust Fund in acquiring Meralco shares for the Salim group, and with nobody opposing such utilization of a pension fund, his executives have used it to the hilt, by using its funds to organize what would be a very aggressive MediaQuest Holdings.
If you’ve never heard of it, its investments are in firms that you would certainly know unless you are a hermit.
MediaQuest wholly owns Channel 5 together its website interaskyon.com; 80 percent of the Business World newspaper (whose editors it will soon replace); 20 percent of Philippine Star (which it plans to completely control soon by buying the shares of Speaker Feliciano Belmonte’s family); and 18 percent of the Philippine Daily Inquirer.
Business sources say that Salim’s media holdings could explain why he has been able to remain virtually invisible to the public here, while Mr. Pangilinan, who has only microscopic shares in Salim’s firms, has been the conglomerate’s face.
The use of the PLDT Beneficial Trust Fund was a brilliant, though controversial, financial maneuver, and one would have to give a lot of credit to Pangilinan.
Sources claim though that it was the brainchild of two British First Pacific executives who control tightly the conglomerate’s finances and who report directly to Salim: Christopher Young, PLDT’s “Financial Advisor” since 1998, and Metro Pacific’s Chief Financial Officer David Nicol.
The bottom-line of it all: It was the thousands of stock market investors who bought those MPIC shares held by PLDT Beneficial Trust Fund that were exchanged for the Meralco stocks. They financed Salim’s Metro Pacific acquisition of that 10 percent bloc in the power firm.
Cash-out: Zero
How much therefore did Metro Pacific in effect spend for that block of shares now valued at a mind-boggling P31 billion?
Zero.
The financing for the purchase of the rest of 40 percent of Salim’s Meralco shares also came not from fresh capital from Hong Kong or Indonesia, or the British Virgin Islands, but from our country’s financial system.
The P21.4 billion that financed the July 2009 purchase of 20 percent of Meralco shares by PLDT subsidiary Piltel  (later renamed PLDT Communications and Energy Ventures, or PCEV), according to PLDT’s report to the US SEC, came from the telephone company’s   “cash flows from operations and borrowings.”
The rest of the Meralco shares which the umbrella firm Beacon Electric Assets Holdings in 2012 bought were financed first through bridge-financing facilities and then through Corporate Notes with 5 to10 years’ maturity all totaling P30 billion, mostly arranged by the investment banking units of Metro Bank and the Philippine National Bank.
And the collateral used for these borrowings?
The very Meralco shares Salim firms had bought with the money they borrowed.
And how would the Salim firms pay these loans?
With Meralco dividends.
Since the advent in late 2009 of the Salim-picked management of Meralco, the firm’s dividends have rocketed, from just P2.8 billion in 2009 to P9.4 billion yearly from 2010 to 2013.
Because Salim’s firms are the 50 percent owners, they got half of that bonanza or P18.8 billion in the last four years.
That would be more than enough for the Salim firms to pay off in the coming two to three years the debts they incurred to buy the Meralco shares.
And they would have still billions of pesos, first, to remit to Salim’s investment company First Pacific in Hong Kong, and then to his offshore firms in the  tax havens in the British Virgin Islands and Liberia.
tiglao.manilatimes@gmail.com
www.trigger.ph and www.rigobertotiglao.com

Indonesian magnate controls Meralco

First of a Series on the Salim Empire in the Philippines

Through several corporate layers, the 65-year-old Indonesian Anthoni Salim who owns Indonesia’s biggest conglomerate controls Manila Electric Co. (Meralco), the Philippines’ biggest private corporation and the monopoly in electricity distribution in Metropolitan Manila, according to publicly-available corporate information.

I asked two people close to Salim’s conglomerate in the country two months ago for its top official in the country  to comment on this column’s topic. They replied that he didn’t want to.
It is probably the country’s most successful case of corporate imaging that the Indonesian tycoon’s control of Meralco—as well as Philippine Long Distance and several other huge firms—has been hidden from public consciousness.

Meralco Chairman Manuel V. Pangilinan, Mr. Salim’s point-man and top executive in the Philippines, has been been portrayed as the face of the Indonesian’s empire in the Philippines, that it is casually referred to as the “MVP Group of Companies.”

However, Mr. Pangilinan owns only token shares (25,000 out of the firm’s 1.2 million shares) in Meralco and less than two percent in Meralco’s ultimate mother companies, the Hong Kong based First Pacific Co., Ltd. and the Philippine-incorporated Metro Pacific Investments.

Salim’s control of Meralco starts with his 45 percent control of the firm which is, as it were, the “mother ship” of his empire in Asia, the Hong Kong-based First Pacific Co. Ltd., listed in that China special region’s stock market.


Salim’s 45 percent holdings in First Pacific are through three offshore-firms, created in secretive, tax haven countries. He is the sole owner of Salerni International Ltd., organized in the British Virgin Islands.

