MPIC’s plan to exit LRT-1 seen raising questions on PPP rail

METRO PACIFIC Investments Corp’s (MPIC) plan to divest its stake in Light Rail Manila Corp. (LRMC), the operator of Light Rail Transit Line 1 (LRT-1), could test investor confidence in public-private partnerships (PPPs) for mass transit, as it highlights the challenges private operators face under the current fare and regulatory framework, analysts said.

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“MPIC’s exit could raise questions about the long-term viability of private investment in mass transit unless fare and regulatory frameworks are recalibrated to ensure commercial sustainability.” Toby Allan C. Arce, head of sales trading at Globalinks Securities and Stocks, Inc., said in a Viber message.

MPIC said it is considering divesting its 35.8% stake in LRMC due to continued losses, with ridership yet to recover from the pandemic impact.

In the first quarter of 2023, MPIC reported that LRMC generated revenues of P595 million, a 73% increase year on year, but the operator still recorded a core net loss of P83 million, albeit 53% lower than the same period the previous year.

“We are still losing on LRT-1, in part because of COVID. Ridership went down, obviously. We continue to lose money from LRT-1, and I think we are considering selling it and getting out of the light rail,” MPIC Chairman, President, and Chief Executive Officer Manuel V. Pangilinan said on Tuesday.

LRMC’s ridership has yet to fully recover, averaging around 450,000 daily passengers in 2019, dropping to 350,000-370,000 in 2023. By November 2024, before the opening of the LRT-1 Cavite Extension Phase 1, daily ridership was 323,000. The first phase of the Cavite Extension was projected to add roughly 80,000 daily passengers, potentially bringing ridership back up to around 403,000.