Govt sweetens LRT 1 deal

The Transportation Department disclosed on Monday the enhanced bidding terms for P60-billion Light Rail Transit Line 1 extension project to Cavite, which now passes the financial risks from the private sector to the government.

Transportation Secretary Joseph Emilio Abaya said the agency would accept “negative bid” from prospective bidders for the project, whose auction in August was declared a failure, after interested companies found the concession agreement risky for investors.

A negative bid means the government would shoulder the risks and most of the cost of the project.
Abaya said the “negative bid” was a part of the amended concession agreement, which would be presented to the National Economic and Development Authority board for approval.

“Allowing a negative bid means that the government will pay the winning proponent with the lowest negative bid. But it does not stop bidders to offer positive bid. So between a negative bid and a positive bid, the government will accept the positive bid since they will pay the government of an X amount,” Abaya told reporters in a news briefing.

He said the mechanism was similar to the one used in the P15-billion Ninoy Aquino International Airport Expressway project where the two proponents submitted upfront payments to the government.
Abaya said aside from allowing a negative bid, the government also agreed to subsidize power rate spikes beyond the reasonable range set by the agency.

“It’s a protection for the concessionaire against unanticipated spike of power rates,” Abaya said.
The government also agreed to bear real property taxes, ensure the integrity of the LRT 1 structure for two years and allow the winning bidder to impose a 5-percent increase in fare upon the completion of the project.

“If anything happens to the existing structure [within two years], the government will shoulder the costs. The winning bidder will operate and maintain the existing structure even they are yet to start the construction of the Cavite extension,” Abaya said.

He said with the improvements in the concession agreement, more groups were expected to join the bidding. “We hope that same players would still be interested and hopefully there would be new players,” he added.
The previously pre-qualified bidders were Light Rail Manila Consortium, a joint venture between the Ayala Group and Metro Pacific Investment Corp.; San Miguel’s SMC Infra Resources Inc.; DMCI Holdings Inc.; and MTD-Samsung Consortium of Malaysia and Korea.
 
The Cavite extension project will extend the existing 20.7-kilometer LRT Line 1 system, which runs from Roosevelt Avenue in Quezon City to Baclaran in Parañaque, by an additional 11.7 km southward to Bacoor, Cavite.

Once operational, the new line will increase the number of passengers at LRT-1 from 500,000 to 700,000 passengers a day.

source:  Manila Standard