Salerni in turn is the sole stockholder of First Pacific Investments (BVI) Ltd. also incorporated in that tax haven, and 57-percent owner of a similarly named corporation, but incorporated in another tax haven, Liberia.

The shares of the two First Pacific Investments and those directly held by Salim compose 45 percent of First Pacific’s (HK) total shares. (Anthoni in 2002 for some reason bought off shares in the two First Pacific investments from his brothers, therefore becoming the undisputed sole biggest owner of the First Pacific conglomerate.)

That Salim’s 45 percent shares in First Pacific means total control is obvious in that the next biggest stockholder are fund managers, who represent thousands of portfolio investors around the world: Lazard Asset Management with 7 percent and Marathon Asset Management with 4.4 percent. Some two dozen-fund managers own less than 1 percent. Pangilinan holds 1.4 percent shares.

The Metro Pacific layer
The next corporate layer for the control of Meralco is the Philippine-incorporated Metro Pacific Investments, which is, as it were, Salim’s command ship in the country.

A Salim holding firm called “Metro Pacific Holdings” has 56 percent ownership of Metro Pacific. (Salim’s control of the holding firm for some reason is through three other firms with interlocking ownership: the Amsterdam-based Intalink, B.V, Enterprise Holdings Corp., and First Pacific International.)

As in the First Pacific layer, that Salim’s firms’ 56 percent holdings in Metro Pacific represent complete control of the firm is beyond any doubt, for the remaining shares are distributed among nearly 40 fund managers, most of which hold less than 1 percent stocks.

The two biggest of these are T. Rowe Price International (UK) Ltd. and Morgan Stanley Investment Management, which hold, respectively, 1.6 percent and 1 percent of the firm’s stocks. Pangilinan has 0.09 percent of the shares, the minimum for him to have to be in its board.

Salim’s third corporate layer—or his third step—for his control of Meralco is a firm incorporated in 2010, Beacon Electric Asset Holdings. The firm is effectively 100 percent controlled by Salim, through Metro Pacific Investments, which has 50 percent shares, and a 100 percent PLDT subsidiary, PLDT Communications and Energy Ventures, which has the other 50 percent.

Salim controls 27 percent of PLDT. That holding may seem small, but that makes up the indisputable controlling bloc in PLDT, which has thousands of shareholders. Its next biggest shareholder with 15 percent shares is the Japanese NTT group. How Salim got to control the country’s biggest telephone firm is yet another story.

And at the end of the corporate layers: Beacon Electric Holdings has 50 percent control of Meralco. The next biggest shareholder is the San Miguel Corp. and its subsidiaries, which together have 27-percent holdings.

Lopez clan gone
Whatever happened to the old-elite Lopez clan, whose name had been synonymous with Meralco? After the Lopezes bought Meralco from its US owners in 1962, after they lost Meralco to Marcos’ brother-in-law Kokoy Romualdez, and then, after the EDSA revolution, President Cory handed back Meralco to them. The Lopez clan then, in 2009, sold most of the Meralco shares to the Indonesian Salim’s firms. The Lopezes now hold only 4 percent of Meralco.

One of course could believe that Mr. Pangilinan has full autonomy in running the First Pacific empire, and that he is of course the most patriotic of Filipinos. That would be supremely naive, unless one is in a socialist system.

But most of the Meralco and PLDT profits flow not to Pangilinan through his 1 percent or token shares in those firms, but to their owners. The lion’s share would be claimed by Salim, and the rest by the thousand or so US and European portfolio investors in First Pacific.

Pangilinan may be the most patriotic of Filipinos, but what happens if one morning, Salim wakes up deciding to replace him with the best executive the world can offer? He can even just pick from the list of the best CEOs in the world the Harvard Business Review annual determines.

And of course, what if, God forbid, Salim passes away, and we learn that the Indonesians had found a way for Salim’s holdings to be turned over to the state of Indonesia, which may have a policy of cut-throat competition with its neighbors?

There are important reasons why nearly all countries in the world have restrictions—not necessarily through their constitutions but through laws and regulations—on foreign ownership of strategic industries, especially utility companies. (That topic for a coming installment of this series.)
And who is Anthoni Salim? Forbes magazine ranked him as the third richest Indonesian last year. He is the youngest of the four sons of ethnic Chinese Liem Sioe Liong, who took the Indonesian name of Sudono Salim, and who had been for decades that country’s richest magnate.

Liem had been Indonesia’s most controversial magnate. He had been viewed as the former strongman Suharto’s most successful crony so much so that he and even Anthoni had to flee Indonesia during the anti-government, anti-Chinese May 1998 riots that eventually led to Suharto’s fall. Sources say that because of that harrowing experience, Anthoni lives mostly in Los Angeles.

The Salim conglomerate includes Indofood, the world’s biggest noodle factory and about 500 firms in diverse industries all over Asia. In Indonesia alone the Salim firms have a workforce of 200,000.
Quite significant though is that according to First Pacific’s 2012 annual report, its profits from its Philippine operations have outstripped those from its Indonesian operations starting in 2011, by about $200 billion in 2012.

