After MCIA, Aboitiz Group targets more regional airports

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Megawide eyes data centers, transport terminals from the sale oF actions

By Arjay L. Balinbin, Senior Reporter

ABOITIZ InfraCapital, Inc. (AIC) continues to work towards its goal of entering the airport business, with its eventual takeover of Mactan-Cebu International Airport (MCIA) seen to bolster its proposals for other provinces.

“We continue to discuss our remaining unsolicited proposals with the government for other regional airports and hope to move forward with them soon,” AIC said in a statement to Business world Saturday.

“We are still awaiting approval from the National Economic Development Authority (NEDA),” the AIC said.

The company has proposed to develop and operate the new Bohol International Airport in Panglao, Bohol, as well as to upgrade and operate the Laguindingan International Airport in Laguindingan, Misamis Oriental.

Deputy Director General for Administration of the Civil Aviation Authority of the Philippines (CAAP), Danjun G. Lucas, said the AIC’s submissions, including Laguindingan’s proposal, were “returned by NEDA due to certain Ifresults.

“All unsolicited proposals are subject to further evaluation,” he said in a phone message.

He noted that the CAAP is awaiting revised Implementing Rules and Regulations (IRR) of NEDA’s Build-Operate-Transfer (BOT) Act.

Groups have questioned the BOT Act’s new TRI because private developers would assume more risk while the government is relieved of responsibility for delayed deliverables. NEDA is reviewing the IRR provisions and is expected to publish the revised rules this month.

AIC recently entered into a historic agreement with Megawide Construction Corp. and GMR Airports International, BV (GAIBV) for Aboitiz to acquire all of its shares in GMR Megawide Cebu Airport Corp. (GMCAC), the developer and operator of MCIA, for 25 billion pesos. .

AIC will pay 9.5 billion pesos to own 33.3% minus one share of GMCAC. Closing of the transaction is expected in November or December, according to Megawide.

Megawide and GAIBV will then issue exchangeable notes maturing in October 2024 to AIC for 15.5 billion pesos. These tickets will be exchanged by the Aboitiz company for the remaining shares of the MCIA operator.

“The most logical justificationIfcation for AICs [investment in MCIA] is to strengthen its entry into other regional airports,” Rene S. Santiago, former president of the Transportation Science Society of the Philippines, said in a phone message Friday.

“The bragging rights on MCIA should strengthen [AIC’s] cards against potential challengers,” he added.

Terry L. Ridon, public investment analyst and organizer of the InfraWatch PH think tank, said in a phone message that the deal “should also prove beneficial for the development of other airports, particularly the scuttled rehabilitation of the airport.” Ninoy Aquino International Airport (NAIA), and other consolidated airports across the country.

“It should be noted, however, that airports remain a public service and airport operators should ensure that airport charges and services remain competitive and affordable to the public,” Mr. Ridon noted.

He added that AIC’s investment in MCIA “should enhance its participation” in other proposed airport projects.

Both Aboitiz, through a consortium, and Megawide offered to rehabilitate NAIA under the previous administration.

“They (the Aboitiz group) don’t have any experience yet, but they’ve always wanted to get into the airport sector, and that’s why it’s also a good strategy – like an alliance where they enter as owner of a third of the shares, then we can always partner with other airport projects, whether it’s NAIA or another,” said Megawide Chairman and CEO Edgar B Saavedra, during a Friday briefing.

“Having this kind of business will really help AIC’s wallet if they want to get Bohol and Laguindingan airports,” Saavedra noted.

Megawide is confident that AIC will already have the technical know-how to manage MCIA when it assumes full control of the airport by 2024.

“We have been able to build a strong Filipino workforce for the airport and we have a two-year transition period which means AIC will learn from us how to run the airport,” said Manuel Louie B Ferrer, President and Director of GMCAC. Megawide’s executive director for infrastructure development.

TRUST IN THE TRAVEL INDUSTRY
AIC said its investment in MCIA is a “vote of confidence for the travel industry, which has steadily improved over the past few months.”

Citing MCIA statistics, the company said the airport handled more than two million passengers in the first half of 2022, a 350 percent increase from 470,000 passengers in the same period last year.

Mr Saavedra said Cebu Airport, which accounts for 30% of Megawide’s revenue, “has dragged us down financially over the past two years due to the pandemic”.

“But right now we are already operating above water,” he added.

For his part, Megawide’s Chief Financial Officer, Ramon H. Diaz, said, “If you look at the situation now, we’re not generating any airport dividends because of the pandemic; we won’t be producing for the next two years, at least.

“So we get the solution today, which opens up a lot of opportunities to replace airport dividends,” he added.

Regarding the impact of the transaction on Megawide’s balance sheet, Jez G. Dela Cruz, the company’s vice president for corporate finance and financial planning, said, “It will have a deconsolidated impact.”

“This means that all of GMCAC’s debt currently, which is around 25 billion pesos, will be removed from Megawide’s balance sheet, so it will be counted as an equity investment,” he noted.

“On the income statement, instead of a line-by-line consolidation, it would simply be the net operating income for the period that would be recognized based on the remaining share of Megawide, which is expected to close next November or December. added Mr. Dela Cruz.

Proceeds from the transaction will be used to fund Megawide’s “pandemic resilient” projects.

“It’s going to be a mix of that. At the same time, we are also considering liability management to further strengthen Megawide’s balance sheet, so that we can be opportunistic. In case there are big projects coming up, then we can aggressively bid on those projects and participate in them,” Dela Cruz said.

Projects that Megawide will focus on over the next three to five years include public procurement, transportation infrastructure such as ground transportation terminals, affordable housing, hospitals, and digital infrastructure, particularly a data center.

“We are trying an investment [in a data center] this year,” said Jaime Raphael C. Feliciano, director of business development for Megawide.

“We already have a partner in place. In fact, we signed preliminary documents. It’s just that we can’t really disclose at this point,” he added.

According to Dela Cruz, part of Megawide’s business model is about “capital deployment and efficiency.”

“Now we are able to have this opportunity to crystallize value,” he said. “It’s not that we’re giving up future revenue from the airport. In fact, we projected these future cash flows and were able to anticipate the value of this transaction. »

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