While President Ferdinand Marcos has been wooing private companies, both local and foreign, to partner with the government and to invest in infrastructure development in order to fuel his administration’s push for economic growth and more jobs, there are some in government who seem to be sending a completely opposite message and who are bent on sabotaging whatever gains the country has achieved so far.
Investments in infrastructure projects are not easy. Not only do they cost so much, it also takes a long time before these investments are recovered and profits realized.
The Philippines even had to come up with a new Public-Private Partnership Code in order for such collaborations to thrive under a predictable policy environment.
Our friends at the Philippine Reclamation Authority (PRA) and its unit PEA Tollway Corp. (PEATC) are singing a different tune altogether.
PEATC has asked the Court of Appeals to issue a writ of mandamus to remove the right of Metro Pacific Tollways Corp. (MPTC) subsidiary Cavitex Infrastructure Corp. (CIC) to operate and maintain the 14-km Manila-Cavite Expressway Project (Cavitex) and to allow it to take over the expressway, including its toll collection business.
The joint venture agreement (JVA) entered into in 1994 called for CIC to do the design, construction and financing and for PRA to operate and maintain Cavitex. In 1996, their toll operation agreement created PRA wholly owned subsidiary PEATC which will operate and maintain the tollway project, the only remaining expressway owned by the national government. Meanwhile, the operations and management agreement (OMA) dated Nov. 2006 included as parties the PRA, the former UMPC now CIC, and Toll Regulatory Board.
The JVA required CIC to shoulder 90 percent of the development and O&M expenses of Cavitex, including PEATC’s budget while PRA should pay for the rest. In turn, CIC receives 90 percent of the revenues mainly from the toll collection business. The revenue-sharing scheme will be altered to 60-40 in favor of PRA once CIC completes its development commitments and repays all of its loans for the project and other conditions have been met.
CIC has spent at least P25 billion to develop Cavitex and owes lenders P7 billion for the project. CIC has also been shouldering 100 percent of the cost of O&M while PRA has been receiving its share of revenues without sharing in the expenses. An additional P4 billion is needed to complete the project.
PEATC said that from the current 90-10 percent revenue sharing in favor of CIC, the Cavitex sharing would change to 60-40 percent in favor of the government once the O&M of Cavitex is returned to the government.
According to PEATC, the government loses around P1 billion annually from the current revenue-sharing structure, which of course is far from the truth. PEATC president Steve Esteban seems to also have conveniently missed the fact that the government has not been remitting its share of the costs which CIC has been shouldering, contrary to what has been agreed upon.
So even before the conditionalities under the contract are met and even before PRA’s full share of the expenses have been turned over to CIC, PEATC wants to get the bulk of the revenues. If this is how the government wants to do business with the private sector, who in its right mind would?
Esteban claims that the O&M agreement with CIC for Cavitex ended on Aug. 25, 2021 and therefore, the O&M should have been turned over to PEATC.
But according to MPTC, up to now, the O&M for Cavitex is PEATC’s responsibility and the 485 employees involved in it are its employees, with CIC responsible only for design, construction and finance. It is the PRA, through PEATC, which operates and maintains Cavitex while CIC is the concessionaire of the toll road.
What Esteban seems to have left out is the fact that CIC is engaged in the temporary O&M of Cavitex in accordance with the agreement it had with PRA. It is PRA which holds the mandate for O&M and simply delegated this responsibility to CIC. The O&M contracts, while in the name of CIC, are directly managed by PRA and PEATC.
And isn’t it a fact that the PRA and PEATC were the ones that requested five times for CIC to extend the O&M contract so that now, it has been extended to Sept. 30, 2024?
Esteban added that it would be illogical for the government to sell out its stake in Cavitex for P2.5 billion when the toll road is earning over P2 billion a year. Earlier, MPTC offered to buy out the government’s interest in the O&M of Cavitex to turn it into a normal PPP project with CIC as the operator and government and regulator.
He failed to mention again conveniently that the P2.5 billion offer considered, among others, the huge outstanding debt which PRA owes to CIC.
There are a number of things that PEATC is not saying and twisting to suit whatever agenda it has.
The case filed with the CA in fact should be dismissed outright since PEATC has no personality to sue. It is only PRA, TRB and CIC which are parties to the agreements. Thus, any legal dispute involving CIC should have included PRA as an indispensable party. Also, the petition was filed by Esteban who lacks authority of the PRA or of the non-existing PEATC board to file such as well without an imprimatur from the Office of the Government Corporate Counsel. Not to mention that everything that PEATC is raising against CIC should be subject to dispute resolution as provided for in the agreements.
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