Monday, June 11, 2018

Tugade: MRT to prioritize maintenance, other issues before approving MPIC’s unsolicited bid

BEFORE it closes the unsolicited proposal for the Metro Rail Transit (MRT) Line 3, the government aims to first address issues pertaining to the upkeep, operations, and acquisitions of and for the said train facility.

Transportation Secretary Arthur P. Tugade said his group would put prime importance to the chronic issues of the railway line before officially approving Metro Pacific Investments Corp.’s (MPIC) P30-billion unsolicited proposal for the modernization and expansion of the train system.

“They’re doing their due diligence, which means they are reviewing the engineering, architectural and marketing aspects of the facility,” he said. “Based on our talks, we can address the unsolicited proposal the end of the year, after finishing the maintenance and operating issues, including the Dalian trains.”

The issues that Tugade listed are currently being addressed through an official development assistance (ODA) deal with the Japanese government, which includes the rehabilitation and maintenance of the rail facility.  The P16.98-billion loan facility will be used to cover the railway line’s trains, power-supply system, overhead catenary system, radio system, closed-circuit television system, public-address system, signaling system, rail tracks, road-rail vehicles, depot equipment, elevators and escalators, and other station-building equipment.

Tentatively, the whole deal will take about three-and-a-half years—31 months for the simultaneous rehabilitation and maintenance works to restore train system to its original design condition and capacity, and a year for the defect liability period. Talks for the said assistance started last year. January saw the exchange of note verbale between the two governments.

Signing the agreement is tentatively set for this month.

The Japan ODA-financed rehabilitation and maintenance project is intended to “fix everything that needs to be fixed” in the MRT 3 through a well-qualified, experienced and single-point-of-responsibility rehabilitation and maintenance service provider. The government is currently directly engaging Sumitomo Corp. and its technical partner Mitsubishi Heavy Industries for the upkeep of the MRT 3.

The two companies designed, built and maintained the MRT 3 in its first 12 years of operations.

Sumitomo’s maintenance contract was terminated in 2012, after the previous administration decided to take over the said component despite contrary provisions in the build-lease-transfer contract with MRT Corp.  The new rehabilitation and maintenance service provider will be mobilized after securing the loan agreement from Japan.

For the Dalian trains, the government is currently reviewing the system audit report conducted by TUV Rheinland, which was submitted to the transpiration department last month, but has not been made public yet.  “They have submitted the report to us. Just give us some time to review it,” Transportation Undersecretary Timothy John R. Batan said.

“As you know, the issue is multifaceted, including signalling, weight and depot equipment. We just really want to understand it fully.”

Chinese train manufacturer Dalian completed the delivery of 48 light-rail vehicles to the government in February last year. These train cars were not deployed immediately despite their monthly delivery from 2016, due to issues pertaining to onboard signalling, weight and parts.

Govt to rule on MetroPac’s MRT bid

The Transportation Department said it expects to make a decision on the unsolicited proposal of Metro Pacific Investments Corp. to rehabilitate and take over the operations and maintenance of Metro Rail Transit Line 3 by the end of the year.

“By end of the year, we expect to address the unsolicited proposal [of MPIC] after finishing the maintenance and operating issues of MRT3 and after finishing the Dalian issue,” Transportation Secretary Arthur Tugade said.

Tugade was referring to the audit of the 48 China-made trains worth P3.8 billion that the previous government procured from Dalian Locomotive and Rolling Stocks Co.

The Transportation Department also tapped Japan’s Sumitomo Corp. and technical partner Mitsubishi Heavy Industries to rehabilitate and restore the MRT 3 system to its original performance standards under a government-to-government official development assistance platform. 

Tugade said MPIC was currently undertaking due diligence for the MRT3 system.

MPIC and Ayala Corp. earlier offered to  invest up to P20 billion to rehabilitate, operate and maintain the MRT3.

The consortium is also looking at buying out the stake of the government and private investors in MRT 3.

The government through Land Bank of the Philippines and the Development Bank of the Philippines own a combined 80-percent economic interest in MRT 3, while the balance is held by creditors of Metro Rail Transit Corp.

MPIC in 2011 offered to buy out the shares of LBP and DBP in MRT 3 for $1.1 billion.

The MPIC-Ayala group earlier said it expected to take over the O&M of MRT 3 in six months, from the submission of its application as the original proponent to the government in July.

MPIC submitted a proposal to the Department of Transportation in 2011 to invest $524 million to rehabilitate and upgrade MRT 3. 

The Aquino administration, however, rejected Metro Pacific’s offer that would involve raising commuter fares.

MRT 3, which runs along Edsa from North Avenue in Quezon City to Taft Avenue in Pasay City, serves over 500,000 passengers a day, beyond its rated capacity of 350,000.

The line has a fleet of 73 Czech-made air-conditioned rail cars.

DoTr to decide on MPIC-Ayala’s MRT takeover by yearend

THE Department of Transportation (DoTr) targets to address the Metro Pacific Investment Corp. (MPIC) and Ayala Corp.’s unsolicited proposal for the rehabilitation and takeover of the Metro Rail Transit Line 3 (MRT-3) by the end of the year.

“Due diligence sila ngayon (is on-going). By end of the year, we will address their unsolicited proposal, after finishing maintenance and operating issues of the MRT-3… (then we’ll know) kung uusad ang unsolicited proposal nila (if their unsolicited proposal will progress),” Transport Secretary Arthur P. Tugade told reporters on the sidelines of the inauguration of the Mactan-Cebu International Airport Terminal 2 last week.

MPIC, in a consortium with the Ayala group and Macquarie Infrastructure Holdings (Philippines) Pte. Ltd., proposed to take over MRT-3’s operations last July 2017. Under the proposal, the consortium will be investing P20 billion for the system’s rehabilitation and will handle its operations for a period of 30 to 32 years.

The consortium’s proposal will double the MRT-3’s current capacity to 700,000 passengers a day. The railway connecting Quezon City’s North Avenue to Pasay City’s Taft Avenue has long been running at more than 500,000 passengers a day, well beyond its capacity of 350,000.

The DoTr granted the group, which already handles the operations of Light Rail Transit Line 1 (LRT-1), original proponent status (OPS) for the project in November.

It was during this time that the DoTr also terminated its contract with Busan Universal Rail, Inc. for MRT-3’s operations. The transport department alleged that BURI failed to ensure efficient and available trains, and failed to procure proper spare parts.

After securing OPS, an unsolicited proposal will have to be placed under review by the National Economic and Development Authority (NEDA) board. A Swiss challenge will then be conducted wherein other groups may submit counter-proposals. The group with OPS has the advantage to match any counter-proposals in order to win the bid.

“Lalabas ang Swiss challenge pag approved na ng NEDA, okay na lahat (We will have a Swiss challenge once the project is approved by NEDA),” Mr. Tugade said.

Recently, the DoTr said it has finalized talks with the Japanese government through Japan International Cooperation Agency for the three-year makeover of MRT-3. The department said that upgrading the railway is set to cost ¥34.48 billion, and will take 43 months.

The government is considering to tap the joint venture of Sumitomo and Mitsubishi Heavy, as they were MRT-3’s maintenance provider from 2000 to 2012.

MPIC is one of three key Philippine units of Hong Kong-based First Pacific Co. Ltd., the others being Philex Mining Corp. and PLDT, Inc. Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., has a majority stake in BusinessWorld through the Philippine Star Group, which it controls. — Arra B. Francia