Ayala backs gov’t bidding for MRT 3

Group seeks strategic partners
/ 03:00 AM January 30, 2012

Government’s plan to bid out contract to manage and upgrade MRT 3 line gets the backing of Ayala Corp.

Conglomerate Ayala Corp. has backed the government’s plan to bid out a contract to manage and upgrade the existing capacity of elevated railway Metro Rail Transit 3 along EDSA and is now in talks with prospective strategic partners to join the auction.

Fresh from its victory in the first public-private partnership (PPP) project auctioned by the government late last year, the Daang Hari link toll road, Ayala welcomed Transportation Secretary Manuel “Mar” Roxas II’s announcement last week of an open competitive bidding to operate and develop the MRT 3 line, Metro Manila’s busiest elevated railway.


“Firstly, we are encouraged by the seeming progress on PPP projects across the transport infra sector,” Ayala managing director and head of corporate strategy Eric Francia said in an e-mail to the Inquirer.

He said Ayala would be prepared to participate in any competitive tender for MRT 3 once the bankable terms of the PPP tender were issued. Corporate rivals San Miguel Corp. and Metro Pacific Investments Corp. are also vying for the MRT 3 project.


However, the government’s plan to bid out a new MRT 3 contract is being questioned by MPIC, arguing that the current concessionaire, Metro Railway Transit Corp., already had the expansion rights under the existing build-lease-transfer deal with the government. MPIC, led by businessman Manuel V. Pangilinan, earlier obtained a foothold in MRTC after signing a “cooperation” agreement with the Fil-Estate group and other MRTC shareholders to either buy their shares or take over their voting rights, giving it an equity control of at least 48 percent and voting rights of more than 70 percent in the concession.

The Fil-Estate-led consortium no longer holds economic rights to MRT 3 as the cash flow from the railway has been committed to creditors under a securitization deal. Bulk of the debt paper of MRTC is now held by the state-owned Development Bank of the Philippines and Land Bank of the Philippines.

For its part, the Ayala group has expressed interest in reinvesting in MRT 3 since last year. Its property unit Ayala Land Inc. used to be a minority stakeholder in the railway consortium.

“Ayala is, at this point, exploring strategic partnerships with local and foreign companies. We are currently in talks with groups that would add value and technical competence to the development and operations of the MRT 3,” Francia said.

One way for a new investor to make money out of MRT 3 is to create new cash flow by expanding capacity, something that Ayala is eager to participate in.

“The most immediate investment where the private sector can participate in is to increase the number of trains to increase the capacity of the whole line,” Francia said.

“Given the recently announced policy of the DoTC [Department of Transportation and Communications] to rationalize train fares across all lines, the MRT 3 project would likely be bankable, given the robust ridership Line 3 has demonstrated over the years,” Francia said.


MRT 3 has a current daily capacity of at least 350,000 passengers but foot traffic goes up to about 400,000 daily. Its capacity can be expanded with the purchase of new cars, upgrading of signaling equipment, increasing the frequency of train departures and lengthening the number of cars per train.

“The impact to the riding public could be quite fast and tangible, if the project is tendered to financially and technically qualified investors and O&M (operations and management) companies. A competitive tender on the right to develop the existing line is critical to ensure that the riding public gets the best level of service for their train fares,” Francia said.

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TAGS: ayala corp., bidding, Business, MRT 3, rail transport, Railways
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