DISPUTED HIGHWAY. Motorists form a long queue heading out of the Manila–Cavite Toll Expressway en route to Metro Manila via Coastal Road in this July 2023 photo. The Philippine Reclamation Authority on Monday (April 22, 2024) rejected the “unfair” PHP2.5 billion buyout offer of Cavitex Infrastructure Corp. (PNA file photo by Jess Escaros)
MANILA – The PHP2.5-billion offer to buy out the government’s share from the Manila-Cavite Expressway (Cavitex) is “unfair” and detrimental to the state’s interests, the Philippine Reclamation Authority (PRA) said on Monday.
In a statement, the PRA said the offer made by Cavitex Infrastructure Co. (CIC), which is under the Manny Pangilinan-led Metro Pacific Tollways Corp., was made before the expiration of the operating and maintenance agreement (OMA) on Aug. 25, 2021.
“However, upon cursory examination, the offer appears to be egregiously unfair, unreasonable, and morally objectionable,” it said.
It noted that accepting the “one-sided proposal” from the CIC by the PRA Board of Directors would have potential legal ramifications such as charges of corruption, actions detrimental to the state’s interests, and accusations of plunder.
“The rejection of the offer underscores the PRA Board of Directors' recognition of its inherent inequity and unsuitability,” it said.
In addition, it said accepting the offer would also result in the dissolution of the Public Estates Authority Tollways Corp. (PEATC), a government-owned and -controlled corporation (GOCC) created by the PRA for the operation, maintenance, and toll collection of Cavitex.
“It is advisable for CIC to conduct a comprehensive review of pertinent statutory and regulatory frameworks, cognizant of the unique constraints and obligations inherent in transactions involving GOCCs,” it said.
Adjusted revenue sharing
Following the expiration of CIC’s OMA in 2021, operations and maintenance of Cavitex should have been turned over to PEATC beginning Jan. 1, 2022, in addition to a revised revenue sharing agreement of 60-40 favorable towards the government instead of the current 90-10 in favor of CIC.
“There have been numerous instances where the PRA Board has iterated demands for the revision of the prevailing 90-10 revenue sharing arrangement to a proposed 60-40 distribution model,” it said.
The CIC rejected the demands due to its inability to recoup their PHP11 billion expenditure on the project, it said.
However, it noted that the CIC cannot credibly assert their ongoing failure to recoup their initial investment in Cavitex.
“Such demands underscore a legal interpretation by the PRA Board regarding the adequacy of returns on investment and the necessity for equitable redistribution of revenues derived from the project, potentially invoking contractual clauses or regulatory provisions governing revenue-sharing agreements within the pertinent legal framework,” it said.
It added that the CIC’s inability to recoup its investment holds no relevance to the revenue sharing of Cavitex.
“According to the terms of the Joint Venture Agreement (JVA), the transition from the current 90-10 ratio to a fairer 60-40 ratio is predicated solely on the completion of Phase 1,” it said.
Phase 1 Segments 1 and 3 of Cavitex opened to the public on May 15, 1998 and July 23, 2019, respectively.
Segment 1, also known as the R1 Expressway, is a 6.4-kilometer toll road while Segment 3, also known as C5 Link Expressway, is 3.8 kilometers long.
Phase 1 Segment 2 is an ongoing project with a length of 1.9 kilometers and a target completion by 2025.
“The government is not obliged to await the entirety of the project or the continuation of the 90-10 revenue sharing arrangement. The government's entitlement to an equitable share is contingent solely upon the completion of Phase 1, as specified in the JVA,” it said.
On Friday, the PEATC demanded the turnover of the Cavitex from the CIC and noted that the expressway is government property, with the CIC’s OMA already expired in 2021.
It filed a writ of mandamus before the Court of Appeals in February to seek help for the turnover of the expressway back to government. (PNA)
