INFRASTRUCTURE 51

Firms reach compromise on common road for NLEX-SLEX toll ways Project proponents Metro Pacifi c and Citra fi nally reached a compromise on the common alignment for their respective road projects that would link the North and South Expressways (NLEX and SLEX). Metro Pacifi c’s NLEX-SLEX Connector Road project and Citra’s Stage 3 project share a 5-kilometer segment considered as the most profi table stretch of either road project. Under the compromise formula, Citra would advance the cost for the construction of the common road, and will later be reimbursed by Metro Pacifi c for its share in the cost.

he NLEX-SLEX Connector Road project is an unsolicited proposal from Metro Pacifi c Tollways Development Corp. T(MPTDC) for the construction of a 13.4-kilometer (km), 4-lane elevated expressway from City to Skyway- Buendia in Makati City (see box). Meanwhile, the Skyway Stage 3 involves the construction of 14-km, 6-lane extension of the Metro Skyway from Skyway-Buendia to Balintawak, Quezon City; it is part of Citra Tollways Corporation’s (Citra) subsisting franchise to develop the Skyway. MPTDC and Citra previously contested over which fi rm has the right to construct an expressway that would link NLEX and SLEX, but eventually both their road projects were approved by the administration. The 2 road projects share a 5-kilometer alignment that starts at Buendia, Makati and runs until Sta. Mesa, Manila. The fi nancing share once its road project is constructed and is connected to and construction of the P7-billion common segment had been the common road (see table). The fi rms’ respective shares in a sticking point in the discussions of the 2 proponents. The the construction cost will be determined by traffi c volume. segment is considered as the most profi table stretch of either road Revenues would initially be split equally, but adjusted according project as it is projected to cater to the highest volume of traffi c. to traffi c volume once traffi c has stabilized. MPTDC insisted, The government had previously set a deadline for MPTDC however, that the construction should be co-fi nanced at the and Citra to come up with a unifi ed proposal on the common onset, with each fi rm paying for 50% of the construction cost. segment by December 15, but this was not met. Citra had earlier In mid-January, following months of discussion, MPTDC and proposed to advance the cost of construction of the common Citra fi nally reached a compromise. The new formula follows road, and to be reimbursed later on by the MPTDC for its

The 5-km common alignment is the most profi table stretch of either road project.

Philippine ANALYST February 2013 52 INFRASTRUCTURE

Skyway Stage 3 / Citra-PNCC Alignment NLEX-SLEX Connector Road Proponent: Citra Metro Manila Tollways Corporation Proponent: Metro Pacifi c Tollways Development Corporation

IMPLEMENTING AGENCY

Department of Transportation and Communications Department of Public Works and Highways (DPWH) – Toll Regulatory Board (DOTC-TRB)

MODE OF PROCUREMENT

Solicited Proposal, pursuant to Citra’s franchise over Unsolicited Proposal Metro Manila Skyway

PROJECT DESCRIPTION

13.4-km, 4-lane elevated expressway that would pass over the Philippine National Railway (PNR) right-of-way, and would stretch from Skyway- 14-km, 6-lane extension of the Metro Manila Skyway from Skyway-Buendia Buendia to the Manila Port District in Tondo; this would be connected to to the NLEX entry point in Balintawak, Quezon City Metro Pacifi c’s separate P10-billion Harbor Link project, which is an 8-km road that would span from the port area to the NLEX.

CIVIL WORKS TIMEFRAME

2013-2016 2013-2015

PROJECT COST

P25.6 billion P25.4 billion

PROJECT STATUS

- Approved by NEDA Board on Jan. 18 - Project approved “in principle” by the TRB - Terms for Swiss challenge expected by March

Sources: PPP Center, DPWH, DOTC-TRB, Press statements

Philippine ANALYST February 2013 INFRASTRUCTURE 535

FORMULA FOR THE FINANCING AND CONSTRUCTION OF THE 5-KM COMMON ROAD

CITRA PROPOSAL MPTDC PROPOSAL COMPROMISE FORMULA

- Citra to provide upfront (Similar to Citra) fi nancing (100% of - Citra to advance cost (100%) construction cost) - MPTDC to provide upfront of construction co-fi nancing with Citra (50%- Financing - MPTDC to reimburse share - MPTDC to reimburse share 50%) for the construction in cost once its NLEX-SLEX in cost once NLEX-SLEX Connector Road project is Connector Road project is completed and linked with completed and linked with the common road the common road

To be determined based on Citra- 50% Citra- 62.5% Cost sharing traffi c volume on respective road projects MPTDC- 50% MPTDC- 37.5%

Consensual contractor to build the Consensual contractor to build the Project contractor Information not available common alignment common alignment

- 50%-50% sharing for the fi rst 3 years “Open system”- motorists to pay fl at rate “in whichever toll plaza Revenue sharing Information not available - To be adjusted after the the motorist chooses to exit” 3-year period according to (MPTDC or Citra toll plaza) traffi c volume

