SC asked to halt LRT1 Cavite extension project

MANILA, Philippines – A lawyer is asking the Supreme Court (SC) to stop the implementation of the P64.9-billion ($1.47-billion) Light Rail Transit 1 (LRT1) Cavite extension project for being “the most disadvantageous government contract of all time.​” 

The tandem Metro Pacific Investments Corporation (MPIC) and Ayala Corporation has signed with the government the 32-year concession agreement for the project in October last year.

The LRT extension project will lengthen Line 1 from 20.7 kilometers to 32.4 km, with a new south endpoint in Niog, Bacoor, Cavite. Approximately 10.5 km of the Cavite Extension System will be elevated and 1.2 km will be at grade level.

The consortium of the groups, Light Rail Manila, was the lone bidder for the public-private partnership (PPP) project. The consortium is led by MPIC, with a 55% stake, and Ayala, with 35%. Macquarie Infrastructure Holdings (Philippines) Pte Ltd holds the remaining 10%.

Under the agreement, LRMC will construct the planned extension of rail services to Cavite in exchange for, among others, the takeover of the existing LRT 1 facilities and the right to its daily income of around P7 million ($158,227.87) per day.

In his 21-page petition for injunction​, lawyer Salvador Belaro Jr, said ​that if  ​the project is not enjoined, it will result in public debt of unfathomable magnitude, plus violations of the Constitutio​n and the Build-Operate Transfer (BOT) Law.

Overpriced

Belaro said the project is overpriced by at least 300% versus the recently finished North extension project.

The 5.71-kilometer North extension project from Monumento to North EDSA costs only P6.3 billion ($142.37 million), Belaro said.

The Cavite extension project, ​which double that distance, costs P64.9-billion ($1.47-billion), ​P39 billion ($881.29 million) of which is for civil and electrical works.

Belaro said that upon the execution of the concession agreement, LRMC already earned P18 billion ($406.73 million) – the alleged overpric​ing in the project.

​Because of such “income” upon contract signing, the 10% down payment ​made by the concessionaire ​– equivalent to P935,010,390 ($21.13 million) – ​did not ​become a burden to LRMC.

Upon signing, the concessionaire already started to earn approximately P2.53 billion ($57.19 million) yearly from LRT1, Belaro ​said.

On the ​4th year, when quarterly payment on the balance of the total concession price starts, the estimated P2.53 billion ($57.19 million) can already be used by LRMC to pay such quarterly payments.

But despite such, there would still be a balance on such yearly net income of LRT1 of more or less P2.23 billion ($50.41 million) for the concessionaire “to enjoy yearly for the entire duration of 32 years of the concession,” which is also can be extended up to 50 years.

The P2.23 billion ($50.41 million), when aggregated, would earn the concessionaire approximately P80 billion ($1.81 billion) from LRT1 alone, not including the income from the Cavite extension project, as well as income from non-rail services of both LRT1 and the extension project, Belaro said.

Also, if the concessionaire would be spending up to P20 billion ($452.08 million) for the Cavite extension project, the latter would still derive a profit (from LRT1 rail services alone) of at least P60 billion ($1.36 billion or P2.23 billion [$50.41 million] multiplied by 32 years) for the entire concession period or P1.6 billion (36.18 million) yearly, Belaro pointed out.

The P1.6 billion (​$​36.18 million) yearly net income for the concessionaire is said to balloon to a yearly net income of P3 billion ($67.84 million) because of the numerous provisions in the concession agreement.

“In effect, the government stands to shoulder all the burden just to make the project a reality, making it the most one-sided contract of all time,” Belaro said.

Constitutional violation

Belaro also ​said​ the LRT1 Cavite extension project should not have been awarded by the Department of Transportation and Communications (DOTC) and Light Rail Transit Authority (LRTA) ​because both ​agencies do not have ​the power to ​do so. 

It is only the Congress which can grant such a franchise​. He said the “closed door” negotiations on the project  ​also violated the people’s constitutional right to information.

Belaro’s filing of the injunction follows several other cases filed in court questioning the increase in fares of LRT and Metro Rail Transit (MRT). SC asked DOTC to explain its basis for the fare hike.

“Under the concession agreement executed between DOTC and LRTA, and LRMC, the government bound itself to make fare increases,” Belaro said.

LRMC targets to complete the extension project by 2019.

The consortium is committed to deliver a safe, reliable, and world-class rail system comparable to commuter railway hubs in the region, MPIC chairman Manuel Pangilinan previously said. – Rappler.com

 

US$1 = P44.22