Gov't starts MRT-3 buyout process

By Lawrence Agcaoili, The Philippine Star

Posted at Feb 03 2014 07:37 AM | Updated as of Feb 03 2014 03:37 PM

MANILA, Philippines - The Aquino administration has started the takeover process of the operator of the Metro Rail Transit Line 3 (MRT-3) along EDSA after successfully awarding the projects to expand the capacity of the mass rail transit system as well as the single ticketing system project.

The Department of Transportation and Communications (DOTC) said the equity value buyout would pave the way for the complete takeover of Metro Rail Transit Corp. (MRTC).

“As for the MRT-3 buyout, government has already begun the process to acquire the urban railway’s facilities and to end government’s obligation to pay exorbitant rental fees to the private owner until the next decade,” the agency said.

Transportation Secretary Joseph Emilio Abaya said last week that the P56 billion needed for the government takeover of MRT-3 is already available as this was included by the Department of Budget and Management (DBM) in the P2.265- trillion national budget for 2014.

“There are still small things left. Clearly from DOTC, we are much better off executing the buyout, otherwise legally there is something always lingering in your mind,” he said.

Abaya said one issue being discussed is whether the government would need the consent from the equity holders of MRTC led by infrastructure conglomerate Metro Pacific Investments Corp. (MPIC) as this is already under arbitration in a court in Singapore.

“One issue is whether we need their consent. But apparently they are doing an arbitration even during the time of our predecessors,” Abaya clarified.

MRT-3’s private concessionaire MRTC, then owned by the Sobrepeña family, decided in 2003 to cash in on its investment in the train line by issuing asset-backed bonds for future equity rental payments.

On the other hand, government financial institutions Land Bank of the Philippines and the Development Bank of the Philippines hold a combined 80-percent economic interest in MRT-3 by acquiring the MRT bonds issued by MRT III Funding Corp. issued by Sobrepeña’s Fil-Estate Group in 2008.

However, its presence in the board is not felt because it does not have voting rights for the shares while MPIC owns 48 percent equivalent to a 20-percent economic interest in MRTC.

In March last year, President Aquino signed Executive Order 126 stating that DOF and DOTC should buy out MRT-3 from MRTC pursuant to a build-lease-transfer (BLT) agreement.

The proposed takeover would help Landbank and DBP unload their interest in MRT-3 after receiving several warnings from the Bangko Sentral ng Pilipinas (BSP) regarding its investments in the mass transport system.

The plan to buy out the private sector’s stake in MRT-3 would also mean the government would no longer need to pay MRTC huge fees every year. The DOTC annually pays the MRTC for equity rental payments, maintenance cost, debt guaranteed payment, insurance expenses, and others.

The proposed government takeover would result in billions of pesos in savings for taxpayers, who provide subsidies mainly to cover the 15 percent return on investment guaranteed to MRTC. The government shells out about P7 billion worth of subsidy for the MRT-3 operations.

Aside from the huge savings, Abaya explained that the operation and maintenance of MRT-3 would be easier after the complete takeover as the government need not get the consent of other private entities.

The 17-kilometer MRT-3 from North Quezon City to Taft Ave. in Pasay City ferry close to 600,000 passengers a day or way above its original design capacity of 350,000 passengers a day.