Take it the way you want it.

Two interpretations
Salim’s control of Meralco and PLDT—both utility firms—is a mockery of our constitutional and legal restrictions on foreign control of strategic industries. And these are not only strategic industries: Salim controls a monopoly in electricity distribution in Metro Manila and surrounding provinces and one member of the duopoly in mobile telecommunications (Smart Communications).

Or the other interpretation: the restrictions imposed by the constitution and our laws are so full of legal loopholes that all that a foreign investor wishing to invest in the Philippines has to do is to contract a good lawyer, or, as some say, a lawyer or law firm with strong political connections.

Sadly, the issue of Salim’s empire in the Philippines would muddle the debate over amending the constitution.

I have heard a conspiracy theory that with the weak legal basis for Salim’s control of utility and mining firms in the country, the solution would be to lobby for amending the constitution so that its existing restrictions on foreign ownership in these industries would be lifted, and the issue becomes moot.
What kind of country have we become?

A magnate in a foreign country which is in our level of development—Indonesia with a GDP per capita of $1.731 just a bit bigger than our $1,501—takes control of what are not only the prized gems of our corporate world, but also the most strategic of our industries.

We are the only country in the world in which a foreigner controls the biggest power company and the biggest telecommunications firm.

What an irony: Our restrictions on foreign investments have turned off global investors so much, that it explains partly why we are the smallest recipient of foreign capital in Asia, barring, of course Cambodia and Laos. Yet an Indonesian magnate of Chinese ethnicity—reputed to have ties with certain leaders of China has businesses in the mainland—controls our strategic industries.

The need to keep out of the public mind such obvious anomaly is probably what has prodded Salim to go into an industry that controls public opinion: Media. That topic in coming parts of this series.

Other parts of these series:
• Foreign ownership by Salim still a legal issue.
• So what if foreign owned? How the Salim conglomerate mobilizes Philippine savings to fund the empire. How its Philippine firms’ profits flow to Hong Kong, Indonesia, and ultimately to Salim’s tax-haven firms.
• The Salim Empire in the Philippines: From telecommunications to toll roads, electricity to the press, mining to medical center.

tiglao.manilatimes@gmail.com
www.trigger.ph and www.rigobertotiglao.com

source:  Manila Times' Column by RIGOBERTO D. TIGLAO

Aboitiz keen on bidding for other airport projects

The Aboitiz Group is keen on bidding for other “bundled” regional airports the government may auction off under its public private partnership (PPP) program and it may keep its partnership with the Ayala group, a company official said.

Aboitiz Equity Ventures president and CEO Erramon Aboitiz said the airport business remained attractive if the government could structure deals that would provide the scale similar to the P17.5-billion Mactan-Cebu International Airport project.

Aboitiz and partner Ayala, as well as five other groups, were outbid during the opening of financial proposals last Dec. 12 for the Mactan-Cebu airport deal. The project, however, has yet to be awarded given a still-to-be-resolved row between the top two bidders.

Recently, the government has indicated that it was looking at bundling airport operations contracts for Iloilo, Bacolod, Davao, Puerto Princesa (Palawan), Bohol and Laguindingan (Misamis Oriental) under the PPP scheme. This means bidders keen on breaking into the business could pursue fresh opportunities.

“We definitely had intentions of growing that business if we were successful in Mactan,” Aboitiz told reporters in a recent interview, adding that they would again participate “if there are interesting projects” and of a particular size.

He noted that there were no commitments to pursue future airport deals with Ayala but “it makes sense that we look at them together.” 

Other conglomerates like JG Summit Holdings and Metro Pacific Investments as well as San Miguel Corp., which were also unsuccessful in the Mactan-Cebu bid, were keen on other deals that may be auctioned off, their respective officials said.

The PPP Center said it would hold a series of meetings with the private sector to help determine the optimal size of bundling. For example, airports in Davao, Bacolod and Iloilo handled about 5.5 million passengers in 2011, government statistics showed. Mactan Cebu International Airport, the Philippines’s second-busiest airport, handled about 6.7 million passengers last year.

Other bidders had noted that they would first need to see the issues surrounding Mactan-Cebu Airport resolved. The awarding of the project, originally scheduled on Jan. 6 this year, has been delayed as the Filinvest group, which placed the second-highest offer, raised various issues, including an alleged conflict of interest violation, against frontrunner Megawide-GMR.

Megawide-GMR offered a P14.4-billion premium bid against the roughly P14 billion offer of Filinvest-Changi. The main conflict-of-interest allegation, being contested by GMR-Megawide, involves a key official of Malaysia Airports Holdings Berhad, which is a partner of a rival consortium for the Cebu airport deal, but is also a director of two airports that GMR operates in India.

