A view of the Manila light rail transit system. Ayala Corp, the Philippines’ oldest family-owned company, may partner with a venture of billionaire Anthoni Salim to bid for a $3.8bn railway project, the most expensive infrastructure work to be auctioned by the Philippine government.

Bloomberg
Manila



Ayala Corp, the Philippines’ oldest family-owned company, may partner with a venture of billionaire Anthoni Salim to bid for a $3.8bn railway project, the most expensive infrastructure work to be auctioned by the government.
Ayala is in talks with Metro Pacific Investments Corp and will likely take in foreign partners for the 653-kilometre (405-mile) railway that will connect the capital to provinces in the south, Ayala managing director Eric Francia said. To date the conglomerate has invested about $1bn in infrastructure projects, a figure that would rise significantly if it wins the rail project and another deal to upgrade Manila’s airport, he said.
“For the larger and more complex projects, it makes sense for us to do this in a consortium,” Francia said in an interview on Friday. Entering into partnerships would spread the financial risk and skirt banks’ limits on lending to companies, he said.
President Benigno Aquino, who will step down in June 2016, is seeking to address an infrastructure logjam that has stunted direct investment into the Philippines. Contract disputes and regulatory reversals in the past have led some foreign companies to leave the Philippines.
The Southeast Asian archipelago is projected to be among the world’s five fastest-growing economies in the next few years, according to a Bloomberg survey of economists. But it ranks 91st in infrastructure in the World Economic Forum’s 2014-15 Global Competitiveness report, far below neighbours such as Thailand, Indonesia and Malaysia.
“Companies like Ayala and Metro Pacific won’t have a difficult time raising funding and finding partners who can provide technical expertise,” said George Ching, an analyst at Manila-based COL Financial. “They will bid at a price that will make money. What investors will be concerned with is, will the terms of the agreement be upheld once the project is awarded and built? As long as the terms before the bidding are followed, this project will be good for whoever gets it.” Metro Pacific is the Philippine unit of First Pacific Co, which is controlled by Indonesia’s Salim Group. Metro Pacific president Joey Lim confirmed that his company is interested in bidding with Ayala for the rail project, but said the exact structure has yet to be finalised.
The 180-year-old Ayala Corp, which transformed a former airstrip in Makati City into the Philippine version of Wall Street, expects its power and infrastructure ventures to contribute 10% to 20% of earnings by 2020, Francia said. More than half of the group’s sales come from its property venture, and the rest from its water, bank, telecommunications and electronics businesses, according to data compiled by Bloomberg.
A venture with Metro Pacific wouldn’t be the first for the two holding companies. Last year they won a 65bn-peso ($1.5bn) contract to run and extend Manila’s busiest elevated mass transit system. They also are among several companies that will jointly bid for a $2.8bn road-like project outside Manila.
“The window is closing. We’re one year away from a shift in administration,” Francia said. Ayala “will be reluctant to participate” in projects where bidding might not finish before the end of Aquino’s term, he said, fearing possible delays or changes.



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