Government costs ‘fully recovered’ in new SCTEx deal

The revised deal between the Bases Conversion and Development Authority and the Manila North Tollway Corp. will result in the government recovering all its expenses in the Subic-Clark-Tarlac Expressway project.

BCDA Chairman Felicito Payumo said the new deal—initially assailed by MNTC chairman Manuel Pangilinan—would help the government agency meet its P34 billion in debt obligations through revenue sharing and advances during periods of shortfall.

“In other words, by virtue of this agreement, the SCTEx can be considered as having been built at no cost to the government for the infrastructure needed by the country,” Payumo said.

“MNTC will [also] be responsible for the upkeep of the expressway and commit P20.56 billion for maintenance work for SCTEx [to keep it] compliant with service quality levels,” the BCDA chairman added.

MNTC, on the other hand, would earn a “reasonable” return to cover “only its commercial risks,” effectively insulating it from risks associated with the construction of the expressway.

The deal paves the way for the seamless integration of the SCTEx with the North Luzon Expressway, which is also operated by MNTC. Both tollroads are expected to help spur the economic development of areas in Central Luzon and adjacent areas.

Payumo pointed out that regulators also learned “valuable lessons” in handling “challenging” projects, specifically those that yield economic benefits but are initially perceived as non-viable.

For one, Payumo noted that the SCTEx, being a so-called “missionary” road, was not a commercially viable project under the old build-operate-transfer scheme. It was financed through a 40-year overseas development assistance loan from the Japanese government, with a 10-year grace period, at concessional interest rates.

“It has now become a PPP (Public-Private Partnership) project by virtue of this agreement, with the private sector taking over the entire P34-billion debt service obligations of the government,” Payumo said. “In effect, the private sector was able to access ODA financing.”

The payment will come from the P64 billion in projected revenue share of the government during the 33-year business and operating agreement, leaving P30 billion more in profit for the government.

The expressway will be turned over to the government at the end of the agreement, possibly for another round of higher revenues in what by then will already be a mature market.

The BCDA chairman also noted that the deal did not extend any form of government guarantee to MNTC for any shortfall in the latter’s traffic volume projections.

“MNTC bears all commercial and market risks,” Payumo said.

In addition, the construction of the SCTEx has given rise to another PPP project—the San Miguel Corp.-led Tarlac-Pangasinan-La Union Expressway (TIPLex)—which will extend the expressway 88 kilometers further from Tarlac to Rosario, La Union.