MANILA - The Department of Finance (DOF) has issued the financial guarantee for the P62.7-billion Metro Rail Transit Line 7 (MRT 7), allowing proponent San Miguel Corp. (SMC) to start processing the financial closure of the deal.
Finance Secretary Cesar V. Purisima issued the performance undertaking for the multibillion-peso overhead train system venture following the transportation department’s endorsement.
“The performance undertaking has been signed by Secretary Purisima. We have signed the implementing guidelines. So, it is a matter of calling the proponent and giving the documents to them so they could start with the financial closure of the deal,” Transportation Secretary Joseph Emilio A. Abaya said in a chance interview. A performance undertaking is a requirement for the financial closure of a project that would be funded by an official development assistance (ODA) loan.
The transport chief urged the food-to-infrastructure firm to hasten the process of closing the project so that it could start constructing the much-needed railway line that would help ease traffic in Metro Manila. “My request is for them to do it sooner, but they said that they could do advanced works once they get the green light. I hope before next year, they could reach financial closure,” Abaya said.
The deal is expected closed by year-end, while the construction of the 44-kilometer road and rail transportation will begin immediately after. It is seen completed by 2018.
The rail component of the MRT 7 project involves the construction of a 22.8-km 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, 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 will receive 70 percent of net revenue while the government will get 30 percent if the return on equity is below 11.9 percent.
Meanwhile, ULC and the government will get 50-percent shares each when the return on equity 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 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 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.