No offer from Sumitomo to rehabilitate MRT, DOTr clarifies

Metro Rail Transit-3 builder and former maintenance provider Sumitomo Corp. has no offer to the government to rehabilitate the overstretched rail system, the Department of Transportation said on Thursday.

DOTr last month said the government and Japan International Cooperation Agency, or JICA, signed the final details on the estimated project cost, scope of works and schedule of the MRT rehabilitation.

Based on the discussions, upgrading the MRT, which is estimated to cost ¥34.480 billion (P16.985 billion), will take 43 months.

In a statement, the DOTr clarified that Sumitomo did not submit any proposal to undertake the scope of the JICA-financed MRT-3 rehabilitation project.

The Transportation department issued the statement in response to “some erroneous claims.”

“Sumitomo Corp. has no offer to DOTr... contrary to some articles circulating online and on print media,” it said.

Reports of MRT train breakdowns have become as regular as the weather. In 2017, the shabby metro rail system, which serves thousands of passengers each day, reportedly suffered at least 500 disruptions.

Last year, the government terminated its contract with Busan Universal Rail Inc., the MRT-3 service provider, due to alleged poor performance. The DOTr at the time said the joint venture of Sumitomo and Mitsubishi Heavy Industries is being considered as it was involved with the train system in the past.

Meanwhile, Metro Pacific Investments Corp.’s offer to rehabilitate the MRT-3 is expected to move forward by the end of the year, Transport Secretary Arthur Tugade recently said.

MPIC unit Metro Pacific Light Rail Corp. was granted original proponent status by the DOTr in 2017 for the P12.5 billion proposal to rehabilitate, operate and maintain the MRT-3 for 30 years.

No Sumitomo rehab proposal for MRT-3 — Transport dep’t

THE Department of Transportation (DoTr) clarified on Wednesday that Sumitomo Corp. did not offer to take charge of the Metro Rail Transit Line 3 (MRT-3) rehabilitation, though the Japan International Cooperation Agency (JICA) remains the source of funding for the project.

“To reiterate, there is no offer from Sumitomo Corp. to undertake the scope of the JICA-financed MRT-3 Rehabilitation and Maintenance Project, and much more, there is no offer from Sumitomo Corp. to do it for P7.5 billion,” it said in a statement.

DoTr issued the statement in response to “erroneous claims” that Sumitomo Corp. is offering to rehabilitate the commuter rail system through Metro Rail Transit Corp. (MRTC) headed by Robert John L. Sobrepeña.

MRTC was formerly in charge of the construction and maintenance of MRT-3. It submitted a rehabilitation proposal to DoTr twice last year, in August and October, but both were rejected.

“Aside from being signed by Mr. Sobrepeña and MRTC President Frederick C. Parayno, and claiming to have been based on ‘discussions with Sumitomo Corp.,’ the Sobrepeña- MRTC Option does not appear to have been prepared by any railway expert,” DoTr said.

It also expressed its faith in JICA’s processes, as the aid agency has conducted a two-month review of the MRT-3 to identify the cost, scope and schedule of the rehabilitation. It said in May that the project will cost P16.985 billion and will take 43 months.

“The DoTr maintains that it is borrowing from Japan to finally, and once and for all, fix MRT-3 with a comprehensive, single point of responsibility solution, delivered by a highly qualified and highly experienced provider, backed by the government of one of the leading railway powerhouse countries in the world,” it said.

Last year, Metro Pacific Investments Corp. (MPIC) and Ayala Corp. submitted an unsolicited proposal to take over the MRT-3. Transportation Secretary Arthur P. Tugade said last week that the government will decide by year’s end about granting the consortium original proponent status (OPS).

If the consortium is granted OPS, the proposal will still have to be approved by the National Economic and Development Authority (NEDA) board and then subjected to a Swiss challenge. Under the Swiss challenge, other companies may submit counter-proposals which the original proponent has the option to match.

Transportation Undersecretary for Railways Timothy John R. Batan told reporters recently that MPIC is currently aligning the terms of its proposal to the terms of the JICA-funded rehabilitation.

“What we are doing with respect to the MRT-3 O&M unsolicited proposal is making sure that it harmonizes with the scope of the JICA rehab. We do not want an overlap, largely because we don’t want two different parties doing the same things,” he said. — Denise A. Valdez

DOTr bats for Japan ODA option to solve MRT woes

By Emmie V. Abadilla

The Department of Transportation (DOTr) yesterday batted for  a government-to-government (G2G) Japan Official Development Assistance (ODA) solution for the woes of the Metro Rail Transit (MRT) 3 and lambasted the private sector alternative as unsubstantial – something “not based on any comprehensive inspection” of the railway system in question.

In its “briefer” issued to the press yesterday, the DOTr pointed out that it has already twice denied the private sector option to solve MRT 3’s problems proposed by Robert John L. Sobrepeña through his MRT Holdings, Inc. II (MRTH II) and subsidiary Metro Rail Transit Corporation (MRTC).

