Gov’t takeover of MRT 3 hinges on Singapore arbitration case

MANILA, Philippines - The complete takeover of the Metro Rail Transit line 3 (MRT 3) along EDSA by the government would hinge on the outcome of the arbitration case filed by the Metro Rail Transit Corp. (MRTC) in Singapore, Transportation Secretary Joseph Emilio Abaya said.

Abaya said the Department of Transportation and Communications (DOTC) would have to wait for the decision of the Singapore International Arbitration Center before executing the equity value buyout of the MRT 3.

“I think we have to await a formal decision from the arbitration,” Abaya stressed.

He pointed out that the DOTC has been meeting regularly with the Department of Finance (DOF), Bureau of Treasury, Land Bank of the Philippines, and Development Bank of the Philippines to finalize the government takeover of MRT 3,

“From our end we want to execute it immediately,” he added.

MRTC filed an arbitration case in Singapore against the Philippine government in January 2009 due to failure to pay equity rentals in a timely manner, while another case was filed against the government over the decision of the DOTC to award a P3.8 billion contract to CNR Dalian Locomotive & Rolling Stock Co. for the supply of 48 brand new light rail vehicles for MRT 3.

President Aquino had issued Executive Order 126 in February last year directing the DOTC, DOF, Landbank and DBP to pursue the equity value buyout of MRTC.

Abaya said early last month that the takeover process of MRTC started after successfully awarding the projects to expand the capacity of the mass rail transit system as well as the single ticketing system project.

 â€œAs for the MRT-3 buyout, government has already begun the process to acquire the urban railway’s facilities and to end government’s obligation to pay exorbitant rental fees to the private owner until the next decade,” the agency said.

According to him, the P56 billion needed for the government takeover of the MRT 3 is already available as this was included by the Department of Budget and Management (DBM) in the P2.265 trillion national budget for 2014.

“There are still small things left. Clearly from DOTC, we are much better off executing the buyout otherwise legally there is something always lingering in your mind,” he said earlier.

One issue being discussed is whether the government would need the consent from the equity holders of MRTC led by infrastructure conglomerate Metro Pacific Investments Corp. (MPIC) as this is already under arbitration in a court in Singapore.

MRT 3’s private concessionaire MRTC then owned by the Sobrepena family decided in 2003 to cash in on its investment in the train line by issuing asset-backed bonds for future equity rental payments.

On the other hand, government financial institutions Landbank and DBP hold a combined 80 percent economic interest in MRT 3 by acquiring the MRT bonds issued by MRT III Funding Corp. issued by then owned the Sobrepena’s Fil-Estate Group in 2008.

However, its presence in the board is not felt because it does not have voting rights for the shares while MPIC owns 48 percent equivalent to a 20 percent economic interest in MRTC.

The plan to buy out the private sector’s stake in the MRT3 would mean the government would no longer need to pay MRTC huge fees every year. The DOTC annually pays the MRTC for equity rental payments, maintenance cost, debt guaranteed payment, insurance expenses, and others.

The proposed government takeover would result in billions of pesos in savings for taxpayers who provide subsidies mainly to cover the 15 percent return on investment (ROI) guaranteed to MRTC. The government shells out about P7 billion worth of subsidy for the MRT 3 operations.

Aside from the huge savings, Abaya explained that the operation and maintenance of MRT 3 would be easier after the complete takeover as the government need not get the consent of other private entities.

The 17-kilometer MRT 3 from North Ave. in Quezon City to Taft Ave. in Pasay City ferry close to 600,000 passengers a day or way above its original design capacity of 350,000 passengers a day.