MANILA, Philippines – The government will tap windfall gain from dividends of government-owned and -controlled corporations (GOCCs) and operations of the National Treasury to fund the planned P53.9-billion ($1.20-billion) buyout of Metro Rail Transit Line 3 (MRT3) assets from MRT Holdings II, Incorporated (MRTH-II).
“The Congress transferred the funding requirements for the EVBO (equity value buyout) of MRT3 assets to the unprogrammed fund. The unprogrammed fund can be activated and the EVBO can be funded if windfall revenues are realized from GOCCs or Treasury operations and/or loan proceeds are received,” Budget Secretary Florencio Abad said in a text message.
Previously, MRTH-II said the government has to be in default first before it could invoke an EVBO – a right given to Metro Rail Transit Corporation (MRTC) in case the government is unable to fulfill its obligations.
In December 2014, the bicameral committee realigned the P53.9-billion ($1.20-billion) budget for Metro Manila’s busiest elevated railway system – retaining only P18.3 billion ($408.69 million).
Of the P18.3 billion, P4.4 billion ($98.26 million) will be allocated for the buyout; P7.4 billion ($165.25 million) for the rehabilitation and reconstruction of the MRT3; and P6.5 billion ($145.15 million) for the payment of taxes of MRT3 in connection with its build-lease-transfer (BLT) contract.
This was after the Department of Transportation and Communications (DOTC) requested a P53.9-billion ($1.20-billion) allocation for the EVBO under the 2015 national budget.
Asked for updates on MRT3 buyout, Transportation Secretary Joseph Emilio Abaya said: “Transportation Undersecretary for Legal [Jose Perpetuo Lotilla] spoke to the Land Bank [of the Philippines] and Development Bank of the Philippines. I saw [Finance Secretary Cesar] Purisima last night and he said, ‘Let’s pursue it.'”
“I also spoke to DBM Secretary Abad and he said it is important to know at what point do we really need the funding. ‘Is it when you go up to the arbitral tribunal? Is it when the arbitral decides?’” added Abaya in an interview on the sidelines of a media briefing on Monday, May 11.
Plan B: Borrowing
Abad said the government can also borrow money, but that will need approval from the Office of the President, if unexpected gains from the operations of GOCC dividends and National Treasury operations are not realized.
The DOTC earlier said it is considering to borrow P53.9 billion ($1.20 billion) from local banks for the takeover of MRT3’s corporate owner, MRTH-II, which is the majority shareholder of MRTC, the owner of MRT3 assets.
“If you borrow as a government entity, normal process is, there has to be a monetary board approval, there has to be a decision first that we’ll go this way, then we’ll get the approvals,” Lotilla in January told reporters.
Asked if the uncertainty in the funding of the MRT3 buyout will delay its execution, Abaya said: “The EO (Executive Order) exists. We’ll execute. There is no other instruction. It will be pursued.”
“We don’t control the tribunal, but we think it wouldn’t take that long. It’s still possible to execute it within the Aquino administration,” he added.
On February 28, 2013, President Benigno Aquino III issued EO No. 126, authorizing the implementation of the EVBO of MRTC to avert the arbitration case filed in 2009 by the MRT3 owner against the government due to, among others, failure to timely pay equity rental payments (ERPs).
“There is an EO, so if we have to borrow, we need the necessary approvals. The EO is specific on how to do the EVBO. If you change the mode, you will have to clear it with the Office of the President,” Lotilla said.
Under EO No. 126, the DOTC, Department of Finance, DBP, and LBP are required to acquire all outstanding shares of stock and other securities issued by MRTC; execute a compromise agreement then submit it to the arbitral panel in Singapore; settle local tax liabilities of MRTC; and terminate the BLT agreement.
To gain control of the MRTC board and avert the arbitration case, the government instructed the DBP and the LBP to acquire shares of stock and other securities, representing economic interest in MRTC.
“The controlling factor for the EVBO implementation is the budget – the objective at the end of the day is that it should be 100% government,” Abaya said in a statement in November.
Amid its plan to buy out concessionaire MRTC, DOTC said it is pushing through with the implementation of its upgrade and rehabilitation projects for MRT3.
Once the buyout is completed, DOTC said it will then auction off an operations and maintenance (O&M) contract for MRT3 to “tap private sector efficiency and customer service orientation for operational needs, while retaining regulatory functions for passenger protection with government.” – Rappler.com
$1 = P44.77