PPP Center executive director Cosette Canilao told reporters this week that the transportation department’s bids and awards committee would soon render a decision on the matter.

source: Philippine Daily Inquirer

DOE approves Basic Energy hydro projects

The Department of Energy (DOE) has given its go signal to the four hydro projects of Basic Energy Corp. in Western Visayas.

In a disclosure to the Philippine Stock Exchange, Basic Energy said that it has received the notice of approval from the DOE for its four hydropower service contract projects located in Negros Occidental.

Specifically, the projects that were approved are the 2-megawatt (MW) Puntian 1 Hydro–Power Project; 2-MW Puntian 2 HydroPower Project; 3-MW Malogo 2 HydroPower Project and 2-MW Talabaan Hydro–Power Project.

The hydropower service contract areas that were given to Basic Energy will cover the Municipality of Murcia, and the cities of Victoria and Cadiz, all in Negros Occidental.

The hydropower service contracts include hydropower exploration, development, production and utilization, including the construction, installation, operation and maintenance of hydropower systems to convert hydropower to electrical power and the transmission of the electrical power.

The contract term covers a two-year nonextendible period from effective date of Pre-Development Stage and upon Declaration of Commerciality. Also, the contract shall remain in force for the balance of the period of 25 years from effective date.

In December last year, the DOE approved Basic Energy’s geo–thermal project in West Bulusan, Sorsogon. Basically, the DOE awarded the company a geo–thermal renewable energy service contract for its West Bulusan, Sorsogon project.

Prior to that, Basic Energy also received three service contracts from the Energy department involving other exploration areas in Luzon, which covers three projects: the Iriga Geothermal Power Project; Mariveles Geo–thermal Power Project and the East Mankayan Geothermal Power Project.

source:  Manila Times

Chinese ‘threat’ worrisome for business

A number of businessmen have expressed serious concern at the escalating word war between the Philippines and China, with Chinese media bristling at President Aquino’s New York Times interview “reminding” nations at the global consequences of Hitler’s annexation of Sudetenland.  While there are some who have criticized the President’s firm response with regard to our country’s maritime disputes with China, people with a strong sense of nationalism say they fully support President Aquino’s unrelenting stance to assert our territorial integrity and sovereignty.

Several observers pointed out that China is not above resorting to “economic” arm-twisting to show its displeasure, to put it mildly, recalling the time when Philippine banana exports meant for China worth $23 million were rejected supposedly because Chinese authorities found pests in the fruits. Norway also felt this kind of backlash when tons of Norwegian salmon were left rotting in Chinese warehouses and ports because of the sudden imposition of new import controls – perceived as punishment for awarding the 2010 Nobel Peace Prize to jailed Chinese dissident and pro-democracy activist Liu Xiaobao. In fact, while Guangzhou (in addition to Beijing and Shanghai) offered short-term visa-free transit to 45 countries last year, Norway was conspicuously excluded.

Many certainly see shades of China in Hong Kong’s decision to revoke visa-free privileges to Philippine officials and diplomats in retaliation to the Philippines’ continued refusal to issue an apology over the bus hostage-taking incident at the Quirino Grandstand in August 2010 that resulted in the death of eight Hong Kong tourists. In contrast, the Philippines issued an apology to Taiwan when a Taiwanese fisherman was shot by members of the Philippine Coast Guard during an encounter at Balintang Channel. Some businessmen though are wondering why the Philippines could issue an apology to Taiwan over the death of one individual but not to Hong Kong considering the number of casualties in the Luneta incident.  An observer remarked that the economic sanctions imposed by Taiwan must have pressured the government – especially when clamor began to mount from the thousands of overseas Filipino workers whose deployment to Taiwan was derailed.

Many countries including the United States are certainly concerned at the growing boldness of China in asserting control over disputed territories as its own by virtue of the so-called nine-dash line despite objections from other claimant countries and its lack of basis under international law regarding the scope of the claim itself. China also increased its defense spending to about $122 billion last year – driving concern over the security balance in the maritime region.

As noted by US Department of State Assistant Secretary for East Asian and Pacific Affairs Daniel Russel in his testimony last Feb. 5 before the House Committee on Foreign Affairs’ Subcommittee on Asia and the Pacific, what happens in APAC will be felt across the globe and will have direct implications on US interests, considering that half the world’s population, half the world’s GDP and almost half the world’s trade is in the region where some of the fastest growing economies are also located.

“Both the South China and East China Seas are vital thoroughfares for global commerce and energy. Well over half the world’s merchant tonnage flows through the South China Sea, and over 15 million barrels of oil per day transited the Strait of Malacca last year, with most of it continuing onward through the East China Sea to three of the world’s largest economies – Japan, the Republic of Korea, and China. A simple miscalculation or incident could touch off an escalatory cycle,” Russel said, expressing America’s commitment to the rule of law that guarantees freedom of navigation and overflight in reference to China’s declaration of an Air Defense Identification Zone and fishing restrictions in disputed territories.

