BCDA says MNTC deal on SCTEX a model infra project

MANILA, Philippines - The Bases Conversion and Development Authority (BCDA) said yesterday that its agreement with the Manila North Tollways Corp. (MNTC) on the management and operation of the Subic-Clark-Tarlac Expressway (SCTEX) gains more significance as it has transferred the debt servicing entirely to the private sector through revenue sharing and advances during shortfalls.

“It is that when we consider that traditionally, government has the responsibility for spending for the infrastructures needed by the public, the agreement we concluded with MNTC created a model for building infrastructures like SCTEX at no cost to the government,” BCDA chairman Felicito Payumo said.

He pointed out that while BCDA will not spend for the expressway, it will also earn from the project since the total revenue share of BCDA of P64 billion during the operating period is roughly double that of the debt service of P34 billion. “Plus it will get back the expressway with its potential for another round of revenues,” he added.

The SCTEX was constructed by the BCDA using loans from Japanese official development assistance.

He said MNTC, on the other hand, will only have to contend with commercial risks associated with unmet traffic volume projections.

“There is no longer any construction risks as the project has been completed. It is a win-win situation. The BCDA-MNTC model also shows the way for constructing what initially are non-viable projects but with high economic benefits,” Payumo added.

He noted that the SCTEX project would not have been financially viable because it was an east-west missionary road and private sector proponent could only get at most a seven to 15-year loan. “What made it viable was an ODA- a 40-year loan with a 10-year grace period at concessionary interest. MNTC, a private company, in effect was able to avail itself of a long-term loan at concessionary terms, for the public good,” he said.

This, Payumo emphasized, is the reverse of a number of build-operate-transfer or BOT (now called PPP or Public-Private Partnership) projects that started out as private sector undertaking but with government extending guarantee against commercial risks (e.g. take or pay provisions) or guaranteeing a minimum return on investments (MRT).

Under the new agreement, MNTC will operate and manage SCTEX for 33 years, longer than the original concession period of 25 years.

The parties said the deal also satisfies BCDA’s requirement that its obligations to the Japan International Cooperation Agency (JICA) be covered through a revenue-sharing scheme and agreed-on advances during payment shortfalls.

The JICA loan used to finance the construction of SCTEx will mature in 2041.

“This is a major breakthrough towards establishing a good business model for Public-Private Partnership vigorously pushed by the Aquino administration as the linchpin of national economic development,” BCDA president and CEO Arnel Casanova said.

For his part, MNTC chairman Manuel V. Pangilinan noted that the agreement reflects the re-affirmation of their alliance with BCDA in running SCTEx, and reiterates their group’s commitment to support the PPP program of the government.

As SCTEX concessionaire, MNTC will have overall management and supervision of the tollway, which links the Subic Freeport Zone in Zambales, Clark Special Economic Zone in Pampanga, and the Central Techno Park in Tarlac.

MNTC noted the contract paves the way for its plan to integrate SCTEX with the North Luzon Expressway.

The new agreement will be forwarded to the Toll Regulatory Board and Office of the President for final approval.

Payumo said the signing of the agreement has concluded a series of talks between BCDA and MNTC executives, which enabled both parties to clarify further the original aspirations and intentions of each one.