FRAPORT-MANILA HOTEL DEAL LEAVES PALACE CLUELESS

MANILA, August 28, 2005
 (STAR) By Marichu Villanueva - Malacañang officials were taken by surprise yesterday by the planned buyout of a German firm’s stake in the consortium that built the new but mothballed Ninoy Aquino International Airport Terminal 3 (NAIA-3) by a newspaper and hotel magnate who owns the Manila Hotel.

Frankfurt airport operator Fraport AG has accepted an offer of $200 million for its stake in Philippine International Air Terminal Co. (Piatco) in a move that could end its dispute with local partners in Piatco and the government, with which Piatco is engaged in a legal tug-of-war over the new NAIA-3.

Fraport said in a statement that it would receive an initial sum of $50 million once it signs the deal, followed by the remaining $150 million within six months of signing.

The sale still needs to be approved by Fraport’s supervisory board, wire news agency Reuters reported.

Fraport does not plan to pursue compensation following the sale of its 30-percent stake in Piatco to Manila Hotel Corp., a source familiar with the matter told Reuters.

Fraport had sought World Bank arbitration to settle a dispute over compensation for the terminal after it was seized by the government in December for alleged anomalies in Piatco’s contract for the terminal. The government had rejected Fraport’s request for $425 million in compensation. Fraport put up most of the money — about $300 million — for the terminal’s construction.

Manila Hotel Corp. is owned by Manila Bulletin publisher Emilio Yap.

Aside from the publishing business, Yap’s business interests include shipping and banking. Yap acquired the five-star Manila Hotel when his company outbid a Malaysian consortium.

Executive Secretary Eduardo Ermita, head of a Cabinet policy group tasked by President Arroyo to handle the NAIA-3 project, expressed surprise over the reported buyout.

"I should know about this because I am the chairman of the policy group. But I had no knowledge of that until this report," Ermita said. "We’re talking every week. We meet every week but we did not have any information about such negotiations."

The STAR sought comment from former interior secretary Jose Lina Jr., who is now the president of the Manila Hotel Corp., but he refused to answer phone calls.

Ermita said he is skeptical of the buyout deal because Yap is not on good terms with beer and tobacco magnate Lucio Tan, who controls Philippine Airlines. "Don Emilio and Lucio Tan are not exactly on good terms. So there is something to this."

However, the Yap-Tan animosity took a new twist after Manila Bulletin published for the first time last Saturday two stories in its business section about Tan’s acquisition of the government’s stake in Philippine National Bank and the side of Tan’s lawyer’s defense on his tax evasion case.

Ermita also doubted the veracity of these reports, which he suspects might be part of a propaganda ploy.

"There are ongoing litigations as far as the NAIA-3 is concerned, and I cannot imagine Fraport, which is just a member of the Piatco consortium, can go into these transactions," Ermita said.

The pending litigation includes petitions filed by Piatco and Fraport before the Supreme Court, contesting the government’s seizure of the new airport terminal.

On top of these, the Philippine government is facing two cases filed by Piatco and Fraport in separate international arbitration panels.

"There are a lot of these cases. So it is not easy to say there is a deal and only $200 million will be paid to them when they’re talking about $300 to $400 million compensation to the consortium," Ermita said.

Ermita pointed out that Fraport is a minority stakeholder in Piatco. "At the very least, Piatco might seek a temporary restraining order to stop Fraport from doing this because the German firm is only a partner of the consortium."

The new airport terminal was completed in 2002 but its opening was delayed by a squabble between Piatco and Fraport AG.

Fraport was further caught in the middle that same year when Mrs. Arroyo abandoned Piatco’s contract to build and operate the terminal, claiming that one-sided provisions in favor of the consortium were inserted in the agreement after it had been signed.

Fraport then warned it might sue the Philippine government for damages if the company’s interests were not protected.

In 2003, the Supreme Court nullified the contract, saying Piatco was not qualified to bid on the project.

That prompted the government to seek court permission to take over the terminal.

A Pasay regional trial court issued a writ of possession to the government last December for the takeover of NAIA-3. The court also ordered the payment of initial just compensation amounting to $62.3 million to Piatco.

Government lawyers appealed the court’s order and even asked presiding Pasay City judge Henrick Gingoyon to inhibit himself from the case. But the judge held on to the case, prompting the lawyers to raise the appeal to the Supreme Court.

On Jan. 14, the High Tribunal issued a temporary restraining order (TRO) on the lower court’s decision requiring the government to pay the amount.

Aside from Piatco’s legal challenge in the Supreme Court, the government is also facing two arbitration cases in separate international courts. Piatco filed a $900-million case against the government with the International Chamber of Commerce in Singapore.

Fraport also filed a $900-million suit against the government with the International Center for Settlement of Investment Disputes in Washington DC.

The government is presently trying to open the airport terminal by November, after it failed to meet its self-imposed deadline of June.

The Manila International Airport authority has signed two out-of-court agreements with Japanese construction firm Takenaka Corporation, a Piatco subcontractor, in line with efforts to open the facility.

But Piatco said the government could not do this because it was the consortium that built the terminal.


News editor-in-chief: Sol Jose Vanzi

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