Paranaque Congressman Roilo Golez observed that “South China Sea is much worse than Sudetenland considering today’s general rules on how nations should behave in the international community compared to the ‘might is right’ atmosphere of the 1930s. In this age of supposed international civility, China instead growls and her behavior in the South China Sea is alarming, exasperating and dismaying to say the least. Indeed, ‘Enough is enough’ and it is incumbent upon us to support the national leadership as he performs his duty to tell the world what the bully is doing in our neighborhood, so the world is forewarned.”

SPYBITS By Babe G. Romualdez (The Philippine Star)

Seven conglomerates’ P144-B 9-month profits in 2013

IF foreigners base on profitability their choice of listed stocks in which to invest their dollars, then they would probably place Ayala Corp. (AC) at the top of their list.

It is consistent profitability that enabled AC to pile up surplus of P92.37 billion as of September 30, 2013. Filipino investors similarly measure companies by their audited financial reports and find the Zobel-controlled AC being among the more reliable.

Incidentally, AC happened to be one of the seven holding companies listed on the Philippine Stock Exchange included in Due Diligencer’s choices. If the previous piece took up their retained earnings as of September 30, 2013, this one would show how they have accumulated their surpluses.


However, Alliance Global Group Inc. (AGI) and AC registered the biggest profit increases. AGI had a nine-month net profit of P19.16 billion, up a huge 42.35 percent, or P5.70 billion from P13.46 billion, while AC’s net income surged 24.92 percent, equivalent to P3.75 billion in peso term, to P18.80 billion from P15.05 billion in the same period in 2012.

Of the seven, three reported smaller but billion-profit increases in the first three quarters of 2013. San Miguel Corp.’s net income dropped 31.21 percent, or P8.02 billion to P17.68 billion from P25.70 billion, while that of JG Summit Holdings Inc. of businessman John Gokongwei Jr. declined 13.97 percent, or P2.126 billion to P13.30 billion from P15.46 billion. Aboitiz Equity Inc., on the other hand, reported a net profit of P20.23 billion, down 10.88 percent, or P2.37 billion from P22.70 billion.
The numbers shown in the table should tell us consumers where our money went in 2012 and 2013, and how much more those who could well afford to buy their products spent last year. But these companies never told us how they made more revenues last year than in 2012. Could it be because they charged us more for the same products they sold us? That is, the price increases generated more money, which meant bigger profits and more dividends for their stockholders. Was it also possible that they produced more and sold more in 2013 but at 2012 prices? This, of course, would be impossible. Business operates for profits. The more money it makes, the better.

As the total shows, the seven of 40 or so listed holding companies needed only P10.86 billion for their combined revenues to hit a trillion, an amount which you and I would have difficulty counting. Yet, we would well understand how much P989.14 billion should mean to big business that had it so good in 2012 and 2013: the more revenues that we contribute to their cash registers the bigger their profits that would accrue to retained earnings, which, in turn, would be distributed as dividend either in cash or in stock.
esdperez@gmail.com

source:  Manila Times Column of EMETERIO SD. PEREZ

ITS Southwest Terminal: Seven firms interested in transport terminal

SEVEN FIRMS have expressed interest in bidding for a contract to build the P2.5-billion Integrated Terminal System (ITS) Southwest Terminal, a public-private partnership (PPP) project aimed at easing traffic in Metro Manila.

PPP Center Executive Director Cosette V. Canilao identified the prospective bidders as San Miguel Corp., Metro Pacific Tollways Corp., Ayala Land, Inc., D.M. Wenceslao and Associates Inc., Vicente T. Lao Construction, Egis Projects Philippines, and Robinsons Land Corp., all of which had bought bid documents.

“The list of bidders could still go down as some of the firms might partner with one another to form consortia,” she added.

On offer is a contract to finance, design, construct, operate and maintain the ITS Southwest Terminal under a 35-year concession. The facility, which will be constructed near the Manila-Cavite Expressway, will connect passengers coming from Cavite to Metro Manila transport systems such as the Light Rail Transit Line 1, city buses, taxis and other public utility vehicles.

Bid documents were made available last Jan. 10 for P150,000. A pre-bid conference is scheduled this coming Monday at the Transportation department. Bids should be submitted no later than May 15 and will be opened that same day.

The winning bidder will receive a notice of award by July and signing of the concession agreement has been set for September. Construction is scheduled to start in October and the terminal should be operational by May 2016.

In another development, Ms. Canilao said the government was now hoping to award the P17.5-billion Mactan-Cebu International Airport New Passenger Terminal Project by next week.

“We are about 70% done in conducting the due diligence. We need to exercise due diligence in really checking and counter check the issues raised,” Ms. Canilao said.

The Filinvest-Changi Airports consortium has asked the Transportation department to disqualify the frontrunner, the Megawide-GMR consortium, due to alleged conflict of interest.

