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Gov’t hopes to salvage hospital PPP

Posted on December 04, 2015

THE PHILIPPINES can resurrect a public-private partnership (PPP) project to upgrade an orthopedic hospital despite the winner of the bid, Megawide Construction Corp., seeking to end the deal, said Cosette V. Canilao, the head of the government’s PPP Center.

“We can actually save it,” Ms. Canilao said in a telephone interview Wednesday.

“There is still an opportunity.”

Public-private partnerships are the cornerstone of President Benigno S. C. Aquino III’s drive to boost infrastructure. The program took a hit after Megawide last month sought to terminate the P8.69-billion hospital PPP deal, citing the Health department’s failure to deliver the site for the project among reasons.

If the deal falls apart, it may put into question the viability of the PPP program where more than $22 billion of projects are lined up, Ms. Canilao said.

Under the contract, the Health department has three options: contest the notice of termination of the deal, allow the deal to end, or convince Megawide to proceed with the project, Ms. Canilao said in a Nov. 23 memo to the president, a copy of which was obtained by Bloomberg and confirmed by her.

“The news of Megawide-World’s Notice of Termination was publicized by the media at a very bad time,” according to the memo, a 33-page document that included attachments.

“It came while His Excellency was hosting country leaders of the Asia-Pacific Economic Cooperation and seeking to attract more foreign investments to the Philippines.”

Megawide Citi Consortium, Inc. -- a subsidiary of listed Megawide -- was awarded the contract in December 2013. It then entered into a P2.9-billion syndicated loan in October 2014 to help finance the project and had expected to start construction that quarter in order to make the facility operational within the first three months of 2017.

The Health department can assert that the notice of termination did not conform to procedural requirements, according to the memo, which added that any dispute will need to be resolved through either amicable means, a project dispute resolution board or arbitration, the memo said.

Scope for delays on big-ticket PPP projects will be “further exacerbated” by elections in May next year, BMI Research said in a Dec. 2 note.

Another risk is the lack of institutional capacity to conduct pre-construction activities such as documentation, spatial planning, feasibility studies, public consultation, permit issuance and land acquisition, it said.

Megawide had already spent more than P400 million as of February this year on hiring consultants and mobilization of contractors, according to the memo.

Its shares fell a third day on Thursday, shedding nine centavos or 1.45% to close at P6.11 apiece.

Sought for comment, Megawide Corporate Information Officer Manuel Louie B. Ferrer said in a telephone interview yesterday that the company has already “spent so much” on the aborted project, noting: “We already formed a team and assigned people, and we’ve been paying for two years already.”

Saying Megawide is “very much open” to a possible revival of the deal, Mr. Ferrer said: “We’re open to a discussion; we’re willing to find the best solution.”

The project involves a 25-year contract to design, finance, build, operate and maintain a 700-bed orthopedic hospital within the National Kidney and Transplant Institute Compound along East Avenue in Quezon City, and transfer the facility to the government after the concession period.

Megawide has bagged four other PPP deals out of the 11 cumulatively worth P193 billion that the government has awarded since late 2010. -- Bloomberg with Daphne J. Magturo