DOF, SMC agree on changes in MRT-7 concession agreement

Posted at 01/07/13 8:55 AM

MANILA, Philippines - The Department of Finance (DOF) and San Miguel Holdings Corp., have agreed in principle on the changes in the concession agreement for Metro Rail Transit Line (MRT-7), a government official told The STAR over the weekend.

San Miguel is the proponent of MRT-7, a $1.2-billion rail project, which is envisioned to complement the existing mass transit lines in the country.

The Finance Department is eyeing to sign the improved MRT-7 deal within the quarter, possibly as early as this month, the same source said.

“The DOF and San Miguel have already agreed in principle. Hopefully, the signing will be in January,” said the source.

San Miguel has already agreed to the improvements in the concession agreement, which the Finance Department had been pushing, the source added.

The Finance Department will issue its performance undertaking and secure the approval of the National Economic and Development Authority-Investment Coordination Committee (NEDA-ICC) for the project once the improved concession agreement is finalized.

The DOF wants San Miguel to ensure compliance with performance standards stipulated in the agreement and that the government must be able to terminate the contract if the proponent is unable to operate at a certain capacity.

Furthermore, the DOF also wants to be able to slap penalties for non-compliance and termination of extended non-compliance.

The government also wants to make sure that there are adequate mechanisms to monitor both passenger and real estate developments of the project to ensure that the government will get its fair share from those developments.

Once the improved concession agreement is finalized, San Miguel is expected to submit a detailed project design and commence construction according to an agreed upon schedule.

The MRT-7 project has been delayed because the DOF wants to clarify provisions in the contract before issuing a performance undertaking.

The proposed MRT-7 will run from San Jose del Monte City, Bulacan to SM City North Edsa, linking up with existing the Light Rail Transit Line 1 and MRT-3.

In 2010, San Miguel Holdings acquired a 51-percent equity interest in Universal LRT Corp. (ULC), which was awarded the concession to operate MRT-7 for 25 years in 2008.

The project was supposed to commence commercial operations this year but issues raised by local government units delayed the project as well as the lack of performance undertaking from the DOF.

It involves the construction of a 22-kilometer train line with 14 stations from Bulacan to EDSA in Quezon City. The project is expected to serve roughly two million public transport users.

Aside from the transport system, the plan also involves the development of commercial space, similar to existing mass transport infrastructure in the country.