Megawide-GMR last month offered the best bid, which included a P14.4-billion premium, for the project. Filinvest-Changi offered a smaller P14-billion premium. A winner was supposed to have been named early January.

The signing of the concessionaire agreement for the P1.72-billion Automatic Fare Collection System project, meanwhile, will be on February 17, Ms. Canilao said, with a losing bidder deciding not to pursue complaints.

The project was awarded last week to the AF Consortium of Metro Pacific Investments Corp. and Ayala Corp. but questions have been raised by the SM Consortium.

“I heard TV news quoting an SM spokesperson as saying that they have no plans of taking legal actions,” Ms. Canilao said. “I’m glad that based on the spokesperson’s statements they will not file any legal action.”

Confirmation was not immediately available from the SM Consortium.

Reacting to a petition to stop the impending “privatization” of Philippine Orthopedic Center (POC), meanwhile, Ms. Canilao said the P5.70-billion contract awarded to the Megawide Construction Corp.-World Citi, Inc. consortium would benefit the poor.

“The government still has control over the POC through the contract,” she noted. “The project’s aim is to improve the services to the public, especially the poor.” -- LCSM

source:  Businessworld

The unwritten rule in DOTC biddings

 “Kung ayaw, maraming dahilan; kung gusto, maraming paraan.” That Filipino adage is the unwritten rule in project biddings at the Dept. of Transportation and Communications (DOTC). Foreign investors are learning the hard way its meaning: “If unwilling, many whys; if willing, many ways.” A string of them unwittingly have wasted time and money for ignoring the rule.

The latest “victim” is Korean conglomerate Hanjin. A veteran of 70 contracts in the Philippines, it didn’t expect this kind of rat in the Puerto Princesa Airport Development Project. The work, to be financed by the Korean Export-Import Bank, was open only to Korean firms. The DOTC hired Korea’s Incheon International Airport Corp. as consultant for the bidding and design-structure. The bidding was not just for the lowest price the government would pay, 30 percent of the grade, but also best technical (design-building) plan, 70 percent.

Aside from Hanjin, only one other Korean giant joined, Kumho. The rivals submitted the financial bids last October, then presented their credentials in November. Within that regulation period Hanjin protested Kumho’s conflict of interest. It turned out the latter was a partner of Incheon Airports in another ongoing DOTC bidding — for the Mactan-Cebu International Airport Project.

Hanjin asked the DOTC to rule on the matter swiftly. Relatedly, it sought clarification on how the DOTC and adviser Incheon Airports would evaluate the technical side. Rightly so, for Incheon Airports would be in a position to cause any bidder to win, no matter what price or technical plan.
The DOTC bidding officers agreed that a ruling needed to be made fast; the legal staff agreed that there indeed was conflict of interest. Anti-graft laws define and penalize such situations. The bidding rules further required disqualification of any bidder that is related to another or to a third party in the bidding process. More so if, that relationship gives it access to information, and influence over the bid of a rival or the outcome of the bidding.

The DOTC did not rule on the matter. Instead it proceeded with the opening of bids last Dec. 12. Hanjin gave the lower bid, $82,923,000, against Kumho’s $83,257,000. Yet the DOTC disregarded the difference of $334,000 (P15 million). As well it disregarded Hanjin’s many letters up to January seeking a ruling on Kumho’s conflict of interest. No amount of cautioning by Malacañang has made the DOTC do right. One excuse it gave was that it was still seeking the Korean EximBank’s stand. Yet the bank had stated since Jan. 6 that it would let the DOTC rule on the issue. More so since, the bank knows, the DOTC’s bidding and legal staffs already rendered opinions against the conflict of interest.

Incidentally the DOTC opened also last Dec. 12 the bids for the Mactan-Cebu airport project. Confirmed was that Kumho and Incheon Airports truly were participating partners. Back to the Puerto Princesa works, word inside the DOTC is that Incheon Airports has given a higher grade to partner Kumho’s technical plan. That, of course, is to put it ahead of Hanjin’s lower bid in the 70-30 evaluation.

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The Mactan-Cebu airport works are also delayed, this time due to DOTC overindulgence. The bidding, to build and operate for 25 years a new passenger terminal, was for the highest toll to be paid the government. The consortium of Filipino Megawide Construction Corp. and Indian GMR Infrastructure Ltd. gave the highest offer, P14.404 billion. Giant Filipino developer Filinvest and its Arab partner came in second, with P13.999 billion (see Gotcha, 8 Jan. 2014).

Megawide-GMR was expecting to sign the contract last Jan. 6, and start work a month later. But then an unfunny thing happened on the way to the signing. The loser, way past the allowable period in Oct.-Nov. to raise issues, gave the DOTC papers about the winner. Supposedly GMR had reneged on an airport contract in the Maldives, for which it slipped financially, so incapable to undertake the Philippine project. The Indian firm retorted that it was the one suing the island-state for $800 million, for rescinding its contract in a coup d’état. The case was in fact among its documentary submissions in compliance with transparency rules.

