Friday, July 11, 2014

Megawide goes into power

Megawide Construction Corp. aims to double its profits in three years as it continues to diversify its traditional construction business into more infrastructure projects like airports and power to achieve more sustainable returns, company officials announced during the firm’s annual stockholders’ meeting on Monday. The company, which is partly owned by billionaire Henry Sy, is lining up renewable power projects like solar plants and wind farms and plans to roll out an attributable power portfolio of 100 megawatts in two years at an estimated investment of $100 million, Megawide chief financial officer Oliver Tan told reporters after the meeting.

The power projects were first announced Monday and will be in partnership with PhilCarbon Inc., but the company has been taking steps toward this direction as it participated and won various projects under the Aquino administration’s public private partnership program. In April, it won the P17.5-billion Mactan Cebu International Airport PPP with partner GMR Infrastructure of India and earlier, the modernization of the Philippine Orthopedic Center PPP in Quezon City. Both the modernized hospital and new Cebu airport terminal would be done by 2017, Tan said, and would dramatically shift the company’s revenue base. By 2017, profit would hit about P2.8 billion with these new projects from P1.4 billion in 2013. Revenues would also double, Tan said. 

He said this was a route also taken by another conglomerate that Megawide “idolizes,” the Consunji family’s DMCI Holdings Inc., whose interests range from construction, property development, power, mining and water distribution. DMCI is also a much larger company, with roughly 10 times Megawide’s market value of more than P20 billion. “Our model is very much like DMCI. We will still retain our current market share in the construction business but we all know the cyclical nature of the industry, which is why we are pursuing assets that will provide us that stability,” Tan said.

Tan said that Megawide’s initial foray into power generation would be a 3.5-MW biomass power plant in Northern Luzon. He said the project would be completed in two years with an estimated costs of $2 million to $2.5 million per megawatt. He said other power projects were being lined up while noting that Megawide was open to taking in partners, depending on the requirements of a particular project. Apart from airports and hospitals, the company, which made its name building residential condominium projects for the SM Group’s SM Development Corp., had won PPP deals for the construction of classrooms.