Gov’t plan to buy out MPIC in MRT 3 now with Palace

MANILA, Philippines - The proposal of the government to buy out the equity stake of Metro Pacific Investments Corp. (MPIC) in Metro Rail Transit (MRT 3) along EDSA has been forwarded to Malacañang for approval.

In the Economic Forum 2012 titled “PPP: On the Road to Investment Grade,” Transportation Secretary Joseph Emilio Abaya said the move is being undertaken to address the concerns of both Land Bank of the Philippines and Development Bank of the Philippines that has a combined 80 percent economic interest in Metro Rail Transit Corp. (MRTC).

“Honestly, the decision an equity buyout by the government has proceeded quite well and is now in the Office of the President,” he told participants of the forum organized by the Economic Journalists Association of the Philippines (EJAP).

He pointed out that the Bangko Sentral ng Pilipinas (BSP) has already warned both Landbank and DBP to divest their interests in MRTC.

Abaya said the Department of Finance (DOF) is in charge of how the proposed buyout of the private partner would be undertaken. “It is more of a DOF than a DOTC play,” he said.

Last Oct. 22, the head of the Department of Transportation and Communications (DOTC) announced plans to take over the MRT3 by buying out the interest of private companies led by First Pacific’s MPIC.

“The other option is government to take over everything. We will buy out all private interest and convert it back to government,” Abaya added.

He revealed that MPIC has proposed to take over the MRT 3 by buying out the stake of the government while diversified conglomerate San Miguel Corp. (SMC) has offered to provide additional trains for the mass transport system along EDSA.

In 2011, MPIC has also submitted a $300-million proposal to the government, meant to expand the capacity of the MRT-3.

“We are studying all of these and eventually we have to reply both to MPIC and SMC,” he explained.

MPIC chairman Manuel V. Pangilinan earlier said he would respect government decision should it decide to de-privatize MRT3.

“It is best that we wait for the official advice of the DOTC (Department of Transportation and Communications). Whatever the government’s decision might be on MRT3, we will respect and abide by it,” Pangilinan said.

The plan to buy out the private sector’s stake in the MRT-3 would mean the government would no longer need to pay MRTC huge fees every year.

The DOTC annually pays the MRTC for equity rental payments, maintenance cost, debt guaranteed payment, insurance expenses, and others.

The proposed government takeover, he said, would result in billions of pesos in savings for taxpayers, who provide subsidies mainly to cover the 15-percent return on investment guaranteed to MRTC.

The government which shells out about P7 billion worth of subsidy for the MRT 3 operations has yet to compute the cost of the proposed buyout of partners.

Once the takeover is completed, he explained that the government would bid out the operation and maintenance (O&M) aspect of MRT 3 through a public private partnership (PPP) scheme.

In 2008, the government through Landbank and DBP bought into MRTC by acquiring the MRT Bonds issued by MRT III Funding Corp. issued by then owned the Sobrepeña’s Fil-Estate Group.

In 2003, the MRT line’s private concessionaire MRTC then owned by the Sobrepena family, decided to cash in on its investment in the train line by issuing asset-backed bonds for future equity rental payments.

As a result, the government now owns around 80 percent of the economic interests in MRTC. However, its presence in the board is not felt because it does not have voting rights for its 80-percent stake while MPIC has economic interest equivalent to 20 percent.

The acquisition of the stake in MRTC was completed during the term of President Arroyo wherein the finance department was headed by former secretary Gary Teves.