LRT Line I extension: Another lopsided deal?

They've already tripped once. Now, they seem to be running through the same faulty course again.

Government officials in charge of build-operate-and transfer (BOT) railway projects approved last month what could be another lopsided deal, this time involving the southern extension to the Monumento-Baclaran Light Rail Transit (LRT) I line.

Documents obtained by The STAR showed that the joint venture agreement between the Light Rail Transit Authority (LRTA), a government-owned and controlled corporation, and the SNC-Lavalin International Inc., a Canadian engineering firm, would leave the government and the public at the losing end.

Sen. Gregorio Honasan has called for a Senate investigation on the "anomalous" agreement. In his Senate Re-solution 711, Honasan said the committee on government-owned and controlled corporations and public enterprises should conduct the investigation "into the reported highly disadvantageous financing package" of the LRT line I extension project.

Honasan cited the deal as allegedly patterned after the Metro Rail Transit (MRT) model which allows the private partner to operate the rail system and earn from it, while the government stands as guarantor - and eventual payor - to all the loans its partner has acquired in financing the project.

The MRT deal has been recommended for review by the Economic Coordinating Council which has realized its flaws. Economic Planning Secretary Felipe Medalla, though, admitted recently that the review may already be too late as there was no longer a way for the government to renege or rescind the allegedly defective contract.

In the LRT line I project, The STAR learned that the LRTA is planning to put up a special purpose company with SNC-Lavalin, a firm that manages train networks in Ankara, Turkey and in Montreal, Canada as partner.

The plan was hatched as early as 1997 and was submitted for study and approval last year to the National Economic and Development Authority (NEDA). It involves extending the existing Monumento-to-Baclaran LRT to Cavite to serve hundreds of thousands of commuters in the cities of Parañaque and Las Piñas and the towns of Bacoor, Imus and Dasmariñas in Cavite.

The first phase of the project -- from Baclaran to Barangay Niyog in Bacoor -- is estimated to cost $597 million or roughly P24.4 billion. The money will be loaned by SNC-Lavalin from foreign lenders to be paid by the special purpose company the Canadian firm will be forming in partnership with the LRTA.

Under the plan, both the high cost of construction of the extended railway and its stations (to cost about $250 million) and the acquisition of land needed for the project (estimated at $23 million) will be guaranteed by the government.

The payment of amortization and all interest and financing charges from SNC-Lavalin's loans are also guaranteed by the government.

Aside from these guarantees, the plan includes a provision wherein the government would pay SNC-Lavalin more than $800 million in 30 years as lease for the extended rail system while the Canadian company would invest only $94 million as its contribution to the joint venture. On top of this, the government is also allowing SNC-Lavalin to use and operate the $1.6 billion existing line 1 and supply all electromechanical requirements -- meaning the trains and all -- without having to go through any bidding process.

As a private partner, SNC-Lavalin is assured of getting 66 percent of the income not only from the LRT extension but from the entire Monumento to Cavite railway which it will operate.

To ensure optimum income, SNC-Lavalin has recommended a new fare system for the LRT. Commuters who are now paying just P12 from Monumento to Baclaran will be charged a P5 entry fee and additional P2 for every kilometer. Summing it up, for the 12-kilometer (Baclaran to Bacoor) extension alone, commuters will have to pay P29 while for the entire Monumento to Bacoor and vice versa, they will have to pay P64 (based on year 2000 rates).

SNC-Lavalin expects to finish the extension line and integrate it with the existing line by 2004.

How the SNC-Lavalin was able to corner the project is still a mystery.

Initially, the LRT extension was recommended by NEDA as a government-to-government project with Japan, availing of low-interest loans from the so-called Obuchi Fund.

In October last year, Transportation Secretary Vicente Rivera Jr. wrote Medalla, saying the LRT project "needed a financial arrangement that will benefit the Filipino people."

Rivera recommended that the Obuchi Fund be tapped since it allows loans to be paid at below one-percent interest a year for as long as 30 years, with an additional 10-year grace period.

Ray Junia, SNC-Lavalin's local spokesman, denied any irregularity in the company's agreement with the government. He said the deal was still the "best financial package" for both the government and its private partner, even better than tapping the Obuchi Fund.

"We did a study and it came out that sourcing money from the Obuchi Fund will be more costly in the long run than sourcing funds elsewhere," he said. "Under Obuchi terms, the government needs to raise 15 percent counterpart fund and at this point, the government does not have the money to finance even a small part of this project."

Junia noted that some parties only wanted to "get a piece of the pie" --that is, to get something from SNC-Lavalin --and so "are creating noise to discredit the project."

"They were sort of blackmailing us, asking us millions of dollars," he said without naming those who were allegedly trying to ruin the SNC-Lavalin's deal with the government. "Our company only wants to do honest business here, nothing more, nothing less," he stressed.