HONG KONG — Metro Pacific Investments Corp. (MPIC), the local flagship of industrial conglomerate First Pacific Co. Ltd. of Hong Kong, has submitted a new proposal to the government with respect to the operation and management of the Metro Rail Transit (MRT) train line, that will let other interested parties to challenge it.
Under the Swiss Challenge method, an offer made by an original proponent to the government can be challenged by third parties that can make better offers for a project. The original proponent then gets the right to counter-match any superior offers given by other parties.
MPIC president Jose Ma. K. Lim said the company is now in discussions with the new head of the Department of Transportation and Communications on how it could take over the operations of the MRT. “We improved our offer in the sense that initially, we didn’t offer to do the Swiss challenge but when they said transparency will be an issue, we said okay lets subject it to that, “Lim said.
Lim said this method ensures that the original offer is superior to other bids and also guarantees transparency, competition and accountability.
He said the group also removed the onerous provisions in the old contract like the guaranteed yield of 15 percent (to the MRT3 operator). “We’ll take market risk. We offered to cover 40 percent of the subsidies that the government is now paying and this relates to the bonds that are held by current third parties,” he said.
“I think the new leadership in DOTC (under Mar Roxas) is reexaminining that plan and announced they won’t proceed with the bidding while studying what to do next. We are hopeful that the proposal will be better received,” Lim said.
Like in its other businesses, instead of a guarantee, MPIC asked for a rate rebasing and review of tariffs on a periodic basis based on an agreed formula,” Lim pointed out.
Lim said this method ensures that the original offer is superior to other bids and also guarantees transparency, competition and accountability.
He said that should the company succeed in taking over MRT3, it would spend $300 million to double the railway system’s current capacity from 350,000 passengers per day as well as purchase new signalling equipment and improve stations/depots.
Lim said the group aims to seamlessly integrate MRT 3, which runs through the capital’s main expressway, with LRT lines 1 and 2.
MPIC controls about 64.07 percent of the Metro Rail Transit Corp. after acquiring the 28.04 percent interest of the Sobrepeña-led Fil-Estate group as well as the interest of other shareholders such as Anglo Philippine Holdings Inc., DBH Inc. and Railco Investment Inc.
MPIC earlier offered to acquire all of the government’s equity interest in MRt 3 held by the state-owned Land Bank of the Philippines and Development Bank of the Philippines for $1.1 billion, an amount enough to settle the government’s outstanding debt to MRT Corp. bondholders.
MPIC, a diversified holding firm with investments in tollroads, water distribution, health care, and power, also earlier signified interest in two projects that will involve the expansion of MRT and LRT— LRT 1 South extension and privatization through concession (which involves the construction of the 11.7-kilometer LRT extension, eight stations with provision for an additional two, a satellite depot for light maintenance, intermodal facilities at high demand stations, additional rolling stocks to meet growth in demand, and systems enhancement).
The DoTC under former Secretary Jose de Jesus earlier tried to bid out a combined operations and maintenance (O&M) contract for the Light Rail Transit (LRT) line 1 and MRT train lines.
Under the proposed deal, the government would have paid the winning bidder P14 billion over contract’s four-year duration to operate both the LRT and MRT train lines.
But newly-appointed DOTC Secretary Mar Roxas expressed reservations over the viability of the O&M contract. Instead of earning from privatizing state assets, he said the government would end up spending money and ran counter to the administration’s policy of promoting public-private partnerships (PPP), a method of funding big-ticket infrastructure projects by passing on the bulk of the financial burden to the private sector. Companies are then allowed to charge fees from the public to recover their investments.