Gov’t changes mind on MRT 3 rehab

The Department of Transportation (DOTr) appears to have set aside the unsolicited proposal of Metro Pacific Investments Corp. to rehabilitate and operate the busy Metro Rail Transit Line 3 that runs along the busy Edsa thoroughfare in Metro Manila.

Transportation Secretary Arthur Tugade said last week that the government would eventually bid out the operations and maintenance of the MRT 3 using the solicited route.

“I will make it solicited. The package will be lock stock and barrel,” Tugade said, referring to a deal that also includes the buyout of MRT 3’s government shareholdings and debt.

The process described by Tugade was different from that offered by Metro Pacific, an infrastructure giant led by businessman Manuel V. Pangilinan. As noted, the Metro Pacific proposal was an unsolicited offer. This means it will need to go through a Swiss challenge, which will allow other companies to challenge the offer of the original proponent.

Solicited projects use a different bidding procedure and are typically part of the list of priority projects. Unlike solicited offers, unsolicited offers should contain no direct guarantees or subsidies.

Last year, the DOTr awarded Metro Pacific an original proponent status (OPS). An OPS gives its holder a big advantage in the mandated Swiss challenge process.

Metro Pacific, which has been eyeing the MRT 3 since 2011, said it would spend P12.5 billion to rehabilitate the MRT-3 over a 30-year concession. That figure could balloon to P20 billion when considering an equity buyout of its shareholders. It said the project would come at no cost to the government.

A key part of the offer involves halting the deterioration of the train line over a period of six months. In addition, it also plans to buy out other shareholders in the MRT 3’s private sector owner, Metro Rail Transit Corp. The state-owned Development Bank of the Philippines and Land Bank of the Philippines hold about 77 percent of MRTC’s economic rights, acquired through bondholders, and about a fifth of its voting shares.

Metro Pacific’s MRT 3 offer has been hanging under a cloud of doubt ever since the DOTr announced late last year that it wanted to bring back MRT 3’s original Japanese maintenance providers. The announcement came after Metro Pacific was given an OPS.

The DOTr is taking this route because Japanese firms Sumitomo Corp. and Mitsubishi Heavy Industries handled maintenance operations for the MRT 3’s first 12 years of operations.

Japan is also offering generous loan terms, the DOTr said.

According to the website of the Ministry of Foreign Affairs of Japan, the loan provision would amount to a maximum of 38.1 billion yen or about P18 billion. The interest rate was set at 0.1 percent a year with repayment in 28 years after a grace period of 12 years.

The DOTr said last May that the rehabilitation and maintenance contract would run for 43 months. It said 31 months were allocated “for the simultaneous rehabilitation and maintenance works to restore MRT 3 to its original design condition and capacity.”

DOTr officials earlier said they were working out a process by which Metro Pacific—should it win the Swiss challenge—would assume the maintenance and operations of the MRT 3 after the Japanese providers completed their contract.