“It is a wonder why some appear to have been consistently selling the Sobrepeña-MRTC Option despite the DOTr’s advance efforts to fix MRT-3 with a comprehensive, single point-of-responsibility solution to be delivered by a highly qualified and highly-experienced provider, backed by the government of one of the leading railway powerhouse countries in the world,” the DOTr stated in its briefer.

The state transport agency stressed that “MRTC had no other railway development experience other than MRT-3.”

On top of this, the DOTr also underscored “Sobrepeña’s track record from his failed College Assurance Plan (CAP) scheme and controversy-ridden Camp John Hay Development. Corp. (it appears that CJHDC still refuses to pay billions in debt intended for the Armed Forces, through BCDA).”

“It is a wonder why some appear to have blind allegiance to the 5-page proposal underlying the Sobrepeña-MRTC Option proposed by Sobrepeña through MRTH II and MRTC, private companies involved in the earlier construction and maintenance of MRT-3.”

MRTC built the P35.6-billion MRT 3. To pay for the construction cost, MRTC used P10 billion of its own money and borrowed P25.6 billion from various lenders, payable over 10 years, at interest rates of 2.8%, 7.52%, and 9%.

Filipino taxpayers have been paying, and will continue to pay, MRTC a 15% return on the P10-billion used in MRT-3. Over 25 years, Filipino taxpayers will have paid MRTC a total of P126.4 billion for its P10 billion equity.

As of early 2018, Filipino taxpayers have already paid MRTC close to P73.7 billion and will continue to pay more than P52.7 billion up to 2025, according to the DOTr.

Aside from coughing up P126.4 billion to MRTC for its P10 billion equity in MRT-3, Filipino taxpayers have already fully paid the P25.6 billion that the borrowed, plus interest of P6.9 billion as of 2010.

In addition, Filipino taxpayers have been paying, and will continue to pay, P2.2 million per month for MRTC’s staffing and administration costs.

As of early-2018, Filipino taxpayers have paid P463.5 million for MRTC’s staffing and administration costs, and will continue to do so up to 2025.

Filipino taxpayers also pay for MRTC’s taxes. As of early-2018, Filipino taxpayers have paid MRTC R27.1 billion as reimbursement for MRTC’s taxes and will continue to reimburse MRTC for its taxes up to 2025.

In total, after investing P35.6 billion to build MRT-3, MRTC already received P133.7 billion total. By 2025, the company stands to receive P200 billion in return for its P35.6-billion investment.

Filipino taxpayers would have paid MRTC the equivalent of almost 6 MRT-3’s, according to the DOTr.

Despite all these, MRTC’s affiliate, MRT DevCo, has refused to pay DOTr almost P2.3 billion as of mid-2015 for leasing out kiosks and advertisement spaces in MRT-3.

MRTC and DOTr are still squabbling on the interpretation of the Build Lease Transfer (BLT) Agreement for MRT-3, as well as MRTC’s performance of its obligations.

There are ongoing cases between MRTC and DOTr, as well as between MRTC and various local governments, both in Singapore and in local courts.

Now, the Sobrepeña-MRTC Option for solving MRT 3’s problems is largely based not just on continuing, but even expanding, what MRTC gets under the BLT Agreement, such as MRTC receiving MRT-3’s fare revenues of almost P3 billion per year up to 2040, without the benefit of any bidding, or even a Swiss Challenge.

The Sobrepeña-MRTC Option also involves an unspecified schedule of fare increases, which will increase MRT-3 fares from the current maximum of P28.00 to up to almost P40.00.

This involves giving to MRTC up to more than P10 billion per year in fare revenues over a period extending to 2040, again, without the benefit of any bidding, or even a Swiss Challenge.

Notably, the Sobrepeña-MRTC Option also involves extending onerous terms of the BLT Agreement beyond 2025, and into 2040.

For example, Sobrepeña-MRTC Option requires Filipino taxpayers to continue reimbursing MRTC for all its taxes.

The DOTr denied this option twice, first in August, 2017 and again in October, 2017.

On the other hand, the Japan ODA option costs P11.6 billion for the railway rehabilitation and P5.5 billion for the maintenance.

Rehabilitation includes restoring MRT-3 to its design operating condition, and will take 26 months. This will “fix everything that needs to be fixed” in MRT-3.

Maintenance, includes day-to-day maintenance, preventive maintenance, corrective maintenance, and the complete general overhaul of MRT-3’s 72 cars, which were supposed to have been done in 2014-2016 (MRT-3’s terminated maintenance contractor, BURI, failed to do the overhaul).

Fixing MRT: Japan vs Sobrepeña plan

Much has been written about the “Sobrepeña-MRTC option” for rehabilitating the ailing MetroRail Transit Line-3 on EDSA. For balance, we are running excerpts from a Department of Transportation briefer comparing that offer with the “Japan ODA option” that the government seems to favor.

The Sobrepeña-MRTC offer was made by businessman Robert John L. Sobrepeña through MRTH II and MRTC, which were involved in the earlier construction and maintenance of MRT-3. The DoTr rejected the offer twice, in August and October 2017, but the proponent persists.

