By Lorenz S. Marasigan | September 2, 2014

The corporate owner of the Metro Rail Transit Corp. (MRTC), the concessionaire of the most congested train system in the country, is open to the government’s multibillion-peso venture to take over the railway line.

However, the transportation agency must first discuss the terms of the proposal to the Metro Rail Transit Holdings Inc. (MRTH), the parent firm of MRTC, a company spokesman stressed.

“We are open to the idea of a buyout, but the government needs to discuss the terms of the plan to the owners,” MRTH Spokesman David S. Narvasa said in a news briefing. “The buyout is actually a right given to MRTC in case of default to the government, meaning that if the government is in default, the MRTC can invoke a buyout.”

Even before the government’s announcement of the acquisition of the corporate owner of the railway line, MRTC already invoked its rights due to delayed rental payments.

“In 2008 MRTC brought an arbitration case to Singapore against the government to execute a buyout. It was MRTC [that] wanted an equity value buyout,” Transportation Secretary Joseph Emilio A. Abaya replied in a text message when asked for comment.

An arbitration case was lodged against the government six years ago for its failure to pay an annual fee of P7 billion in equity rental costs to the concession in accordance with the 25-year build-lease-transfer (BLT) agreement signed 15 years ago.

‘Not enough’

President Aquino ordered in February 2013 the acquisition of the railway line’s corporate owner to upgrade the decade-and-a-half-old train system.

Roughly P53.9 billion has been earmarked to acquire the railway line. But for the group that claims to be the rightful owners of the train system, the amount was not enough.

“Definitely it’s not enough to buy out MRTC. The amount, if I’m not mistaken, represents the price of the bonds held by the two government banks,” Narvasa said, referring to the Land Bank of the Philippines and the Development Bank of the Philippines.  The two state-owned banks own 80-percent in economic interests in the concessionaire.

MRTC is wholly owned by the MRT Holdings II Inc. (MRTH-II), which is 85-percent owned by MRTH.

Buyout will not address MRT issues

MRTH Vice President Frederick C. Parayno noted that the price of the line was already pegged at $2.5 billion (roughly P110 billion) in 2008, back when the arbitration case in Singapore started.

“This could have ballooned by this time,” he said.

The MRT Line 3 has been under fire these past few weeks due to safety and operation-related issues. The worst one happened last month, when a train car rammed against a concrete barrier in the southernmost station in Pasay, leaving almost 40 people injured.

Aside from risks posed by the MRT’s 15-year-old infrastructure, commuters have to brave kilometric lines just to ride the train that connects the north and south of Metro Manila.

During peak hours, passengers coming from densely populated areas such as Pasay, Makati and Quezon City have to wait some 45 minutes or more than an hour to hitch a ride on a train system that promises fast and efficient travel.

But for Narvasa, a government takeover is not enough to address these issues.

“An equity value buyout will not address the problem of safety. The problem of safety can only be addressed by getting a qualified maintenance provider,” he said.

Currently, APT Global Inc. holds the maintenance contract for the MRT Line 3. The contract will expire on September 5, but will be extended due to the late procurement of a new upkeep provider.

The Department of Transportation and Communications (DOTC) is now auctioning off the P2.2-billion expanded contract for the maintenance of MRT 3.

The agency decided to expand the contract’s terms to three years from just a year, as this was considered optimal given the difficulty in procuring spare parts for the railway system.

A prebid conference was scheduled on September 9, while the deadline for the submission of bids was scheduled on October 13.

Lawmakers have urged the DOTC to bar the three previous maintenance providers—Sumitomo Corp., PH-Trams CB&T Joint Venture and APT Global Inc.—from joining the bidding due to their inability to properly maintain the line.

The government is also spending P6.8 billion to overhaul the line. The complete makeover was seen completed within the term of President Aquino.

It includes the procurement of additional train coaches, train general overhauling, ancillary systems upgrade, platform edge doorstep, signaling system upgrade, rail steel replacement, communications system upgrade, traction motors replacement and the improvement of the overhead catenary system.

The rehab venture also includes security fence and noise barrier, consulting services, upgrade of conveyance facilities, a footbridge for the North Avenue Station, weather protection cladding, Internet connection, passenger information system and passenger hand straps.

Since 2004, the train system has been operating at overcapacity. Currently, the line serves nearly 550,000 passengers per day. At one point this year, train capacity hit the 650,000 daily passenger mark. The line has a rated capacity of just 350,000 daily passengers.