Abaya: Gov’t to proceed with MRT3 buyout

MANILA, Philippines – Citing a Palace order issued last year, Transportation Secretary Joseph Emilio Abaya said the purchase of controlling shares in the Metro Rail Transit Corporation (MRTC) will proceed as intended.

Abaya made the statement in response to the suggestion raised by Senator Sergio Osmeña III at the Senate hearing on the proposed 2015 budget of the Department of Transportation and Communications (DOTC) on Thursday, November 20.

Osmeña suggested that the government loan the equity value buyout (EVBO) from the Development Bank of the Philippines (DBP) and the Land Bank of the Philippines (LandBank), instead of spending taxpayers’ money.

An EVBO is a right given to MRTC in case the government is unable to fulfill its obligations.

The government allotted P56 billion ($1.24 billion*) for the EVBO following Executive Order 126 issued by President Benigno Aquino III in February 2013. 

But private shareholders of the MRTC insist that the value falls short from its total equity value, and pointed out that the P56 billion only accounts for the bonds controlled by the two state-run banks.

Abaya had said that the DOTC is not obliged to speak to MRTC’s private owners as it has already talked with the majority of its shareholders. The government holds 9 out of 15 seats at the MRTC after it purchased its bonds in 2009. MRTC’s current chair is Tomas de Leon, who is also the national director of the Land Bank of the Philippines.

Thus, the government could not complete the buyout yet, and advised DOTC to settle the bonds first, Osmeña said.

“It’s another P53 billion ($1.18 billion) in other words. So if they say the really want it to take it over, then they’re looking at about a P100 billion ($2.22 billion), not P53 billion,” Osmeña said.

Private shareholder Metro Rail Transit Holdings (MRTH) previously said  government shareholders have not consulted with it to discuss the buyout.

David Narvasa, spokesperson of the MRTH, said the government has to be in default first before it could invoke the EVBO.

Senate’s version of P6.6 billion ($146.48 million) 2015 allocation for the MRT3 does not include the buyout. The amount only covers subsidizing the railway system which has been hounded by maintenance problems.

Instead, the P56 billion ($1.24 billion) buyout value is placed under unprogrammed funds – or appropriations authorized by Congress when “projects are not originally considered in the budget expenditures and sources of funding submitted by the President to Congress.”

Gearing for full control

Despite this, Abaya said the government will not take a back step in its bid to take full control of the MRT3.

“We don’t know yet what will happen, but at least there’s an EO signed by the President. We will execute that EO. We’re not taking a step back,” Abaya told Rappler.

EO 126 authorized the implementation of the EVBO of MRTC and prescribed guidelines for the process.

The government wants to nationalize the MRT3 so it would no longer have to pay MRTC huge fees annually, to cut costs in acquiring service contracts, and to fast-track upgrades in the train system hounded by technical glitches, the worst one occurring on August 13, when a train derailed a the Taft Avenue station, injuring passengers.

At present, MRT3’s concessionaire bears a complex ownership structure as a result of the government’s generous financial guarantees to the private proponents in the 1990s, and succeeding efforts to resolve mounting government debts over public pressure to keep fares down.

The MRTC is wholly-owned by the MRTH-II, which is currently owned 84.9% by MRTH-I, 12.65% of the Fil-Estate Group, and 2.45% of private shareholders.

Meanwhile, 18.6% of the MRT-I’s shares, is owned by the Fil-Estate Corporation; 18.6% by the Anglo Phil. Holdings Corporation, 18.6% by DBP; 16% by Sheridan LRT Holdings, Inc.; 4.8% by LandBank; and 4.8% by DBH Inc.

The DOTC is also awaiting an opinion from the Office of the Solicitor General (OSG) to proceed with the buyout.

The OSG opinion is deemed important as a compromise agreement with the MRTC, as it would be forwarded to the arbitration court in Singapore, where the MRT3 concessionaire filed an arbitration case against the government in 2009 over late payments in equity rentals. – Rappler.com

*$1 = P45