DOF ready to issue MRT 7 P62.7-B finance guarantee

August 19, 2014 at 09:59

Category: Banking & Finance 17 Aug 2014

Written by Lorenz S. Marasigan

DIVERSIFIED conglomerate San Miguel Corp. (SMC) may soon start constructing the P62.7-billion Metro Rail Transit Line 7 (MRT 7) as the finance department is set to issue the infrastructure’s financial guarantee this week, a source familiar to the matter told the BusinessMirror.


The source, who recently met with government officials for updates on the railway project, said the Department of Finance (DOF) is ready to issue the performance undertaking—a financial security from the state—for the multibillion-peso overhead train-system venture.

“The DOF will issue the performance undertaking for the MRT 7 this week. The government is really eager to start the implementation phase of this project,” the source said in an interview.

“It will be presented to the public soon.” A performance undertaking is a requirement for the financial closure of a project that would be bankrolled through the official development assistance fund.


The deal is expected to be closed by yearend, while the construction of the 44-kilometer road and rail transportation will begin immediately after this. It is seen to be completed by 2018.

The rail component of the MRT 7 project involves the construction of a 22.8-kilometer rail-transit system that is envisioned to operate 108 rail cars in a three-car train configuration with a daily passenger capacity ranging from 448,000 to 850,000.


It will have 14 stations, starting with the North Avenue Station in Edsa passing through Commonwealth Avenue, Regalado Avenue and Quirino Highway up to the proposed Intermodal Transport Terminal in San Jose del Monte, Bulacan.


The road component of the project, meanwhile, involves the construction of a six-lane access road from San Jose del Monte to Balagtas, Bulacan North Luzon Expressway Exit. The 25-year concession agreement between Universal LRT Corp. (ULC) and the government was signed in 2008, but was delayed due to the proponent’s failure to secure financial closure.


San Miguel Holdings Corp., a unit of the food-to-infrastructure firm, owns a 51-percent controlling stake in ULC. Party-list Rep. Terry Ridon of Kabataan, a member of the House Committee on Transportation, earlier called for a review of the agreement, particularly the arrangement on the return of equity (ROE), the proposed fare scheme and the “socioeconomic impact” of the project, especially on families that will be displaced due to its construction. He questioned the net revenue sharing presented in the concession agreement. The transportation department earlier revealed that ULC would receive 70 percent of net revenue while the government will get 30 percent if the ROE is below 11.9 percent.


Meanwhile, ULC and the government will get 50-percent shares each when the ROE reaches the 11.9 percent-to-14 percent range.


The lawmaker also questioned the fare scheme of the MRT 7.

Officials of the transportation agency has said that in a Congressional briefing that the proposed fare for a full 14-station single journey in the MRT 7 from North Avenue to San Jose del Monte, Bulacan amounts to P38 for the first year of operation, increasing at a 5-percent rate per annum for 25 years.


Ridon said that, under such rate, the initial P38 will increase to as much as P128.68 by the time the concession agreement ends after 25 years.

This is equivalent to a total of P90.68, or 238.63-percent overall increase, in the MRT-7 fare in a span of 25 years.




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