DOTC to MRT: Lower return of equity

While the fate of the Metro Rail Transit (MRT) Phase 2 remains unknown, the Department of Transportation and Communication (DOTC) will ask the system’s private builder to lower its return of equity (ROE) for the extension project, an official said.

DOTC Undersecretary Carlos Borromeo noted that the Metro Rail Transit Corp. (MRTC) maintains a guaranteed 15 percent of the ROE for the Phase 2 project under their joint agreement.

"DOTC likes to get an improvement over the original terms and conditions as reflected in the Build-Lease-Transfer (BLT) contract of Phase 1. We’re trying to do this in the course of our negotiation for the contract for Phase 2," he added.

The $285-million extension project links the North Avenue station of MRT to the Light Rail Transit station in Monumento, Caloocan City. Between these terminals lie a five-kilometer route along EDSA.

MRTC built Phase I of MRT for $665 million under a 25-year BLT contract with the DOTC.

ROE pertains to the loans arranged by MRTC for the government to finance the railway system. These loans were reflected in the Phase I contract and the MRTC did not profit from it.

Borromeo, however, admitted that improving their contract with MRTC would be complicated.

"When international credit was less tight during the Ramos administration (when the contract was forged), the government was then willing to grant a 15-percent ROE. Now that credit is very tight, are we going to reduce? It does not seem to follow," he said.

Borromeo also admitted it would not be easy for the DOTC to change the terms of a contract that it inherited from the past administration.– Sheila Crisostomo