Tuesday, 31 March 2009

Philippine gov’t takes majority stake in MRT operator

A MOST WELOME NEWS
BusinessWorld
http://www.bworldonline.com/BW033109/content.php?id=001

THE GOVERNMENT has acquired a majority stake in the company which runs the Metro Rail Transit (MRT) line on EDSA, a development officials said would generate savings and allow for improvements to the railway.

State-owned Development Bank of the Philippines (DBP) and Land Bank of the Philippines last month bought 56% of Metro Rail Transit Corp. (MRTC) — which operates the MRT-3 line — and is seeking to raise this to 76%, DBP president and CEO Reynaldo G. David told a briefing yesterday.

"The two GFIs (government financial institutions), DBP and Landbank, acquired a portion last December. We ... [initially] bought 26% and then a group came to us and offered us their stake last month, and so we were able to acquire 56%," he said.

"We have signed agreements and by the third week of April, the two GFIs will have 76% of MRT," he added.

Mr. David declined to elaborate on the cost and other details, saying the sale is covered by a nondisclosure agreement.

"We are under a confidentiality arrangement. We can’t divulge it (the details) or major complications will arise," he declared.

Finance Secretary Margarito B. Teves, however, said a government takeover of MRTC would allow for state savings that can be rechanneled to upgrade the railway.

"There will be savings to the tune of $235 million [which] will enable the government to expand the facility of MRT-3, and plans are being formulated to optimize revenues derived from collateral businesses in the rail system," he said.

Mr. David, for his part, said the government plans to increase the number of coaches and to reduce headway — the time interval between two following trains — to ensure the rider convenience.

"Before, we (the government) couldn’t increase coaches and reduce the headway because we did not own it (MRT)," he said.

"[Now] It’s incumbent for to us to make it efficient."

MRT-3 takeover plans were first raised some four years ago, with the government reasoning that doing so would be better than continuing to subsidize the railway while at the same time paying dues to MRTC under a build-operate-transfer agreement. The move was also spurred by the state’s being behind in payments, would have activated default provisions.

Officials considered a bond float of some $900 million to fund a buyout but this was scrapped in the wake of the global downturn. Earlier this year, officials said the government was looking at just taking a majority stake in MRTC.

MRTC is the Sobrepeña-led consortium that built the MRT-3 line, the busiest of Metro Manila’s three light railways and which runs 17 kilometers from North Ave. in Quezon City to Taft Ave. in Pasay City. The firm’s contract expires in 2025.

MRTC officials were not immediately available for comment.

Mr. Teves said the deal was not against privatization policy since the government was looking to divest "as soon as possible".

"We cannot call this a reverse privatization. It is only temporary. We just want to generate savings and expand the facilities. We will privatize this as quickly as possible," he said.

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