Instead of disqualifying the belated complainant, the DOTC entertained the belated complaint. Pending any findings, the project lies in limbo.

*      *      *

The DOTC is embroiled in yet another bidding storm — over the single-fare system for Metro Manila’s three railway lines. The SM-led consortium says it gave the superior bid of P1.008 billion, to be paid to the government up-front. But the DOTC is awarding the deal to a consortium of Ayala Corp. and Metro Pacific. The latter’s bid was only P103,000 more than SM’s. But it would pay the government only P279 million initially, with the P800-million balance to come in tranches after reaching the 750-million quarterly ridership. That would be in 10-11 years.

The DOTC is accused of fudging its own rules in the P3.85-billion bidding for vehicle license platemaking. Midway into the process, it split the contracts for car and motorcycle plates. This was to accommodate two bidders who lacked financial track records for the combined amount. The DOTC also imposed a US quality-standards test that no longer exists, yet junked a newer one taken by only the lowest bidder. This was to make “compliant” the two favored though higher bidders.

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Why’s everybody talking about PETA’s theater season opener, the comedy-musicale “Rock of Aegis”?
For one, it’s a takeoff from the Broadway hit musicale, “Rock of Ages,” this time adopting songs of the hot local rock band of the ‘80s-’90s, Aegis. For another, the time-place setting is so familiar, the Great Flood in Metro Manila from Super Storm Ondoy of 2009, repeated elsewhere in Luzon, Visayas, and Mindanao. For yet another, it highlights not only the resiliency of the Filipino to rise from calamity, but also the need for political leaders to answer for the disaster unpreparedness.

Starring Isay Alvarez, Robert Seña, Aicelle Santos, Joan Bugcat, and Kalila Aguilos. Directed by Maribel Legarda, written by Liza Magtoto. Matinees and regular shows run Fridays to Sundays till Mar. 9, at The PETA Theater Center, #5 Eymard Drive, New Manila, Quezon City. Tickets available at the box office, or call PETA (02) 7256244 or (0917) 5765400, or Ticket World (02) 8919999.

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Catch Sapol radio show, Saturdays, 8-10 a.m., DWIZ (882-AM).

source:  Philippine Star Column of Darius Bondoc

The TPLEx dilemma

THERE’S NO DENYING that building roads translate to more favorable votes come election time. Over the past holidays, no less than the President himself inaugurated the Paniqui junction of the TPLEx, adding another 10 kms. to the initial 13 kms. of dual carriageway opened just last Halloween. It was good news copy as all the frenzy of mass crucifixions of corrupt public officials and political enemies can make everyone headline weary. Judging by the northbound SCTEx to TPLEx traffic the past holiday seasons should put to rest doubts as to the commercial viability of North Luzon tollways. The break-even point of 25,000 vehicles per day should soon be weekend and perhaps daily reality.

But with this success comes the major traffic jams at the Tarlac SCTEx temporary toll plaza at San Miguel. Palliative measures like prepayment of the Tarlac exit toll at the Mabalacat entry have been a great help, but this heavy traffic situation could have been avoided if the Palace acted three years ago.

As early as 2009, the BCDA, owners of the SCTEx and MNTC, NLEx long term operations and maintenance contractors and interim O&M contractors of the SCTEx, already anticipated the buildup in traffic once the TPLEx opens, even in initial single carriageway form. Plans were laid for a big toll plaza in Tarlac. And if long term integration with NLEx operations was to be approved, the Dau and the so-called Clark Logistics or Mabalacat toll plazas were to be eliminated, reducing toll queues twice over. The upgrading of several interchanges in Tarlac and north Pampanga were in the cards to adjust to new exits and entries.
Even the reconfiguration of the Pasig-Potrero viaduct into several more bridge spans to replace the earth fill approaches was planned. If this was done three years ago, the damage to this scenic viaduct wrought by typhoon Maring would not have happened. Today, this span is traversed by temporary bailey bridge.

When TPLEx construction started, PIDC, the project proponent, was hamstrung by the absence of financial backing by JICA, which earlier gave generous terms to build the SCTEx. PIDC broke ground during the last year of the Arroyo administration but the pace of work for the TPLEx only accelerated when San Miguel Infra came in as a financially muscular partner. SMC’s later partnerships with Citra for the Skyway and SLEx, plus its investment in the STAR tollway, gave it the nous and gravitas in tollway operations and maintenance. This helped SMC win the PPP bid for the NAIA expressway extension.

With SMC on board, the total 89.0 kms of TPLEx all the way to Rosario, La Union may finish in 2015, three years ahead of schedule. Moreover, the TPLEx will, from the very start, operate as a limited access dual carriageway instead of the initial piecemeal plan of operating as a single carriageway until revenues can pay for further construction. As a dual carriageway, north bound motorists will face reduced risk of headline-grabbing head-on collisions, which bedevil the two-lane Lipa to Batangas segment of STAR.

