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A sweetheart deal

"My math could be wrong, so I want to hear from BCDA."

 

 

The contract of Changi Airport Philippines, JG Summit Holdings (Cebu Pacific), Filinvest Development Corp. and PAGSSI (Philippine Airport Ground Support Solutions, Inc.) to manage Clark International Airport for 25 years and their being paid more than 80 pesos for every 100 pesos of gross revenue looks to me like a sweetheart contract.

Last year, Finance Secretary Sonny Dominguez raised all kinds of objections to the proposed $15-billion airport of San Miguel Corp. in Bulakan town, Bulacan province. The DOF chief’s main objection is that the government already has an airport north of Manila, Clark, and it is worth $14 billion.

Yet, last December 2018, the right to manage that $14 billion airport was handed to North Luzon Airport Consortium—the group of Changi, Cebu Pacific, Filinvest, and PAGSSI on a silver platter, for a fee of just 18 pesos for every 100 pesos of gross revenues.

A sweetheart deal

To placate critics of the deal, NLAC is now offering to spend P6 billion of its own money. Most of that money will be used to fit out (meaning partition, furnish, and equip) the new Clark Terminal Two that the government will complete by next year.

P6 billion is a pittance for the right to operate an airport valued at P742 billion. By the way, NLAC bagged the deal not because its offer was the best but simply because the government eliminated its rivals from the bidding, making NLAC the lone bidder. Being the lone bidder, NLAC won.

Assuming Clark will service 10 million passengers a year, a leap of faith from the present volume of two million passengers, and each passenger pays P500 in departure fees, NLAC will generate P5 billion a year.

Of that P5 billion, NLAC pays the government P900 million. Divide P742 billion by P900 million, you get 824 years. It will take government more than 824 years to recover its cost from its deal with the Changi, JG Summit and Filinvest group. From passenger fees, NLAC will recover itst P6 billion investments in just 18 months.

Of course, NLAC can collect rental income from concessionaires—like duty free shops, restaurants, news stands. Assume that income is another P900 million. Still, the number of years to recover P742 billion is 412 years—when every generation from today and those born in the next 14 years would have been dead.

My math could be wrong. Which is why I would want to hear from Vince Dizon of Bases Conversion Development Authority (BCDA), the state agency that is the developer of sprawling Clark, JG Summit, Filinvest, and PAGSSI on the refinements and nuances of the NLAC deal not yet known to the public.

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Topics: Changi Airport Philippines , JG Summit Holdings , Filinvest Development Corp , Philippine Airport Ground Support Solutions , Sonny Dominguez
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