Japan’s Sumitomo acquires stake in LRT-1 operator

By Denise A. Valdez, Reporter

METRO PACIFIC Investments Corp. (MPIC) has sold part of its stake in the operator of the Light Rail Transit Line 1 (LRT-1) to Japanese company Sumitomo Corp.

In a statement, the listed company said it unloaded its economic interest of 19.2% in Light Rail Manila Corp. (LRMC), which holds a concession to operate, maintain and expand the LRT-1 until 2047.

Under the deal, Sumitomo acquired a 34.9% stake in Metro Pacific Light Rail Corp. (MPLRC), which has a 55% stake in LRMC.

Sumitomo is the maintenance provider of the Metro Rail Transit Line 3 (MRT-3), which is currently contracted by the government to do its rehabilitation together with Mitsubishi Heavy Industries Ltd. and TES Philippines, Inc.

The transaction between MPIC and Sumitomo is worth approximately P3 billion, which was paid in full upon completion.

“MPIC welcomes Sumitomo as a strategic stakeholder in the LRT-1 project along with its current partners AC Infrastructure Holdings Corp. and Macquarie Investments Holdings (Philippines) Ltd.,” MPIC Chairman Manuel V. Pangilinan said in the statement.

“This investment by Sumitomo is a welcome illustration in their belief in the future of this project. We are all eager to resume operations of LRT-1 when the current extended quarantine is released,” he added.

In a disclosure to the exchange, MPIC said the deal is expected to strengthen the balance sheet of the company.

Mr. Pangilinan said in a media briefing on May 6 that the company was evaluating its transportation-related portfolio considering physical distancing measures required by the coronavirus disease 2019 (COVID-19) pandemic. MPIC’s rail business reported its profit slid 19% to P180 million in the first quarter.

LRMC is currently working to extend LRT-1 to Cavite by adding eight new stations from Baclaran to Bacoor. Before the lockdown in March, the plan was to get it partly operational by end-2021.

“Sumitomo’s investment will significantly contribute to the efficiency of our current operations and assist us as we continue heavy works on the Cavite Extension,” LRMC President and CEO Juan F. Alfonso said in the statement.

WATER CONTRACT
Meanwhile, MPIC said in an online stockholders’ meeting Friday that its water unit Maynilad Water Services, Inc. may begin contract negotiations with the government in the next two weeks.

MPIC President and CEO Jose Ma. K. Lim said the government committee in charge of drafting Maynilad’s contract is already finalizing the terms. Once done, this will be presented to President Rodrigo R. Duterte for approval, then given to water concessionaires for consideration.

“We can expect that by the first half of June, we will receive the set of terms for consideration and that will be the start of the discussion,” Mr. Lim said.

“We are very optimistic because of the recent statement of the president being more friendly towards the concessionaires,” he added.

To recall, Maynilad’s water contract, along with that of its fellow water concessionaire Manila Water Co., Inc., have been under government review since December after Mr. Duterte alleged them of onerous provisions.

But in May, Mr. Duterte apologized to the two companies, saying the private sector’s assistance to the COVID-19 pandemic has humbled him, and now he is “ready to talk” and “would be reasonable.”

MPIC posted a 47% income decline to P1.9 billion in the first quarter, amid the economic slowdown. Shares in the company at the stock exchange added six centavos or 2.12% to close at P2.89 apiece on Friday.

MPIC is one of three Philippine subsidiaries of Hong Kong’s First Pacific Co. Ltd., the others being PLDT, Inc. and Philex Mining Corp. Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., maintains an interest in BusinessWorld through the Philippine Star Group.