Govt control of MRT3 to bring savings, upgrades

MANILA, Philippines - Manila will acquire control of the company running the Metro Rail Transit (MRT), a train system that traverses EDSA, the Philippine capital’s most important highway network. The move will generate some $235 million in “in savings from refinancing of equity rental payment," Finance Secretary Margarito B. Teves said. It will also allow government to increase the system’s coaches, reducing the gap between trains, allowing faster travel. Currently, the government holds 56 percent of the Sobrepena-led consortium that maintains the 13-station MRT after it acquired a portion last December at 26 percent. But by the third week of April, two GFIs – the Land Bank of the Philippines and the Development Bank of the Philippines (DBP) – will own three-fourths of the Metro Rail Transit Corp. (MRTC), Reynaldo G. David, DBP president and chief executive officer, said in briefing As a result, the two government banks will secure 10 out of the company’s 14 board seats, the statement said. “Plans are being formulated to optimize revenue derived from the collateral business in railway system," Teves told reporters. “The government financial institutions (GFIs) can exit from the MRT3 via competitive sale of shares. This will be under public-private partnership scheme." When asked about the ownership structure, David cited a non-disclosure agreement, disallowing him from divulging details. "The acquisition gives us economic value. As GFIs, the savings is much more," David said. Since the government is also providing an annual P5.7-billion subsidy for the MRT3’s operations, a government takeover is better especially when ridership has exceeded to 413,000 people daily, David said. "When MRT 3 was conceived and caught to reality, the equity stakeholders pushed $190 million to us while the project (cost) is $679 million. The balance of $489 billion is the debt assumed by the government. You have a private MRT yet the government is paying off subsidy plus equity internal rate of return (IRR)...Due to lower interest rate, it does not make sense to guarantee a project of 15 percent IRR," David said. Equity IRR or return on equity measures how much profit a company gets with the money invested. The MRTC was awarded a Build-Operate-Transfer (BOT) contract by the Department of Transportation and Communication (DoTC), which will own the system and assume the administrative functions such as regulation of fares and operations. Next: Govt takeover allows for enhancement of train facilities Govt takeover allows for enhancement of train facilities For his part, Teves denied that the move is not reverse privatization, or a regression of a contracted ownership to government control. Had the government not stepped in through DBP and Landbank, it will continue paying 15 percent equity rental payment and will be unable to expand the facilities of the MRT. In its Web site, MRT3 said it has a fleet of 73 Czech-made modern and air-conditioned rail cars, of which up to 60 three-car trains operate daily. The MRT3 runs from North Avenue to Taft Avenue. As the government takes over, David said it has more freedom to reduce the headway, or gaps between trains especially during peak hours, increase number of coaches and expedite connection to the 15-kilometer Light Rail Transit system (LRT)-1. Operating since 1984, the LRT-1 runs from Monumento in the north to Baclaran in the south along Rizal Avenue and Taft Avenue. "It (takeover) is more of a procedural approach than anything else. It is a corporate maneuver but the benefits to the riding public will be substantial. You don’t have to negotiate for additional coach," David said. - GMANews.TV