DOTC bent on completing P53-billion MRT-3 buyout

The Department of Transportation and Communication on Wednesday expressed confidence it will be able to implement the P53-billion buyout of the Metro Rail Transit (MRT) Line 3 despite opposition from the private contractor operating the mass rail system.

 

Transportation Undersecretary Jose Perpetuo Lotilla also maintained the price offered by the government to buy out stakeholders of the MRT Corporation (MRTC) is adequate, since it was computed through a formula under the build-lease-transfer (BLT) contract the company and DOTC signed in 1997.

 

“Base sa kontrata, maba-buy out sila… The formula was stated in the BLT contract. It’s called an equity value buyout. Once the government pays that amount, the contract is finished,” he said.

 

Once the buyout is completed, the DOTC no longer need to spend for equity rental payments, maintenance cost, guaranteed debt payment, insurance expenses, and other expenses. The DOTC subsidy for MRT-3 operations amounts to roughly P3 billion a year.

 

In 2013, President Benigno Aquino III issued Executive Order No. 126 directing the DOTC and Department of Finance to execute the buyout under the BLT agreement. Congress has allocated P54 billion in the 2015 national budget for the government to takeover MRT-3.

 

MRT Holdings, which owns MRTC, however, said the amount is not enough. According to Roberto Sobrepeña, chairman of Fil-Estate Corporation which holds a significant stake in MRTC, the government needs to increase its offer by $200 million to $300 million more to buy out the private stakeholders.

 

Loopholes 

 

Lotilla said the MRTC’s decision to file an arbitration case in Singapore in 2008 triggered the buyout.

 

“They triggered the equity value buyout. They started the arbitration case in Singapore to force the government to buy them out,” he said.

 

Although Lotilla blamed the glitches occurring frequently in the MRT-3 to loopholes in the BLT contract, he explained the government had little choice but to sign it back in 1997 because it had difficulty getting investors on board for the train system.

 

“The contract had a guaranteed rate of return of 15 percent for 25 years. If that were today, it’s going to be considered as mainifestly disadvantageous because the interest rates now are low. But back when the contract was signed, the interest rates were very high,” he said.

 

The DOTC official said the buyout is a way of correcting the loopholes in the existing MRT contract.

 

“We have to learn from the mistakes of the past. What happened to the government then was there were no investors. To put it colloquially, parang kapit sa patalim. The intention now is to correct that,” he said. – VS, GMA News