MPIC in talks with government on MRT 3, LRT 1

MANILA, Philippines - Metro Pacific Investments Corp. (MPIC) is currently in discussions with government on how to participate in the operation and maintenance (O&M) of the Metro Rail Transit (MRT) Line 3.

This developed as MPIC chairman Manuel V. Pangilinan revealed in an interview that they are also interested in undertaking the O&M of the Light Rail Transit (LRT) 1 mass transit system.

The two projects, included in the list unveiled by the Department of Transportation and Communications (DOTC) as a priority for investing and financing under the Public-Private Partnership (PPP) program, involves the privatization of MRT 3’s O&M for a period of three to five years, with the option to integrate LRT 1 O&M, prior to privatization, through a concession, including repair and rehabilitation of rolling stocks.

Pangilinan said if MPIC will be able to operate and maintain for the government LRT 1, it must also be integrated with Line 3. “It is part of our obligation to integrate. But Line 3 has to be fixed first,” he said.

MPIC earlier acquired the 29 percent stake of Fil-Estate Corp. in MRT 3 and now wants to purchase government’s stake to give it 100 percent ownership. “We have not heard from government yet regarding our proposal,” he revealed.

MPIC earlier offered to acquire the shares held by state-owned lenders Land Bank of the Philippines and Development Bank of the Philippines in MRT 3 for $1.1 billion, an amount enough to settle the government’s outstanding debt to MRT Corp. bondholders.

Pangilinan explained that it makes sense not only to own MPTC but to operate and maintain the mass transit system. Privatizing the O&M aspect of MRT3 was listed as a priority under the government’s PPP program.

Company officials earlier said Hong Kong-based conglomerate First Pacific Co. Ltd., the parent firm of MPIC, will help fund the group’s bid for MRT 3.

MPIC, which intends to further diversify its business interests – which already includes high-profile investments in telecommunications, infrastructure, health care, power generation and distribution, reportedly wants to own 51 percent of the MRT 3 project.

Industry analysts believe there is still a lot of room for growth in MRT 3 given that the current number of passengers is at 500,000 a day, already above the project’s capacity of 300,000.

Should it succeed in taking over the project, MPIC plans to spend $300 million to expand MRT 3’s capacity to 40,000 passengers per hour per direction (PPHD) or 700,000 passengers a day. The budget would also cover additional light railway vehicles, signaling system upgrades, station and depot improvements.

The acquisition will give MPIC, chaired by Pangilinan, 100-percent ownership of the company that holds the right to operate the train line that runs through the capital’s main expressway.

As part of its proposal to the DOTC to acquire government’s stake in MRTC, MPIC sought the reduction of the 15-percent equity rental payments that the government pays to MRTC.

The government’s rental fees stood at $118.33 million last year. This figure is expected to hit $130 million a year beginning this year until 2014.

MPIC also sought an extension of the build-lease-and transfer agreement by 15 years or until 2040 to make it financially viable.

The company also believes that the project would be feasible if the government allows an increase in the MRT 3 fare from P12.50 to P30.

Earlier, MPIC said it is the company’s intent to increase its shares in MRT 3, subject to the consent of its bondholders.

Pangilinan said that while their group may want to look at acquiring an additional stake in MRT 3, it depends on other shareholders if they will allow it. “What is certain for now is that MPIC will buy the 29 percent stake held by Fil-Estate,” he pointed out.

MPIC has likewise signified its interest in two projects that will involve the expansion the expansion of MRT and LRT.

The first, the MRT/LRT Expansion Program: LRT 1 South extension and privatization through concession, 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.