Sources: DOTC-TRB, DPWH, Press statements

Citra’s initial fi nancing scheme, but differs from it in terms of DOTC modifi es rules for Mactan airport cost- and revenue-sharing. Citra will initially pay for the full cost of construction, and MPTDC will later reimburse its contribution to project bidding, allows airline operators to Citra once the NLEX-SLEX Connector Road project is completed. participate Unlike Citra’s proposal, however, the compromise includes a pre-determined cost-sharing: Citra will shoulder 62.5% of the Airline operators are now eligible to bid for the Mactan-Cebu construction cost, while MPTDC will cover the remaining 37.5%. International Airport (MCIA) Passenger Terminal Building This cost-sharing formula is reportedly based on “forecasted project, after the Transport Department recently revised traffi c share”. Meanwhile, revenue-sharing will follow an “open the project’s bid criteria. The DOTC has partially lifted the system” where MPTDC and Citra will each set up its own toll restriction that previously barred airline owners from joining plazas; motorists will pay a fl at rate for the use of the common the auction. This paves the way for the participation of major road “in whichever toll plaza the motorist chooses to exit.” conglomerates in the P17.52-billion project. This is the 1st The compromise formula is still subject to the airport project to be rolled out under the PPP program. approval of Malacañang. Once approved, the agreement The MCIA Passenger Terminal Building project is a P17.52- will be included in the Supplemental Toll Operations billion undertaking that involves the construction of a new Agreement for Citra’s Skyway Stage 3 project. passenger terminal building in MCIA (see box). This is the 1st Resolving the issue on the common alignment paves the way airport project to be rolled out under the Aquino administration’s for the road projects to begin construction. But as an unsolicited Public-Private Partnership (PPP) program. The invitation to pre- proposal MPTDC’s NLEX-SLEX Connector Road project would qualify and bid for the project was published on December 21. still have to undergo Swiss challenge. While the Skyway Stage So far, 11 companies have expressed their interest to participate 3 project, by virtue of Citra’s franchise over Skyway, could in the auction. Prospective bidders include major conglomerates immediately commence construction upon fi nal approval. The with stakes in airline operations (see table of prospective bidders). Skyway Stage 3 has already been approved “in principle” by Airline operators and airline-related fi rms, i.e. fi rms with the Toll Regulatory Board, but it is still subject to approval stakes in airline companies regardless of whether direct or indirect, from the President. The terms for the NLEX-SLEX Connector were previously excluded from participating in the project auction. Road Swiss challenge are presently being prepared and are As the Department of Transportation and Communications scheduled to be published within March. Both MPTDC and Citra (DOTC) explained, the restriction was intended to prevent plan to start construction of their road projects within the year. anti-competitive behavior and confl ict of interest. “The airline- slash-airport operator may have detrimental acts against rivals… (It) can make the availability of slots, gates, counters, lounges, baggage handling more diffi cult for its competitors,” said DOTC Sec. Joseph Abaya. This provision would have automatically barred San Miguel Corp. (SMC) and JG Summit Holdings, Inc. (JGS) from bidding for the project. SMC holds an indirect minority stake in fl agship carrier Philippine Airlines, while JGS through Cebu Air, Inc. controls budget carrier Cebu Pacifi c Air.

Philippine ANALYST February 2013 54 INFRASTRUCTURE

Airline operators and airline-related fi rms are now allowed to have a limited stake in the companies which may bid for the project.

PROSPECTIVE BIDDERS IN THE MCIA PROJECT (as of Feb. 18)

FIRMS THAT BOUGHT BID DOCUMENTS AIRLINE OPERATOR / AIRLINE-RELATED PARTNERSHIP

 Indirect minority stake in Philippine 1. San Miguel Corp. (SMC) Airlines and Air

 Partnering with MPIC and undisclosed airport 2. JG Summit Holdings, Inc. (JGS)  Parent company of Cebu Pacifi c Air operator

 Partnering with JG Summit Holdings and 3. Metro Pacifi c Investments Corp. (MPIC) undisclosed airport operator

 Partnering with Ayala Corp. and multinational airport operator ADC & HAS (Airport Development 4. Aboitizland Inc. Corp. and Houston Airport System) Airports Inc. (Ayala Corp. holds 100% stake in air charter provider Ayala Aviation Corp.)

 PAL Holdings, the parent company of Philippine Airlines, is a stakeholder in MAC. 5. MacroAsia Corp. (MAC)  MAC is also the parent company of domestic air charter provider MacroAsia Air Taxi Services, Inc.

 Affi liated with air charter provider 6. First Philippine Holdings Corp. Inaec Aviation Corp, a member of the Lopez Group of Companies

7. Filinvest Development Corp./ Filinvest Land Inc.

8. Prime Power Holdings Corp.

9. Megawide Construction Corp.

10. GMR Infrastructure

11. Premier Airport Group (c/o SM Investments Corp.)

Sources: DOTC, Securities and Exchange Commission, Philippine Stock Exchange, company websites, press statements

Philippine ANALYST February 2013 INFRASTRUCTURE 555

MACTAN-CEBU INTERNATIONAL AIRPORT (MCIA) PASSENGER TERMINAL BUILDING PROJECT

Implementing Agency: Department of Transportation and Communications-Mactan Cebu International Airport Authority (DOTC-MCIAA)