No less than President Aquino was impressed with the speed at which the TPLEx progressed ever since SMC’s entry. So much so that at his inauguration speech of the Paniqui interchange last December, he called SMC’s Ramon S. Ang “idol”. But the President could do better than return the favor by alleviating traffic at the Tarlac toll plaza connecting the SCTEx to the TPLEx. All the Palace has to do is approve the O&M contract between the BCDA and MNTC, which has been pending since 2009 .

The Arroyo administration deferred approval of this contract with MNTC in deference to the incoming Aquino government, which promptly cancelled it. Within a year, there were no other qualified takers for the interim operation and maintenance of the SCTEx. Understandably so, as O&M contracts entail huge investments that should have at least a 10- or, ideally, a 20- or even 30-year term. It is not a security agency contract that one can cancel on a whim as there are gazillions of other options out there. Not so with outfits experienced in tollway O&M.

So its back to the original BCDA MNTC contract, by which time MNTC was already absorbed by Metro Pacific Tollways. After three years and three further sweeteners, the DoF finally endorsed the contract to the Palace and that is where it sits, gathering dust as traffic to the TPLEx piles up.

Its only natural for the officials in power to have their favorites, specially when the performance of such favorites enhances their prestige. By extension, those who are not in the inner circles, deserved or not, won’t be able to count on favorable treatment. Metro Pacific’s Maynilad water utility, which heavily invested in greatly improving the city’s water supply, was not allowed by the MWSS a price hike as per contract. It was even imposed a price cut. Metro Pacific’s Meralco, hard hit by the shutdown of the Malampaya gas field, couldn’t even get a compensatory power rate hike from the ERB as mandated by the EPIRA law. Instead, the Supreme Court issued a restraining order while other administrative arms want to investigate the members of the Energy Regulatory Board. The DoE, bowing to populist pressure and other powerful interests, is again “open” to having Congress review the EPIRA law. Metro Pacific’s MRT has been prevented from investing in new trains, new tracks, signaling equipment and maintenance contracts but the DoTC has not yet bought out Metro Pacific and other private investors in the MRT.

Tactically and strategically, it is always good populist ad copy to be against price increases to try to please the masses as the alleged “bossings” of this administration. So it’s tough being a business conglomerate that owns and funds power, water and rail infrastructure and not be in the inner circle of favorites and idols.

Prejudices aside, the delay in approving the long term SCTEx O&M contract that integrates it to the NLEx is prolonging the agony of those heading for the TPLEx. The private sector, idol or otherwise, has put in a lot of time and money to realize a fully functioning TPLEx three years ahead of schedule. It would be a tragic irony if this administration fails to improve traffic flow by having delayed the SCTEx O&M integration with the NLEx. But if we believe the hype that we are the “bossings” -- us motorists stuck in long toll queues at San Miguel Tarlac temporary toll plaza heading for the TPLEx -- then we hope the Palace gets the integration contract going. That way, there is, at least, a semblance of a “level playing field”. Even just for appearances sake. What, indeed, are we in power for?

source:  Businessworld's Column of Tito Hermoso

Aquino claims classroom lack now erased

PRESIDENT Benigno S. C. Aquino III yesterday claimed his administration has filled the classroom shortages in public schools left by his predecessor, former President Gloria Macapagal-Arroyo.

  “Today (yesterday), we witnessed the ceremonial turn-over of 66,813 new classrooms which also erased the backlog we inherited from the past administration,” Mr. Aquino said in a speech at the Carmona National High School in Cavite.

Mr. Aquino said the Arroyo administration left a backlog of 66,800 classrooms, each costing an estimated at P800,000. His government’s public-private partnership program, the president added, had helped address part of the need.

Two groups -- the Citicore-Megawide and BF Corp.-Riverbanks Development Corp. consortiums -- won the P16.42 billion PPP for School Infrastructure Project Phase 1 (PSIP-I), involving around 9,300 classrooms, in 2012.

An update is expected to be released today.

The second phase, portions of which were awarded last year, involves the construction of an additional 4,370 classrooms.

Communications Secretary Herminio B. Coloma, Jr. said the Department of Education (DepEd) has also added over 62 million textbooks to address backlogs. He claimed the government saved as much as 40% as the materials were purchased a lower price.

The DepEd has also addressed a school chair shortage of 2.5 million and added 103,000 teachers, he said.

“We can see here that DepEd has made meaningful accomplishments and this serves as basis in the social development program of our government,” Mr. Coloma said.

Asked to comment, Kabataan party-list representative James Mark Terry L. Ridon said: “I am certain that the President has been misled” with regard to the classroom backlog having been addressed.

“All it takes is to go around the schools to determine that our kids still have no adequate classrooms over their heads,” the legislator said. 

 

source:  Businessworld