President Aquino has confirmed that private concessionaires of the Light Rail Transit Line 1 Cavite extension project are demanding P7.5 billion in compensation from the government for the latter’s supposed failure to meet its contractual obligations.
But whether the government will accede to the Light Rail Manila Consortium’s (LRMC) demand for compensation from the Department of Transportation and Communications (DOTC) has yet to be determined, the President said.
“It is really under discussion right now, so there are no conclusions,” Aquino told a multimedia forum of the Inquirer group.
The President clarified that the issue has not yet reached the point where the two parties will have to seek arbitration.
“They (DOTC and LRMC) are in the preliminary discussions of the issue,” he explained.
The LRMC—composed of Metro Pacific Investments Corp. with a 55 percent interest; Ayala Corp., with 35 percent; and Australia’s Macquarie Infrastructure Holdings (Phil.) with 10 percent—is the private consortium that won the P65-billion LRT 1 public-private partnership project to build the 11.7-kilometer extension from the present end of the LRT line in Baclaran to Bacoor, Cavite, and the operation of the entire line.
According to Finance Secretary Cesar Purisima, the LRMC was demanding that the DOTC fulfill its sovereign guarantee for failing to deliver its commitments under the contract it signed last October for the
LRT-1 extension project.
Purisima explained that the DOTC and the Light Rail Transit Authority being the implementing agencies, the contract carries with it a sovereign guarantee, or a promise from the government to discharge the contingent liabilities of the DOTC and the LRTA.
However, the government neglected to insure this performance undertaking it gave for the fulfillment of the contract, Purisima said.
Last week, the militant Bagong Alyansang Makabayan said it had obtained a copy of an Aug. 7 letter of Transportation Secretary Joseph Abaya asking Budget Secretary Florencio Abad for P7,519,428,667 in anticipation of a demand for compensation from the LRMC group.
“Under the concession agreement, the DOTC/LRTA (Light Rail Transit Administration) shall make the following payments, in case of its failure to comply with its obligations under the agreement. DOTC anticipates that it may not be able to comply with these obligations, and may be liable to make payments to LRMC in 2016,” Abaya said in the letter.
Unsigned letter
Abaya pointed out that the letter in the possession of Reyes was unsigned.
However, Abaya did not confirm or deny if the LRMC was demanding compensation for the following: P5.04 billion due to government’s failure to address the defects of the LRT-1 trains and rail tracks; P106 million as “deficit payment” for failing to increase the LRT fare from P11 to P12.13 minimum fare; P500 million seed money for a block account for payment of future penalties; P1.05 billion for the possible loss in a contract dispute; and P444 million for right-of-way acquisition.
Bayan secretary general Renato Reyes claimed that the payments to LRMC would be drawn from the P30-billion risk management program fund which was allocated in the 2015 budget. The P30-billion allocation was to be used to cover for the government’s anticipated penalties to its private partners, such as the compensation being demanded by Manila Water and Maynilad for the government’s failure to raise water rates as provided for in their concession contracts, he said.
Unconscionable
ACT Teachers Rep. Antonio Tinio said that Abaya would be made to explain the P7.5 billion penalty to be paid to the LRMC at the hearings next week on the DOTC budget.
Bayan Muna Rep. Neri Colmeneras said Abaya’s acquiescence in paying private concessionaires who have yet to start construction on the project was “unconscionable” as the LRMC only offered P9.35 billion as concession fees to win the award, of which it has only paid P935 million with the balance to be paid after four years.