Govt enters formal negotiations for MRT3 takeover

The Philippine government on Tuesday said it has begun formal negotiations with the Metro Rail Transit Corp. for its takeover of the Metro Rail Transit Line 3. The MRT 3 is a 16.9-kilometer modern rail system that stretches along EDSA from North Ave. in Quezon City to Taft Ave., Pasay City. The Department of Finance said that the decision has been made to buy-out MRTC from MRT3 according to the terms of the existing build-operate-transfer agreement, although no clear timetable for the buy-out has been put in place. Finance undersecretary John Philip Sevilla said the government had entered into negotiations with the MRTC on the buy-out where officials were seeking the best terms allowed under the BOT agreement. "We are not negotiating for any discount, MRTC will not incur a single centavo of loss with what we have proposed to them. We don't know how long this will take," Sevilla said. The buy-out was first elevated for approval by the Development Budget Coordination Committee last month following the conduct of a due diligence study on the valuation of MRT assets. The Finance department proposed the take-over in order to plug a major fiscal leak caused by the government's continued subsidy of MRT operations. DBCC records showed that the government was spending at least $3.3 million every month for equity payment and $1.67 million for maintenance costs to Japanese operator Tespi Corp., a subcontractor of Sumimoto Corp. It was also estimated that the government was paying about P48 subsidy per passenger. With a daily volume ranging from 420,000 to 430,000 passengers, taxpayers were paying P20.46 million a day given the minimum fare of P10 a passenger. The Department of Transportation and Communication said that the government's plan to acquire the assets and equity of Metro Rail Transit Corp. would entail about $600 million in funding computed at net present value. In 2006, it was estimated that buying out the Metro Rail Transit Corp would save the government almost $2 billion in interest payments to the consortium led by Fil-Estate Corp. The net present value of the contract with MRT, according to official estimates, included a 15 percent return on interest for MRTC which the government wanted to bring down to about 9 percent. Buying out MRTC would give the government about $1.7 billion in savings for the remaining life of the 25-year build-lease-and-transfer contract that would end on 2025. The take-over plan is being discussed amid MRTC's plans to increase the passenger capacity of MRT-3 from 350,000 passengers a day to 600,000. - GMANews.TV