DOTC shelves SMC-MPIC bid for MRT-3

MANILA, Philippines - The Department of Transportation and Communications (DOTC) has put on the back burner the proposals of diversified conglomerate San Miguel Corp. (SMC) and infrastructure giant Metro Pacific Investments Corp. (MPIC) to modernize and expand the Metro Rail Transit-3 along EDSA.

Transportation Secretary Joseph Emilio Abaya said in an interview with reporters that the proposals of both SMC and MPIC would no longer be considered in light of the decision of the Aquino administration to buy out the private partners in Metro Rail Transit Corp. (MRTC) – the operator of MRT3.

“SMC has a proposal and MPIC has a proposal but our direction right now is for the buy out to happen,” Abaya stressed.

MPIC which claims control over MRTC by virtue of the acquisition of the shareholdings of bondholders led by the Sobrepeña family’s Fil-Estate Group has offered the government $300 million to expand the capacity of the MRT 3 and $350 million for the acquisition of equity and some of the bonds issued by the MRTC.

On the other hand, SMC has submitted an offer to purchase new light rail vehicles (LRVs) for the MRT 3 on the condition that the incremental revenues should go to diversified conglomerate.

Last December, Malacañang gave the DOTC the greenlight to pursue the complete takeover of MRT3 in a transaction worth close to $1 billion.

The proposed buyout including the source of the $1 billion would be finalized by the Department of Finance (DOF) headed by Secretary Cesar Purisima after which President Aquino would issue an executive order (EO).

The proposed takeover would help state-owned government financial institutions (GFIs) led by Land Bank of the Philippines and the Development Bank of the Philippines to unload their interest in MRT3 after receiving several warnings from the Bangko Sentral ng Pilipinas (BSP) regarding its investments in the mass transport system.

The plan to buy out the private sector’s stake in the MRT-3 would mean the government would no longer need to pay MRTC huge fees amounting to billions of pesos every year.  The DOTC annually pays the MRTC for equity rental payments, maintenance cost, debt guaranteed payment, insurance expenses, and others.

“I think it is better that we come in because even if you have a proposal the private entity right now could always say you need our consent before you could entertain all of these. So I think it would be better if we get in fully and decide from there,” Abaya expalined.

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

In 2008, the government through Landbank and DBP bought into MRTC by acquiring the MRT Bonds issued by MRT III Funding Corp. issued by then owned Sobrepeña’s Fil-Estate Group.

As a result, the government now owns close to 80 percent of the economic interests in MRTC. However, its presence in the board is not felt because it does not have voting rights for the shares while MPIC has economic interest equivalent to 20 percent.

The acquisition of the stake in MRTC was completed during the term of President Arroyo wherein the finance department was headed by former secretary Margarito Teves.

The 17-kilometer MRT 3 from North Ave. in Quezon City to Taft Ave. in Pasay City ferry 540,000 passengers a day or way above its original design capacity of 350,000 passengers a day.