Metro Pacific sets P36-B capex level for 2013

By Miguel R. Camus, BusinessMirror

Posted at Feb 04 2013 08:17 AM | Updated as of Feb 04 2013 04:17 PM

SEOUL, South Korea—Metro Pacific Investments Corp. (MPIC), the local unit of Hong Kong-based conglomerate First Pacific Co. Ltd., is hiking capital spending to about P36 billion across its portfolio companies this year, with the bulk of funds allotted to required investments for its water utility unit and to expand its power distribution business, an official said over the weekend.

David Nicol, MPIC chief financial officer, told reporters that the figure is higher than the estimated P27.7 billion spent last year. It also represents a large portion of First Pacific’s total P73.2-billion capital outlay for 2013, which includes P28.6 billion for Philippine Long Distance Telephone Co. and P8.1 billion for Philex Mining Corp.

Nicol noted that the individual units and MPIC are ready to finance their own requirements but did not rule out the possibility for further debt fund-raising efforts this year.

Most of the spending, or P17.2 billion, has been allotted to Maynilad Water Services Inc., the water concessionaire for the west zone of Metro Manila.

Nicol said P12.9 billion has also been allotted to Manila Electric Co., the country’s largest power distributor, to increase efficiencies and for expansion.

The planned spending mirrors the respective contributions of these two companies, which generated 44 percent and 32 percent, respectively, of MPIC’s operating income as of the third quarter of 2012. MPIC booked P5.03 billion in core net during the same period, up 27 percent, while revenues also increased 28 percent to P20.54 billion.

Unit Metro Pacific Tollways Corp. (MPTC) is expected to spend P2.6 billion, the hospitals unit will spend P1.5 billion and MPIC itself is spending another P2.1 billion this year for potential “smaller projects,” Nicol added.

Nicol reiterated that MPIC will also actively participate in the government’s Public-Private Partnership Program, and is keen on the construction deals for the Cavite-Laguna expressway, Naia Expressway, the Light Rail Transit 1 extension and Mactan-Cebu International Airport.

Maynilad, which is jointly owned by MPIC and DMCI Holdings Inc., is ramping up spending on sewerage services, with the budget seen to increase coverage to 27 percent to 28 percent through 2016 from the current 9 percent at a cost of P26 billion. The plan is to bring this up to 100 percent by the end of concession period by 2037.

MPIC President Jose Lim also noted challenges in terms of the regulatory environment for Maynilad.

He said the Metropolitan Waterworks and Sewerage System is requiring concessionaires to fund the sewerage spending out of their own pockets as opposed being allowed access to official development assistance loans as the water regulator had “maxed out” its credit limit. Such added costs would have a “significant” impact on tariffs to consumers, he added.

A deal for Japanese trading giant Marubeni Corp. to enter Maynilad has yet to close although the entry of a third strategic partner is seen to provide added technical and financial muscle for the water utility, officials said during the briefing.

For Meralco, much of the current budget will help address losses in its system and also as the electricity retailer ramps up spending on power generation as part of a plan to bring its capacity to 2,700 megawatts (MW), Meralco President Oscar Reyes said.

Meralco’s first power project is the 600-MW coal facility in the Subic Bay Freeport Zone with Aboitiz Power Corp. and Taiwan Cogeneration.

For MPTC, spending will be for new roads connecting to its flagship North Luzon Expressway (Nlex), which connects Metro Manila to the northern provinces. Current expansion deals include a new connector road linking Nlex with South Luzon Expressway, and three new extension segments for Nlex, MPTC President Ramoncito Fernandez said.

MPIC is keen on eventually acquiring the 14-km Cavite-Manila Expressway, Lim said.

The firm last year invested P6.77 billion in the toll road’s owner Cavitex Holdings Inc. via a convertible debt deal.

MPIC is also keen on growing its hospital unit via acquisitions and is in talks to close a new deal within Luzon. It recently signed an initial agreement to acquire a controlling stake in De Los Santos Medical Center In Quezon City.

Its hospitals currently include Makati Medical Center, Cardinal Santos Medical Center, Our Lady of Lourdes Hospital and Asian Hospital in Metro Manila; Riverside Medical Center in Bacolod; and Davao Doctors Hospital in Mindanao.

While investments in the Philippines continue to represent the bulk of MPIC’s initiatives, officials during the briefing also noted that they continue to explore investment opportunities in Vietnam, Cambodia, Burma and even Thailand for potential road, water and power deals.

MPIC shares rose 0.56 percent to P5.23 each on Friday, giving it a market value of P128.8 billion.