Private sector’s fair share
The recent P650-million integration of the North Luzon Expressway (NLEX) and the Subic-Clark-Tarlac Expressway (SCTEX) indeed is manna from heaven to motorists plying these routes.
Even Senator Frank Drilon, who in December 2014 suffered from monster traffic going to Baguio as a result of which he pushed for the integration of the two highways, was all praises for the recent integration which was completed a week before Holy Week.
Drilon said the integration is a huge help to our countrymen as more efficient movement of people means less time on the road and more time for them to spend with their loved ones.
Even the Bases Conversion and Development Authority (BCDA) that built SCTEX described the integration as a “game-changer” that would greatly benefit motorist in terms of faster travel time and convenience.
Metro Pacific Tollways Corp. (MPTC) president Rodrigo Franco said seamless and faster travel could now be experienced at NLEX and SCTEX as toll collection stops have been cut from five to only two from Balintawak to the Subic Freeport and back, saving about 40 minutes of travel time, and from four to two from Balintawak to Tarlac City and back.
The integration also introduced other payment option at SCTEX, now featuring electronic toll collection through Easytrip.
Inspite of the billions of pesos already invested by the Metro Pacific Investments Corp. (MPIC) Group in all these projects, the government does not seem to recognize the fact that all these benefits do not come free. Businesses come in to do government’s job of putting up infrastructure projects, but they have to be able to recoup their investment plus a reasonable return on investments.
Our government, in particular the Toll Regulatory Board (TRB), still refuses to grant the toll fee adjustments the operators have been requesting for several years now, putting off any action on the petitions despite the fact that biennial or triennial rate adjustments are guaranteed under the provisions of their respective operation and maintenance (O&M) contracts.
TRB has been continuously reviewing such rate adjustments, and we know where it is coming from in deciding to put off any increases for as long as possible.
The Supreme Court, itself, in one of its rulings, has supported a reasonable rate of return for operators via periodic adjustments, saying that “while the interests of the public are ideally to be accorded primacy in considering government contracts, the reality on the ground is that the tollway projects may not at all be possible or would be difficult to realize without the involvement of the investing private sector, which expects its usual share of profit.”
Noting that the basic rationale for investing in a toll project is a “reasonable rate of return for the investment,” the Supreme Court said the viability of any infrastructure project depends on the returns, which should be reasonable, of the investment coming from the private sector.”
While the TRB and this government might think they are doing the public a favor by putting off these rate increases, they are actually penalizing the motorists in the long run. Without a guaranteed reasonable rate of return, what businessman in his right mind would invest in these very expensive infrastructure projects?
Just recently, the Manila North Tollways Corp. (MNTC) filed an arbitration case to compel government to pay at least P3 billion due to the long overdue toll hike for NLEX. The amount covers MNTC’s foregone revenues from January 2013 to December 2015, plus VAT and interests. It does not include yet an additional P111.8 million for every month of delay in compensation starting in January 2016.
Toll fee hikes were due for NLEX on January 1, 2013 and on Jan. 1, 2015 (biennial) under the Special Toll Operation Agreement (STOA) with government. Had both petitions been approved as scheduled, NLEX toll fees would have risen by a combined 15 percent by now.
MNTC issued on April 4 a Notice of Arbitration and Statement of Claim to the Philippine government, acting by and through the TRB.
In its PSE disclosure, MNTC parent MPIC said that despite compliance with applicable legal requirements and submission of proper petitions, and even acceding to TRB’s requests to extend the amicable settlement period by more than 90 days, MNTC has not received any feasible settlement offer from the TRB. In view of this, MNTC was compelled to deliver the notice to preserve its rights under the STOA.
As explained by Franco, however, the arbitration could only rule on the payment of the foregone revenues and not on the long-due rate hike petitions.
MNTC is filing its NLEX arbitration case before the United Nations Commission on International Trade Law (UNCITRAL) in Geneva, Switzerland. The company has nominated former Supreme Court Justice Jose Vitug to represent MNTC in the three-member arbitral panel that will be formed to decide on the case. One will be nominated by the Philippine government, while the third member will be nominated by the two other members.
Meanwhile, MPIC may also seek a separate compensation of P700- to P800-million covering foregone revenues from 2012-2015 of subsidiary Cavitex Infrastructure Corp. (CIC) that runs the 14-km Cavite Expressway (Cavitex). CIC is seeking rate hikes of 16 percent and 25 percent for CAVITEX Radial Road 1 and 2 extensions.
SCTEX has a similar pending petition for 2012, 2013, 2014 and 2016.
As a result of government’s failure to act on these petitions, and despite the continued outlay of MNTC, Tollways Management Corp. and CIC, the MPIC Group’s foregone revenues have already reached P2.3 billion.
But while MPIC faces tariff risks in its toll road businesses, company executives say they are on track to invest as much as P79.6 billion in the next five years for the construction of new toll road projects and expansion of the existing expressways.
MPIC is spending P62.3 billion (inclusive of the P27.3billion upfront payment) on CALAX, which will start from the CAVITEX exit in Kawit, Cavite and end at the SLEXMamplasan Interchange in Biñan, Laguna, and is expected to cut travel time between these two expressways by some 45 minutes.
MPIC is also investing P27.9 billion in the Cebu-Cordoba bridge project, which was unchallenged during the Swiss Challenge conducted by both local governments. This will decongest traffic in the two existing bridges, Marcelo Fernan Bridge and Mandaue Bridge, between Cebu and Mactan islands.