Wednesday, June 20, 2018
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Connector tollroad project hits a snag

Finance lists ‘flaws’ of proposed deal with SMC-Citra

The North-South Luzon connector tollroad project spearheaded by the San Miguel-Citra alliance has hit another stumbling block even after the recent settlement of intragovernment debates on who has authority over tollroad concession contracts.

The Department of Finance, in an April 2 memorandum, has expressed concern on the draft concession framework or supplemental toll operation agreement (STOA). The DOF has called for a revision of the framework for the connector road (Skyway Stage 3) to be executed by the Toll Regulatory Board (TRB), which recently regained authority from Malacañang to enter into tollroad concession contracts after a long-running legal debate with the Department of Public Works and Highways.

Among others, the DOF wanted Philippine National Construction Corp. (PNCC) taken out of the picture, noting that the current draft was placing “undue reliance on the supposed continuing effectivity and validity of the franchise” of this government corporation. Otherwise, the DOF said this would be “putting at risk the integrity of the competitive tender process for tollways under the PPP (public private partnership) program.”


PNCC has a minority stake in the connector road project, which was originally a partnership between the government-owned firm and the Citra group.

The memorandum was signed by Finance Secretary Cesar Purisima and addressed to Secretaries Joseph Emilio Abaya of Transportation, Rogelio Singson of Public Works and Highways and Arsenio Balisacan of Economic Planning, Cabinet Secretary Jose Rene Almendras and TRB chief Edmundo Reyes Jr.

The DOF argued that the draft STOA had “unnecessarily included” PNCC as a party even as the latter’s legislative franchise had expired in 2007.

Other concerns raised by the DOF were that the draft “erroneously” granted the STOA to new entities: Citra Central Expressway Corp. as “investor” and Central Metro Manila Skyway Corp. as “operator” instead of “original investor” Citra Metro Manila Tollways Corp. and that this made a “major departure” from the contract terms that the government has been offering under the solicited PPP in tollroad projects like the Daang Hari and the Naia Expressway.

The DOF also argued that such departure was such that it would create “significant, unnecessary and undesirable” burdens and risks for the government. By making a distinction between the investor and operator as contract counter-parties, even if they were related parties, the DOF pointed out that the STOA would make it “more complex and difficult to ensure compliance with the various obligations.”

Another complaint was that the STOA did not include specific key performance indicators for operations and maintenance and penalties for noncompliance or that failure to complete the entire project within a 36-month timeframe could provide grounds for termination.

The draft likewise appeared that Citra would be responsible not just for the costs but the actual process of acquiring right of way for the project, the DOF said. Also, it noted that the draft contained many grounds for the investor to seek toll rate adjustments “for factors it should already be aware of and should already factor in today, such as taxes, insurance premiums, changes in estimated construction costs, and others.”

The STOA likewise contained provisions that “in effect requires the government to get the investor’s consent to exercise its regulatory powers.”


In light of these concerns, the DOF said the project would be able to proceed “on firmer legal footing and without delay” if the draft STOA were revised such that:

— the STOA is viewed as a supplement to an earlier STOA amendment, the latter being “an entirely new authorization” granted by TRB and “an entirely new authorization to a joint venture company after the lapse of PNCC’s franchise.”

— the concession agreement is granted in favor of CMMTC, the original investor;

— the PNCC is completely excluded from this STOA; and

— more provisions are incorporated to “better protect the public interest.”

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TAGS: connector tollroad, Department of Finance, Infrastructure, Philippinws
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