INFRASTRUCTURE conglomerate Metro Pacific Investments Corp. (MPIC) is hoping to formally take over the operations of the Metro Rail Transit (MRT) Line 3 by the first half of 2018, should the government decide to proceed with its multibillion-peso proposal to rehabilitate and expand the most congested train line in the Philippines.
Rogelio L. Singson, the president of Light Rail Manila Corp., said buying out the corporate owners of the train system will prove to be a good proposition for Metro Pacific, given that it—together with Ayala Corp.—operates the Light Rail Transit (LRT) Line 1.
He explained that taking over the line will pave the way for better passenger experience, as there will be a seamless transfer of riders from both lines, as the two systems are effectively connected on Edsa.
“Our proposal is all-encompassing. It is basically lock, stock and barrel. Our offer aims to address all the issues connected to the MRT 3: the equity value buyout of the government, the bonds issued to government financial institutions, existing service contracts, the existing concession agreement and issues with other investors. We will take over all those obligations,” he said.
The proposal, which involves an initial P12.5-billion tag price, was submitted to the transportation department on July 14.
The proposal involves the expansion of the capacity of the railway system by adding more coaches to each train, allowing it to carry more cars at faster intervals.
The multimillion-dollar expansion plan also aims to double the capacity of the line to 700,000 passengers a day from the current 350,000 passengers daily.
Same provisions as LRT 1 deal
Singson said the proposal submitted to the government somehow mirrors the current concession agreement for the LRT 1 Cavite Extension deal, which the company bagged in 2014 through the Public-Private Partnership (PPP) Program.
“We have lifted the same provisions under the concession agreement under LRT 1. It means that instead of having a different operator and maintenance provider, our group will be the one to do both,” he added. “It is the only way that will make sense.”
The build-lease-transfer agreement between MRT Corp. and the Philippine government, signed almost two decades ago, requires the government—as the operator of the train line—to pay equity rental payments to the owner of the facility. The railway system is owned by the group of Robert John L. Sobrepeña and a few minority shareholders.
The proposal of MPIC also involves the replacement of the rails of the MRT 3. This, Singson said, will allow the company to operate the new trains purchased by the government from Chinese train manufacturer Dalian.
“Other components include the improvement of the reliability of rolling stock, the upgrading of power supply and the upgrading of stations,” he said. “We are hoping that the government will give the proposal serious evaluation and give the proponent the original proponent status.”
Should the government grant MPIC such a status, it can proceed with the Swiss Challenge for the deal. Unsolicited proposals are required, under the law, to go under a competitive challenge, wherein other groups can offer a similar proposal, and the original proponent can present a counter offer.
“It could be as soon as four to six months that the operator of the MRT 3 will be different. Hopefully, the best proposal comes out by the first quarter of 2018,” Singson said.
He noted that Metro Pacific has been in discussion with Sobrepeña for the acquisition of the facility.
Sobrepeña, in a text message to the BusinessMirror, contested, however, that his group has yet to touch base again with Metro Pacific.
Metro Pacific had an agreement with Sobrepeña’s group back in 2011, when it first submitted a proposal to upgrade the facilities of the MRT 3.
“No, they haven’t talked to us yet about their planned buyout,” Sobpreña, who is on a personal trip to Italy until mid-September, told the BusinessMirror.
Different vehicle
Singson noted, however, that LRMC will not be the vehicle for the said transaction, as issues linked to the MRT might affect the private company negatively.
“It has to be a separate special-purpose vehicle because it will be a different concession agreement, so that our concession will not be affected by any issue on the other. It is very possible that the ownership will be the same,” he said.
Should Metro Pacific win the said deal, there will be synergies between MRT 3 and LRT 1, which could result in cost and operation efficiencies.
“We can have synergies between Line 1 and 3 in terms of suppliers, depot management, logistics management—like one machine does not have to be bought by two entities. There will be a lot of synergies that can reduce the cost and improve efficiency,” he added.
Why invest?
The MRT 3 has been a big problem for the government for over half a decade now due to congestion relating to operations and maintenance issues.
On one hand, the maintenance provider of the MRT 3, Busan Universal Rail Inc. claimed that breakdowns, glitches and passenger off-loading incidents happen because, intrinsically, the train facility’s design is flawed.
Transportation Undersecretary Cesar B. Chavez, on the other hand, said these issues—reaching more than 2,000 incidents per year—are related to the poor maintenance of the train line. Chavez has said that the government is keen on ending its contract with Busan Rail.
It is also entangled in legal tussles. There is a pending case before a Singaporean arbitration court, which aims to result in the government’s P53.9-billion corporate buyout. With all these issues at hand, why does Metro Pacific want to take over the line?
The answer, according to Singson, is simple: It is part of the company’s thrust for
nation building.
“Believe it or not, it is really part of their desire to contribute to nation building. They are all convinced that it is what is needed today. They are even willing to take all the reputational risk attached to it,” he said.
LRMC operates the oldest overhead railway facility in Southeast Asia. It recently received two international certifications on management and environmental standards from TUV Rheinland. It is on the lookout for railway deals in the Philippines, syncing its expansion plan to the Duterte administration’s massive infrastructure thrust.
The Duterte administration has lined up several rail-infrastructure deals in its huge pipeline of projects: the Mega Manila Subway, the Mindanao Railway, the Philippine National Railways South Long Haul Line and the LRT Line 2 Extension, among others.