The DoTr is pursuing the “Japan ODA option” under government-to-government Official Development Assistance from Japan, through the Japan International Cooperation Agency with the help of railway experts from the Asian Development Bank and Australia Aid.

The DoTr apparently banks on the track record of Japan in railways construction and management, as well as its favorable government-backed financial package.

The MRT-3 was built by MRTC at a total project cost of P35.6 billion. MRTC used P10 billion of its own money, and borrowed P25.6 billion from various lenders, payable over 10 years, at interest rates varying from 2.8 to 9 percent.

The DoTr said taxpayers have been paying, and will continue to pay, MRTC a 15-percent return on the P10 billion it has put in. Over 25 years, taxpayers will pay the firm a total of P126.4 billion for its P10 billion equity.

As of early-2018, taxpayers have already paid MRTC close to P73.7 billion, and will continue to pay it more than P52.7 billion until 2025, the DoTr said.

On top of paying MRTC P126.4 billion for its P10 billion equity, taxpayers already fully paid as of 2010 the P25.6 billion that MRTC borrowed, plus interest of P6.9 billion.

The DoTr said that although MRTC borrowed the P25.6 billion, taxpayers were the ones who paid P32.4 billion for its debts. It added that taxpayers will continue to pay P2.2 million per month for MRTC staffing and administration expenses.
For the past several years, the DoTr noted, MRTC’s only business activity has been to collect from taxpayers.

The DoTr said that after MRTC invested P35.6 billion to build MRT-3, it received P73.7 billion as return for its equity, P32.4 billion as payment for its debts, P463.5 million for staffing and administration, and P27.1 billion for tax payment – for a total of P133.7 billion.

By 2025, MRTC stands to receive close to P200 billion in return for its investment, according to the DoTr.

While MRTC has been enjoying a windfall, its affiliate, MRT DevCo, has refused to pay the department almost P2.3 billion as of mid-2015 for leasing out kiosks and advertisement spaces in the MRT-3 line.

There are disagreements between MRTC and DoTr in interpreting the Build-Lease-Transfer Agreement for MRT-3, as well as MRTC’s performance of its contractual obligations. More taxpayers’ money is being spent on cases being litigated in Singapore and Philippine courts.

Advantages of Japan ODA cited

Comparing the two rehab plans, the DoTr said that the Japan ODA option is backed by the government of Japan, whereas the Sobrepeña-MRTC option is backed only by Sobrepeña and MRTC.

It pointed out that MRTC has only one railway project (MRT-3) and Sobrepeña’s project references include the failed College Assurance Plan scheme and the controversial Camp John Hay Development Corp. (it appears that CJHDC refuses to pay billions in debt, intended for the armed forces, through the Bases Conversion and Development Authority).

The Japan International Cooperation Agency has been the Philippines’ long-time development partner, having extended more than P1.4 trillion in ODA projects to the country, P250 billion of which have been for railway-related projects.

JICA is extending an additional P500 billion in ODA for the PNR Clark 1 (Tutuban-Malolos), PNR Clark 2 (Malolos-Clark), PNR South Commuter (Manila-Los Banos), the Metro Manila Subway, and the Philippine Railway Institute Projects.

The Japan ODA loan for the project has an interest rate of 0.1 percent per annum, repayment in 40 years, and grace period of 12 years. The MRTC loans, which taxpayers fully paid in 2010, had a repayment period of 10 years and interest rates of 2.8, 7.52, and 9 percent.

The JICA-appraised indicative base cost for rehabilitation is P11.6 billion, and P5.5 billion for maintenance. Rehabilitation includes restoring MRT-3 to its design operating condition within 26 months. This will “fix everything that needs to be fixed.”

Maintenance includes day-to-day maintenance, preventive maintenance, corrective maintenance, and the complete general overhaul of MRT-3’s 72 cars, which were supposed to have been done in 2014-2016.

The DoTr said that it is “borrowing from Japan to fix MRT-3 once and for all with a comprehensive, single point of responsibility solution, delivered by a highly-qualified and experienced provider, backed by the government of one of the leading railway powerhouse countries in the world.”

The Sobrepeña-MRTC proposal consists of five pages and a series of letters that essentially contain the same things. It is largely based on continuing and expanding what MRTC gets under the BLT Agreement.

For example, the option involves MRTC receiving MRT-3’s fare revenues of almost P3 billion per year up to 2040, without benefit of bidding or a Swiss Challenge.

It also involves an unclear schedule of fare increases that will raise fares from the current maximum of P28 to up to almost P40. That would give to MRTC up to more than P10 billion per year in fare revenues until 2040.

Under the Sobrepena-MRTC scheme, taxpayers will be paying the firm the equivalent of almost six MRT-3’s in exchange for building one MRT-3.

Putting a premium on Japan’s railway expertise, the DoTr cited that country’s having more than 27,000 rail kilometers carrying more than seven billion passengers per year, and its ranking among the safest and most reliable railway systems in the world.

It said Tokyo alone, which has almost the same area as Metro Manila, has 700 kilometers of railways with a ridership of 30 million per day.