Government increases stake in MRT3

The government, through Land Bank of the Philippines and the Development Bank of the Philippines (DBP), has increased its stake in the company running Metro Rail Transit Line 3 (MRT) to give it elbow room in expanding line while saving millions of dollars in equipment rental.

Reynaldo David, DBP president and chief executive, said that by the end of last year the government held 26 percent of the project.

“And in January, a group came to us and offered us [a] stake and we took it in February. We closed another deal [so] we are able to acquire 56 percent,” he said.

The executive said the government has signed another agreement to buy more shares in MRT3, thereby increasing its stake to 76 percent by the third week of April.

At present, the government occupies six board seats of Metro Rail Transit Corp. (MRTC). But since it bought another 20 percent of the project, the government will have an additional four seats, bringing the total to 10 out of 14 board seats.

MRTC is majority owned by MRT Holdings Inc., a consortium originally composed of Ayala Land Inc., Anglo Philippines Holding Corp., Fil-Estate Management Inc., Ramcar Inc., and Greenfield Development Corp. Through the years, the composition of the consortium changed as other members divested their ownership to fund managers.

“Why we are doing this? The subsidy being pushed by government toward sustenance of MRT [3] is P5.7 billion. The fact that when MRT 3 [was] conceived and [brought] to reality, the equity stakeholders [put] in $190 million. The project is $679 [million] so [the] balance of $439 [million] is debt assumed by government,” David said.

“Here you have [a] private MRT 3, yet [the] government is paying subsid[ies], paying it off plus equity IRR [internal rate of return],” the bank president said.

“[But] today, due to lower interest rates, it does not make sense to guarantee the project of 15 percent IRR by reacquiring [it]. That what has happened when MRT came about,” he added.

David sees the government’s increased shareholding in MRT 3 would benefit the public because they can increase the coaches and reduce headway. The line’s number of passengers increased from 200,000 in 2007 to 413,000 persons a day this year.

“Because we don’t own \[the MRT 3], we can’t innovate. Its incumbent [upon] us to reacquire to add coaches, make it efficient by connecting MRT 3 to MRT 1 and reduce headway to make riding easy,” David said, adding, “We are arbitrated on these two cases: one filed in Washington and the other filed in Singapore. It gives us freedom to work on it and sell it on [to the] private [sector] on [a] more efficient basis — something that benefits [the] public and those who will bid for it we should be doing it within the year.”

Besides increased control of the public transport system, the government would save about $235 million in equipment rental and other leases paid to the private consortium.

The MRT 3 is a 16.9 kilometer transportation system that runs from Taft Avenue in Manila to North Triangle in Quezon City.
–Johanna M. Sampan, Manila Times