Business World

Ayala firms up road foray 

 December 15, 2011 11:46:13 PM

AYALA CORP. outbid a San Miguel Corp.-led consortium for the contract to build, operate and maintain the 4-kilometer Daang Hari-South Luzon Expressway (SLEx) Link Road, with just a final evaluation left to hurdle before the first public-private partnership (PPP) project under the current government is awarded, officials said on Thursday.

The country’s oldest conglomerate, whose core business lies in real estate, banking and telecommunications, is thus poised to firm up its foray into road infrastructure along with its venture into power generation.

“Ayala [Corp.] submitted the winning bid of P902 million versus South Expressway Link [Consortium’s] P608 million,” Rogelio L. Singson, secretary of the Department of Public Works and Highways (DPWH), said via text.

DPWH Director Rebecca T. Garsuta said separately by phone that the government had set a P371-million floor price, representing reimbursement of its “initial investment” in the project.

South Expressway Link Consortium -- consisting of San Miguel Corp.’s Optimal Infrastructure Development, Inc., Star Infrastructure Development Corp. and CLGP Philippine Holdings, Inc. of the Citra group -- and Ayala had been the only bidders for the PPP deal.

DPWH said in a statement yesterday the notice of award will be issued on Dec. 22, following post-evaluation and qualification of Ayala’s bid.

“If Ayala fails to meet any of the requirements or conditions, it will be post-disqualified [sic] and the [DPWH Special Bids and Awards Committee] will conduct the post-qualification on South Express Link [Consortium],” the department said in its statement.

The Daang Hari-SLEX Link Road is a 4 km, four-lane thoroughfare that will connect Bacoor, Cavite to SLEx near the Susana Heights interchange in Muntinlupa City.

The project, involving a 30-year contract for financing, design, construction, operation and maintenance (O&M), will have an initial toll rate of P17 for Class 1 vehicles (jeepneys, pickup trucks, vans and cars), P34 for Class 2 vehicles (light trucks and buses), and P51 for Class 3 vehicles (trailers and large trucks), both DPWH and Ayala said in their separate releases on Thursday.

This is Ayala’s first toll road project which, the firm said further in its statement, will complement its property projects in Cavite and in Muntinlupa City.

“This is a good initial foray in the transport infrastructure space and we believe this successful experience working within a public-private partnership framework would be helpful in pursuing future projects under the PPP program,” the statement quoted Fernando Zobel de Ayala, Ayala Corp.’s president and chief operating officer, as saying.

“This road project provides significant opportunities for synergies within the Ayala group, especially our real estate group, Ayala Land, Inc., as it cuts travel time to our residential and commercial projects in this rapidly growing part of the metropolis.”

The firm sees the project as a “long-term investment” that will complement other segments of the group, John Eric T. Francia, Ayala Corp.’s managing director, told reporters in a briefing yesterday.

The Daang Hari-SLEX Link Road will pass near Ayala Land’s Avida Settings Cavite, Southvale Solnera, Verdana Homes Mamplasan, Amaia Scapes, and various Ayala malls, among others, Mr. Francia noted.

Ayala said in its statement that it will pursue the project through a partnership with Spanish firm Getinsa, which has experience in toll road projects in Spain, other parts of Europe, Latin America and in Asia.

In his briefing yesterday, Mr. Francia said the firm expects to sign the concession agreement in January, with a detailed design to be drafted within four months afterwards. The government is also expected to complete right-of-way acquisition for the project within six months from signing of the agreement, he added.

“As soon as the government delivers right-of-way acquisitions [sic], Ayala plans to begin construction by July 2012,” Mr. Francia said.

“By the second half of 2013, [the road] will be operational.”

Mr. Francia said the firm expects to invest “north of P2 billion” for the toll road project.

“We have the flexibility of funding [the project] through equity; maybe have the option of taking in bank financing,” Mr. Francia said.

“But there’s a good chance we will use our cash for this.”

Ayala is also looking at other toll roads in the government’s PPP list, he added, such as the P10.6-billion Ninoy Aquino International Airport Expressway and the North Luzon Expressway-SLEx Connector Road, for which Metro Pacific Investments Corp. has submitted a P21-billion unsolicited bid, that could be rolled out in the first quarter of 2012.

Moreover, Ayala Land is eyeing a bid for the Laguindingan Airport O&M deal, Mr. Francia said.

The government last month said it aims to auction off 15 PPP projects next year.

Sought for comment, San Miguel President Ramon S. Ang said via text, “Congratulations to them (Ayala Corp.)”

Ayala Corp. shares closed 1.43% or P4.20 higher at P297 apiece yesterday, while those of San Miguel closed 0.678% or P0.80 higher at P118.80 per share.