MPIC ups 5-year capex to P478 B

HONG KONG – Metro Pacific Investments Corp. (MPIC), the Philippine listed management and holding company focused on infrastructure and development, is planning to spend P478 billion in capital expenditures from now to 2020, which includes new investments as officials underscored the need for pending tariff hike applications for both the tollways and water businesses to fund new projects.

In a press briefing over the weekend, MPIC chief financial officer David John Nicol said the P478 billion consists of P401 billion existing capex plan from 2015 to 2020 and P78 billion for new projects for the period.

The P401 billion capex plan for 2015 to 2020 is broken down as follows: P170 billion for power, P106 billion for water, P65 billion for roads, P44 billion for its rail projects, and P16 billion for hospitals.

Further projects totaling P78 billion would amount to P11 billion for water and P67 billion for roads, he said.

“This is the level of investment that we are aspiring to make in the Philippines between now and 2020. These are long-term investments and they take a lot of funding up-front. Our capex spending plans amount to P401 billion and if we add to that the other projects in our radar, that would add another P78 billion, so total aspiration over the period is P478 billion-which is a pretty hefty sum of money,” Nicol said.

Against this backdrop, he said one of the biggest challenges the business is facing is the regulatory hurdle surrounding the tariff hike petitions.

“We want to spend this P478 billion over the next few years but in order to do that we do have to have confidence the tariffs will come through as expected,” he said

He said without the tariff adjustments, service quality may be affected.

“We’re striving to make sure that doesn’t happen, but it can happen if you run out of cash to fund these investments and these are investments that people need,” he said.

MPIC’s tollway arm Metro Pacific Tollways Corp. continues to await approval of inflation adjustments for the North Luzon Expressway (NLEx) and six years for the Manila-Cavite Toll Expressway (Cavitex), equivalent to 19 percent and 23 percent, respectively.

MPTC operates NLEx and CAVITEx via Manila North Tollways Corp. (MNTC) and CAVITEx Infrastructure Corp. (CIC), respectively.

“These tariff adjustments have accumulated through successive failures to raise tariffs since 2011 and are now constraining MPTC’s ability to finance road construction necessary for continued economic growth,” MPIC said in an earlier disclosure.

For its water utility business Maynilad Water Services Inc., MPIC is claiming P3.44 billion after the Metropolitan Waterworks and Sewerage System Regulatory Office (MWSS-RO) failed to implement a water rate increase in favor of the company.

In a separate briefing in Manila last week, Maynilad chief finance officer Randy Estrellado said foregone revenues from non-approval of the rate hike have reached P4.9 billion since January 2013.

Moving forward, Nicol said in the medium-term, the conglomerate may have to eventually sell down some of its stake in Maynilad or the Hospitals Group as part of some repositioning on its growth portfolio to keep funding future projects.

“We grow up the value of our investments and at some point we need to sell down to generate cash and keep this machine growing. We’ve only just increased our shareholding in Meralco (Manila Electric Co.) so obviously that will not be a target. I think Maynilad and the hospitals lend themselves to some form of participation by another investor,” Nicol said.

He said that while Meralco and other companies continue to grow, MPIC would have to do some repositioning on its growth portfolio to keep funding future projects.

In the same briefing, MPIC president and CEO Jose Ma. Lim said that if the sell down pushes through, the company intends to maintain the control and management and remain the largest shareholder.

“Obviously the choice of which one will go will depend on the valuations that we can see versus the kind of cash flows we will have to give up by selling down,” Lim said.

MPIC holds interests in water utilities through the provision of water and sewerage services by Maynilad Water Holding Company, Inc., the holding company that operates Maynilad and Philippine Hydro, Inc., as well as bulk water services by MetroPac Water Investments Corporation.

Its toll roads operations is through MPTC while its investments in power distribution is through Beacon Electric Asset Holdings, Inc., which in turn holds the company’s investments in Meralco.

It also has investments in healthcare through hospitals nationwide and investments in rail through the operations and maintenance of the Light Rail Transit (LRT) and construction of the extension by Light Rail Manila Corporation (LRMC) and ticketing services by Automated Fare Collection Services, Inc. (AFCS).