SMC pays P30B upfront for NAIA rehab deal

San Miguel Corporation (SMC)-led New NAIA Infra Corp. (NNIC) has remitted an upfront payment of PHP 30 billion to the Philippine government for the Ninoy Aquino International Airport (NAIA) Public-Private Partnership (PPP) project.

Finance Secretary Ralph G. Recto hailed the payment, which was cleared by the Manila International Airport Authority (MIAA) through the Bureau of the Treasury (BTr) on September 16, 2024, shortly after the official turnover of NAIA’s operations and maintenance to NNIC on September 14.

“We are hitting two birds with one stone on this project. This will not only transform NAIA into a world-class airport but also guarantees the government a healthy income stream from the private sector operator,” said Recto.

The PHP 30 billion is part of a broader financial commitment by NNIC under the concession agreement, which is expected to generate PHP 900 billion in government revenues over the 15-year term, potentially extendable by another 10 years.

Recto explained that the deal is projected to provide a revenue stream of around PHP 36 billion annually, which will fund critical projects in education, public health, and infrastructure.

Largest PPP Project Under Marcos Administration

With an estimated total project cost of PHP 170.6 billion, the NAIA rehabilitation is the largest public-private partnership venture under the administration of President Ferdinand R. Marcos Jr. Approved by the National Economic and Development Authority (NEDA) Board on July 19, 2023, the project was fast-tracked through the evaluation process, securing approval within a record-breaking six weeks.

The project aims to resolve long-standing issues such as undercapacity and congestion at NAIA. The upgrades will increase the airport’s capacity from 35 million passengers annually to 62 million, while expanding air traffic movements per hour from 40 to 48.

Led by the Department of Transportation (DOTr) and MIAA as co-grantors, the rehabilitation will introduce internationally benchmarked Minimum Performance Standards and Specifications. The private sector’s expertise is expected to drive modernization and capacity expansion efforts at NAIA.

Additional Revenue and Modernization Benefits

Beyond the upfront payment, the SMC-led consortium has committed to providing a fixed annual payment of PHP 2 billion and a revenue-sharing scheme, where 82.16% of the project’s earnings, excluding passenger service charges, will go to the national government.

“The 30 billion pesos is just the upfront payment from the private sector partner. As the project finally takes off, the government is expected to generate roughly 900 billion pesos in revenues from this deal,” Recto said, further emphasizing the economic benefits the government stands to gain over the project’s lifespan.

The contract for the NAIA rehabilitation was awarded to the SMC-led consortium on February 16, 2024, after it submitted the highest bid. The concession agreement was officially signed on March 18, 2024, by DOTr, MIAA, and the NNIC.