INVESTOR sentiment on the government’s key infrastructure program has been tarnished, at least in the case of a listed infrastructure giant, whose executives said there has got to be a “cleanup” of the mess the current administration has created for not honoring contracts.
Metro Pacific Investments Corp. (MPIC) has pending claims against the Aquino administration amounting to P11 billion on foregone revenues arising from the government’s failure to implement tariff increases on tollways and delivery of water services.
MPIC also has a P1.9-billion claim on rails, as the government also failed to deliver its end of the multibillion-peso Light Rail Transit Line 1 (LRT 1) contract: a hundred working train cars, better train platforms and a fare hike.
“There are projects under this administration and the past [with] issues pending. For example, the arbitration cases on the tollways and the water side. Then the matter of LRT 1—there are obligations of the government with respect to LRT 1 that are unfulfilled,” MPIC Chairman Manuel V. Pangilinan said.
He emphasized: “To look back, there’s got to be a cleanup. We don’t want to be in a case with the government. We hope to resolve it, so we could move forward.” Broken down, the company is claiming roughly P7 billion in water-revenue losses, and some P4 billion in foregone revenues from its toll-roads business. These, according to Metro Pacific CFO David J. Nicol, are the company’s projected losses by year-end.
“For the water business and for roads business, the claims are going up all the time the longer they take to settle,” he explained. “The more rapidly
these can be resolved, the more quickly there’s a smaller claim upon the National Treasury.”
In March last year Maynilad Water Services Inc. initiated arbitration proceedings against the government for refusing to compensate for foregone revenues due to its delayed implementation of water-rate increases.
To recall, the Metropolitan Waterworks and Sewerage System rejected in 2013 Maynilad’s petition for an P8.58-per-cubic-meter hike in its basic water charge. An appellate panel decided, however, to allow an increase of only P3.0 per cubic meter, much lower than the petition.
Manila North Tollways Corp. sought in April the intervention of an arbitration court for the settlement of roughly P3 billion in foregone toll revenues due to the government’s inaction to petitions for adjustment of the expressway operator.
On the other hand, the toll regulator has not acted on the company’s two rate-hike petitions for the North Luzon Expressway in 2012 and another in 2014.
The first petition was due on the first of January 2013. The second, submitted on September 30, 2014, would bring the cumulative toll-rate adjustment to 15 percent, of which 12 percent was long overdue. The concession the Pangilinan-controlled company holds allows for toll adjustments every two years.
Current toll fees at the thoroughfare (from Mindanao Avenue to Santa Ines) amount to P218 for Class 1 vehicles (cars, jeepneys, pickup trucks and vans); P544 for Class 2 vehicles (two-axle trucks, buses and vans); and P652 for Class 3 vehicles (trucks and trailers with three or more axles).
Cavitex Infrastructure Corp., also in April, filed another claim case on foregone revenues of the Manila-Cavite Toll Expressway (Cavitex) to the tune of P877 million.
For the Cavitex, the company is seeking
a 25-percent increase in tariff, as its last increase was given in 2011. It was supposed to
implement adjustments in 2014, as its contract with the government allows for such surges.
In absolute terms, the petitions for a rate hike for Cavitex are as follows:
■ Class 1 vehicles, including cars, jeepneys, pickup trucks and vans, to P27 from P22;
■ Class 2 vehicles, including two-axle trucks, buses and vans, to P54 from P44; and
■ Class 3 vehicles, including trucks and trailers with three or more axles, to P81 from P66.
With respect to the rail business, Metro Pacific President Jose Maria K. Lim explained that his company’s estimated claim of P1.9 billion involves a number of factors.
“The claims amounted to P1.9 billion—that’s a combination of different claims because of the infrastructure, the number of light-rail vehicles delivered and the fare, which is only 90 percent of what it should be,” he said.
Under the deal, the government should deliver 100 working train cars to Light Rail Manila Corp., but was only able to provide 77 vehicles. The group shouldered the cost of the repair and the rehab of the trains. Now, there are 91 trains working daily, thanks to the company’s initiative.
All these could have been prevented, all three officials said, had the government honored the contracts that it signed with the private sector.
“The regulator has seen fit to simply reject most of it. So we said we should go to mediation,” Lim said. This was not the only case the Aquino administration failed to honor contracts struck under its banner infrastructure thrust, the Public-Private Partnership (PPP) Program.
Megawide Construction Corp., which bagged the P8.69-billion deal for the modernization and the operation and maintenance of the Philippine Orthopedic Center, also reported agonizing over the same fate.
Due to the delays on a “review” conducted by a new health secretary—no matter that the contract was signed by President Aquino himself—the private proponent abandoned the deal and filed a P400-million claim for damages due to the administration’s failure to deliver on its promise. Still, both companies are scouting for other transactions, despite their sad experience with the government.
With the curtains now falling, President Aquino will have to move quickly to get more deals before it exits on June 30. When it does, the next administration will inherit a pipeline of more than 50 infrastructure deals. “There are new PPP projects that will carry over to the next government—airports and rails. They have a bit of inventory to deal with,” Pangilinan said.