San Miguel eyes major stake in MRT-7 project

San Miguel Corp. has been offered a majority stake in the $1.24-billion Metro Rail Transit Line 7 project (MRT-7) and is negotiating with the consortium that won the contract for the project. The beer giant, which has been diversifying into other sectors such as power, water and infrastructure, told the Philippine Stock Exchange on Thursday it had started due diligence on the MRT-7 project. "The company is negotiating with the members of the consortium of the MRT-7 project the terms and conditions for the acquisition of such majority stake and has commenced due diligence work," San Miguel Corporate Information Officer Ferdinand K. Constantino said. According to the Website of the Universal MRT Corp. — the consortium tasked to build the rail — the MRT-7 project consists of 45 kilometers of road and rail transportation from the Bocaue, Bulacan exit of the North Luzon Expressway (NLEX) to the MRT-3 North Avenue-EDSA station in Quezon City. The 22-km, six-lane asphalt road will connect the NLEX to the major transportation hub development in Tala, Caloocan City and the adjoining municipality of San Jose del Monte in Bulacan. Meanwhile, the 23-km mostly elevated MRT starts from Tala and ends at the integrated MRT-3/MRT-7 station at EDSA.

Analyst Jose Mari B. Lacson of brokerage Campos, Lanuza & Co., Inc. said San Miguel’s diversification into infrastructure could create value for shareholders since the MRT-7 could be a profitable business. "It’s good to see them investing in new areas that have theoretically better returns. Brewery earns them single digit returns, not even enough to pay the cost of capital… The question is whether the project they’re getting into carries the returns that they want," he said in an interview. Lacson noted that while the mass transit project does not create a synergy for San Miguel, it addresses a critical need and would likely be patronized by Bulacan residents who work in the Ortigas and Makati business districts. The construction period is expected to last three-and-a-half years. The proponent will operate and manage the system on behalf of the government for 25 years, while gradually transferring ownership of the system to the state in proportion to payments of annual capacity fees. The MRT-7 consortium comprises Tranzen Corporation, La Costa Development Corporation, China Railway 18 Group, Universal LRT Corporation, Redford Assets Limited (SM Investments Corp./Banco de Oro/Penta), Yuchengco-led EEI Corporation, Penta Capital Management Corporation, Merlin Pacific Capital, Inc., TCGI Engineers and E. L. International Holdings Group. Also on Thursday, San Miguel said it was in talks with the stockholders of Ausphil Tollways Corporation to acquire a 67-percent stake in the company. "The terms and conditions of such contemplated acquisition are the subject of the final phase [of] negotiations between the parties," it told the bourse. Ausphil is the lead proponent of the P10-billion North Luzon East Expressway (NLEE) project, which will link Metro Manila to Tuguegarao City in Cagayan Valley via a 480-kilometer expressway. The first stage of the expressway — the first awarded unsolicited built-operate-transfer toll road project in the Philippines — will host a 35-megawatt hydroelectric component using the Metropolitan Waterworks and Sewerage System aqueduct as a conduit and the constructed roadways and wetlands as catchment to divert over 15.2 million cubic meters of floodwaters to the La Mesa Reservoir yearly as it initially serves 70,000 vehicles daily. San Miguel said it would disclose information on the Ausphil and MRT-7 negotiations as soon as it closes the deals. — Norman P. Aquino, GMANews.TV