DOF expects deal with San Miguel on MRT-7 finalized by yearend

By Iris C. Gonzales, The Philippine Star

Posted at Oct 16 2012 08:03 AM | Updated as of Oct 16 2012 07:33 PM

MANILA, Philippines - The Department of Finance (DOF) may finalize by yearend an improved concession agreement with San Miguel Holdings Corp. to operate Metro Rail Transit Line 7 (MRT-7), a ranking official said yesterday.

The department is also targeting to issue its performance undertaking and secure the approval of the National Economic and Development Authority-Investment Coordination Committee (NEDA-ICC) for the project, Finance Undersecretary John Philip Sevilla told The STAR in an interview.

“I would like us to do it by the end of the year (the NEDA approval and the performance undertaking). We want the contract to become effective as soon as possible,” he said.

The DOF and San Miguel’s wholly-owned subsidiary SMHC, the proponent for MRT-7, are discussing ways to enhance the existing concession agreement for the much delayed $1.2-billion rail project.

Sevilla said the talks are going well.

“We’ve had pretty good discussions with San Miguel. I think we’re going to get there,” he said.

Discussions with SMHC are centered on ensuring compliance with performance standards stipulated in the agreement and that the government must be able to terminate the contract if the proponent is unable to operate at a certain capacity.

Furthermore, Sevilla said the government wants to ensure that it can slap penalties for non-compliance and termination of extended non-compliance.

He said the government also wants to make sure that there are adequate mechanisms to monitor both passenger and real estate developments of the project to ensure that the government will get its fair share from those developments.

“We insisted that we define performance standards and penalties for not meeting those performance standards. It’s useless to have performance standards if you don’t have carrot and stick,” Sevilla said.

He said that after the talks are sealed, SMHC is expected to submit a detailed project design and commence construction according to an agreed upon schedule.

“Hopefully, construction has started and operations have started by the end of 2016,” Sevilla said.

The MRT-7 project has been delayed because the DOF wants to clarify provisions in the contract before issuing a performance undertaking.

Finance Secretary Cesar Purisima, for his part, has said the DOF could not issue a performance undertaking without knowing the precise amounts which government would have to pay after all the cost adjustments.

The proposed MRT-7 is expected to complement the existing mass transit lines. It will run from San Jose del Monte City, Bulacan to SM City North Edsa, linking up with the existing Light Rail Transit Line 1 and MRT 3.