Government to retain control of PNCC after all

After its failed attempts to privatize the Philippine National Construction Corp. (PNCC), government has decided to retain control of the company and spin off its construction business to enable it to concentrate on its cash-rich tollway operations.

The Asset Privatization Trust (APT) said the government would pursue its original plan to rehabilitate PNCC, streamline its operations and sell off some assets to settle some of its debt.

APT chief executive trustee Renato Valdecantos told reporters yesterday that the government is now considering the possibility of folding up PNCC’ construction business which had been the primary cause of the company’s losses and indebtedness.

Valdecantos said PNCC will concentrate on its tollways operations, maintaining and managing its existing tollroads. "For sure, PNCC would be strengthening and concentrating on its tollway operations," Valdecantos said."If we can not fold up the construction business, we are also thinking of folding it into one of PNCC’s subsidiaries," he said.

Valdecantos said PNCC has a wholly owned subsidiary, Dasmariñas Industrial Steel Corp. (DISC), that could absorb the construction business.

He said PNCC also has a number of non-performing real estate assets that could be sold in order to raise more funds to settle its debt.

PNCC’s main cash flow comes from toll collections from the North Luzon Expressway and South Luzon Expressway. It also has a stake in the operations of the Citra-owned South Luzon Skyway.

Government has been reluctant to give up PNCC, one of its biggest cash cows, but was required to privatize the corporation as government struggles to generate revenues to offset its ballooning budget deficit.

PNCC was placed on the auction block last month in the Dong-A Group, a Filipino-Korean construction venture, made the highest bid of P1.228 billion. However, the Committee on Privatization (COP) rejected this offer and declared a failure of bidding.

The indicative price given by COP for government’s shares in PNCC was P7 billion. This includes the value of PNCC’s franchise to operate the South Luzon Expressway and the North Luzon Expressway which had been extended for another 30 years.

Under the law, PNCC was granted its original franchise effective until 2007. This had been extended for 30 years as the company expanded both the North and South Luzon Expressways.

Although PNCC still has to lobby successfully for the restructuring of its debts, the company’s cash flow has been attractive since it has the sole tolling franchise for the South Luzon Expressway and the North Luzon Expressway, the two most significant expressways in Luzon.

The sale of the PNCC was paved by the Securities and Exchange Commission (SEC) which dismissed the bid for i ts former owners to regain control of the company, ruling that the government financial institutions (GFIs) led by the Philippine National Bank (PNB) had sufficiently proved their claims over PNCC.