DOTC eyes borrowings to buy out MRT3

MANILA, Philippines – Since the budget to buy out its private partners was not included in the P2.6 trillion ($58.70 billion) 2015 national budget, the Department of Transportation and Communications (DOTC) is now considering borrowing funds to finance the complete government takeover of the beleaguered Metro Rail Transit line 3 (MRT3).

The acquisition of MRT3 is worth P56 billion ($1.26 billion).

The government previously said that it was expecting to purchase the privately-owned equity shares of the Metro Rail Transit Corporation (MRTC) in the first week of January 2015.

The government is considering borrowings from foreign sources or local banks to pursue the equity value buy out (EVBO) of the private shareholders of MRT3 as mandated by President Benigno Aquino III, DOTC undersecretary Jose Perpetuo Lotilla said.

President Aquino issued Executive Order 167 in March 2013, directing the DOTC and the Department of Finance (DoF) to implement the EVBO in an attempt order to put an end to the ongoing arbitration case between the DOTC and Metro Rail Transit Corporation (MRTC) in Singapore.

For the buyout to proceed, approvals though are needed, especially from the Monetary Board if borrowing is to be made by a government entity, Lotilla explained.

DOTC is discussing all possible options with various agencies including the Department of Finance (DOF), the Department of Budget and Management (DBM), the Bangko Sentral ng Pilipinas (BSP), among others and would make the final recommendation to the Office of the President.

“We have this road block because we don’t have the money. So we have to ask if we can do it this way because we don’t have appropriation,” Lotilla added.

The buyout would terminate the concession agreement and transfer full ownership of MRT3 to the government.

The Land Bank of the Philippines and the Development Bank of the Philippines hold an 80% economic interest in MRTC. Private shareholders led by MRT Holdings II Incorporated have a 100% stake in MRTC.

Toward government takeover

The government is annually paying billions of pesos in equity rental payments to MRTC.

To date, the government has already spent a total of P147 billion ($3.32 billion) for the EDSA rail line, which includes P85 billion ($1.92 billion) in rental payments to MRTC; P32 billion ($722.51 million) in loans incurred by the company that are state-guaranteed; P20 billion ($451.57 million) in MRTC taxes; and P10 billion ($225.74 million) in maintenance fees.

The government wants to buy out all the private shareholders so no temporary restraining order (TRO) from the courts could disrupt the planned expansion and improvement projects for the mass rail transit system along EDSA, DOTC secretary Joseph Emilio Abaya previously said.

Upon the buyout completion, the DOTC would bid out an operations and maintenance (O&M) contract for the mass transit system to tap private sector efficiency and customer service orientation for operational needs.

The biggest project is the P3.76 billion ($84.88 billion) MRT3 capacity expansion project for the acquisition of 48 brand new trains that was awarded to CNR Dalian Locomotive and Rolling Stock Company of China.

The project aims to increase the system’s capacity by 66% to 800,000 per day and reduce the waiting time for the arrival of trains for each station to 2.5 minutes. – Rappler.com

US$1 = P44.30

See related stories:

• DOTC doubts Sobrepeña’s cheaper MRT3 offer
• Sobrepeña: MRT3 price tag less than P20B
• Abaya: Gov’t to proceed with MRT3 buyout
• MRT3 buyout begins in January 2015
• MRT3 owners open to a buyout
• DOTC: OSG opinion on gov’t MRT3 takeover should be out soon
• MRT3 shareholder: Gov’t budget for buyout not enough
• Gov’t eyes compromise with MRTC for takeover of MRT 3