MRT3 buyout begins in January 2015

MANILA, Philippines – The government expects to purchase the privately-owned equity shares of the Metro Rail Transit Corporation (MRTC) in the first week of January 2015.

By then, both houses of Congress are expected to jointly approve the P50 billion ($1.12 billion)* that the government requested to proceed with the equity value buy out (EVBO).

Department of Transportation and Communications (DOTC) Secretary Joseph Emilio Abaya said the agency made several rough calculations on the timeline of the buyout. In September last year, Abaya said the buyout would be completed at the end of 2013, but it did not happen.

MRTC is the concessionaire of the Metro Rail Transit line 3 (MRT3), which has been riddled with technical glitches. The worst incident occurred on August 13, when a train derailed at the Taft Avenue station.

“We are buying everything out – the bonds, the remaining equity interest in private hands. The objective is for the government to own 100%,” Abaya told reporters on Thursday, October 16.

On September 26, the House of Representatives approved in the second reading the buyout budget proposal of the Aquino administration, said Bayan Muna Representative Carlos Isagani Zarate. Earlier, Davao City Representative Isidro Ungab said the sum amounts to P54 billion ($1.20 billion)*.

Previously, the Metro Rail Transit Holdings (MRTH) said the government has to be in default first before it could invoke an EVBO. An EVBO is a right given to MRTC in case the government is unable to fulfill its obligations.

The government wants full control of the MRT line 3 (MRT3) so it would no longer have to pay MRTC huge fees annually. The takeover also aims to expedite procurement of maintenance contracts.

Last year, President Benigno Aquino III ordered the takeover of the MRTC, which holds the build-lease-transfer (BLT) contract for the 17-kilometer MRT3.

The government allotted P56 billion ($1.25 billion) for the EVBO. The amount was included in the P2.26-trillion ($50.45-billion) national budget for 2015.

However, MRTC’s private shareholders said the amount only accounts for the 80% bonds owned by state-run Land Bank of the Philippines and Development Bank of the Philippines. (READ: MRT3 shareholder: Gov’t budget for buyout not enough)

In September, Abaya said that prior to the buyout, the DOTC needs to receive the Solicitor General’s opinion on whether the government should proceed with its plan to take over MRT3.

Apart from the buyout, the DOTC has also proposed P6.6 billion ($147.02 million) to subsidize operations of the troubled railway system in 2015.

Once the buyout is complete, the DOTC would bid out an operations and maintenance contract for the mass transit system to tap private sector efficiency and customer service orientation for operational needs.

Pending audit results

Since the August derailment, glitches in the MRT3 continued, stirring up anger among hundreds of thousands of commuters who ride the more than decade-old railway service.

A DOTC probe pinned the blame on lapses by train personnel and vowed to file administrative cases against them.

Representatives of Hong Kong’s Mass Transit Railway (MTR) arrived in Manila on August 26 to audit MRT3’s physical structure, rolling stock, and performance of the existing maintenance provider.

Abaya said the DOTC has yet to release the results as “I have yet to read it.”

This month, a broken railway track was discovered along the southbound section of the line near Boni Avenue station, forcing MRT3 to limit service from North Avenue to Shaw.

Key stakeholders of the MRT3 agreed that a temporary shutdown of the system might be recommended to ease passengers’ suffering caused by recurring breakdowns. But the temporary shutdown would affect an estimated 560,000 to 580,000 passengers of the train system. – Rappler.com

(*$1=P44.89)