A number of these projects originated from the Aquino administration, mostly under the PPP Program. The current administration, however, wanted to place these projects under state funding to hasten their construction.
Rogelio L. Singson, the president of Light Rail Manila Corp., said buying out the corporate owners of the train system will prove to be a good proposition for Metro Pacific, given that it—together with Ayala Corp.—operates the Light Rail Transit (LRT) Line 1.
He explained that taking over the line will pave the way for better passenger experience, as there will be a seamless transfer of riders from both lines, as the two systems are effectively connected on Edsa.
“Our proposal is all-encompassing. It is basically lock, stock and barrel. Our offer aims to address all the issues connected to the MRT 3: the equity value buyout of the government, the bonds issued to government financial institutions, existing service contracts, the existing concession agreement and issues with other investors. We will take over all those obligations,” he said.
The proposal, which involves an initial P12.5-billion tag price, was submitted to the transportation department on July 14.
The proposal involves the expansion of the capacity of the railway system by adding more coaches to each train, allowing it to carry more cars at faster intervals.
The multimillion-dollar expansion plan also aims to double the capacity of the line to 700,000 passengers a day from the current 350,000 passengers daily.
Same provisions as LRT 1 deal
Singson said the proposal submitted to the government somehow mirrors the current concession agreement for the LRT 1 Cavite Extension deal, which the company bagged in 2014 through the Public-Private Partnership (PPP) Program.
“We have lifted the same provisions under the concession agreement under LRT 1. It means that instead of having a different operator and maintenance provider, our group will be the one to do both,” he added. “It is the only way that will make sense.”
The build-lease-transfer agreement between MRT Corp. and the Philippine government, signed almost two decades ago, requires the government—as the operator of the train line—to pay equity rental payments to the owner of the facility. The railway system is owned by the group of Robert John L. Sobrepeña and a few minority shareholders.
The proposal of MPIC also involves the replacement of the rails of the MRT 3. This, Singson said, will allow the company to operate the new trains purchased by the government from Chinese train manufacturer Dalian.
“Other components include the improvement of the reliability of rolling stock, the upgrading of power supply and the upgrading of stations,” he said. “We are hoping that the government will give the proposal serious evaluation and give the proponent the original proponent status.”
Should the government grant MPIC such a status, it can proceed with the Swiss Challenge for the deal. Unsolicited proposals are required, under the law, to go under a competitive challenge, wherein other groups can offer a similar proposal, and the original proponent can present a counter offer.
“It could be as soon as four to six months that the operator of the MRT 3 will be different. Hopefully, the best proposal comes out by the first quarter of 2018,” Singson said.
He noted that Metro Pacific has been in discussion with Sobrepeña for the acquisition of the facility.
Sobrepeña, in a text message to the BusinessMirror, contested, however, that his group has yet to touch base again with Metro Pacific.
Metro Pacific had an agreement with Sobrepeña’s group back in 2011, when it first submitted a proposal to upgrade the facilities of the MRT 3.
“No, they haven’t talked to us yet about their planned buyout,” Sobpreña, who is on a personal trip to Italy until mid-September, told the BusinessMirror.
Different vehicle
Singson noted, however, that LRMC will not be the vehicle for the said transaction, as issues linked to the MRT might affect the private company negatively.
“It has to be a separate special-purpose vehicle because it will be a different concession agreement, so that our concession will not be affected by any issue on the other. It is very possible that the ownership will be the same,” he said.
Should Metro Pacific win the said deal, there will be synergies between MRT 3 and LRT 1, which could result in cost and operation efficiencies.
“We can have synergies between Line 1 and 3 in terms of suppliers, depot management, logistics management—like one machine does not have to be bought by two entities. There will be a lot of synergies that can reduce the cost and improve efficiency,” he added.
Why invest?
The MRT 3 has been a big problem for the government for over half a decade now due to congestion relating to operations and maintenance issues.
On one hand, the maintenance provider of the MRT 3, Busan Universal Rail Inc. claimed that breakdowns, glitches and passenger off-loading incidents happen because, intrinsically, the train facility’s design is flawed.
Transportation Undersecretary Cesar B. Chavez, on the other hand, said these issues—reaching more than 2,000 incidents per year—are related to the poor maintenance of the train line. Chavez has said that the government is keen on ending its contract with Busan Rail.
It is also entangled in legal tussles. There is a pending case before a Singaporean arbitration court, which aims to result in the government’s P53.9-billion corporate buyout. With all these issues at hand, why does Metro Pacific want to take over the line?
The answer, according to Singson, is simple: It is part of the company’s thrust for
nation building.
“Believe it or not, it is really part of their desire to contribute to nation building. They are all convinced that it is what is needed today. They are even willing to take all the reputational risk attached to it,” he said.
LRMC operates the oldest overhead railway facility in Southeast Asia. It recently received two international certifications on management and environmental standards from TUV Rheinland. It is on the lookout for railway deals in the Philippines, syncing its expansion plan to the Duterte administration’s massive infrastructure thrust.
The Duterte administration has lined up several rail-infrastructure deals in its huge pipeline of projects: the Mega Manila Subway, the Mindanao Railway, the Philippine National Railways South Long Haul Line and the LRT Line 2 Extension, among others.
A number of these projects originated from the Aquino administration, mostly under the PPP Program. The current administration, however, wanted to place these projects under state funding to hasten their construction.
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