Project Objectives: • To augment the capacity of the MCIA passenger terminal to be able to handle the increasing air traffi c demand, to promote operational effi ciency, and to ensure passenger convenience • To increase revenues from tourism Project Description: The project involves the construction of a new world-class passenger terminal building in the Mactan-Cebu International Airport, its components are: 1. Construction of a new passenger terminal 2. Construction of an apron for the new passenger terminal 3. Renovation and expansion of the existing terminal to handle domestic operations 4. Installation of all the required equipment and other related facilities 5. Installation of the required information technology (IT) and other equipment for operations 6. Operations and maintenance of both passenger terminals during the entire concession period

Civil Works Timeframe: 2013-2015 (Phase 1) PPP Structure: Build-Rehabilitate-Operate-Transfer (BROT)

Concession Period: 20 years, inclusive of construction

Project Cost: P17.52 billion Phase 1 (Initial Investment): P8.873 billion Phase 2 (Future Expansion): P8.647 billion

MCIA PROJECT TIMELINE

ACTIVITY SCHEDULE

Publication of Invitation to Pre-qualify and Bid Dec. 21, 2012

Pre-qualifi cation conference Feb. 13, 2013

Submission of pre-qualifi cation documents March 22, 2013

Issuance of Instruction to Bidders, Draft Concession Agreement & Draft Minimum Performance Standards April 11, 2013* and Specifi cations

Submission of bid proposals Aug. 11, 2013*

Issuance of Notice of Award Sept. 26, 2013*

Signing of Concession Agreement Oct. 30, 2013*

*Indicative schedule

After appeals from interested bidders, however, the DOTC The amended rules are expected to encourage broader revised the terms for bidding. Based on the new rules issued on Feb. participation in the auction, while maintaining a level playing 1, airline operators and airline-related fi rms are now allowed to fi eld for the prospective bidders. To address its initial concern have a limited stake in the companies, which may qualify to bid for about potential confl ict of interest situations, the DOTC resolved the project. These fi rms may own a maximum of 33% interest in the to “include strict competition safeguards in the concession Special Purpose Company (SPC), which will be formed for the sole agreement” and to vigilantly implement these safeguards. purpose of carrying out the concession agreement for the project. The deadline for submission of prequalifi cation documents is Just recently, JGS formed a joint venture with Metro March 22. The deadline has been pushed back twice from the original Pacifi c Investments Corp. (MPIC) called MPIC-JGS Airport deadline of Feb. 18 to accommodate bidders’ request for extension. Consortium, Inc. to bid for the airport. MPIC will hold a The auction is scheduled to take place between April and August. 57% stake in the joint venture, while JGS will have a 33% The MCIA is the 2nd most important Philippine airport in terms interest, and an undisclosed airport operator will own the of domestic traffi c. Over the last 10 years, MCIA had a compounded remaining 10%. The revised rules retained the provision annual growth rate of 12.02% for domestic operations and 14.73% requiring bidders to have at least 3 years experience in the for international operations (see graph). The existing MCIA operations and maintenance of an international airport. terminal handles both domestic and international operations, and has an annual capacity of 4.5 million passengers. But, as of 2012, passenger traffi c in the airport totaled 6.22 million passengers.

Philippine ANALYST February 2013 56 INFRASTRUCTURE

The MCIA project is expected to enable the airport to handle The CALA Expressway project is divided into 2 sections: increasing air traffi c demand, to promote operational effi ciency, the PPP section and the ODA section. The PPP section of the and to ensure airline passenger convenience. The new passenger expressway will cover a 28.9-km stretch from Kawit, Cavite terminal building alone will be designed to handle 8 million to Aguinaldo at Silang, Cavite (Cavite section), passengers per year. Once constructed, this will exclusively while the ODA section will span some 18.1-km stretch from cater to international operations, while the existing passenger Silang, Cavite to Mamplasan, Laguna (Laguna section). The terminal building will be for domestic operations. The MCIA private proponent for the project will be in charge of the project is also expected to increase tourism revenues. MCIA operations-and-maintenance of the entire expressway for serves as the gateway airport to the Visayas region, while a concession period of 35 years, inclusive of construction. the province of Cebu itself is a popular tourist destination. The PPP component of the CALA Expressway project costs some P17.1 billion, while the ODA section has a cost of P7.5 billion pesos. The rest of the project cost, amounting to about P10 billion, Gov’t to bid out CALA Expressway soon will be covered by the government and will be spent on right- of-way fi nancing and consultancy services. The Public Works The government is preparing to bid out the Cavite-Laguna department disclosed that it is eyeing the Japan International (CALA) Expressway project, after the project recently Cooperation Agency to provide the assistance for the ODA section. secured NEDA Board approval. The CALA Expressway Once constructed, the CALA Expressway will connect the is a P35.6-billion project involving the construction of a Manila-Cavite Expressway with the SLEX. The CALA Expressway 47-kilometer expressway from Cavite to Laguna. It will be is intended to ease traffi c congestion in major road networks, particularly along Governor’s Drive, , fi nanced through Public-Private Partnership (PPP) and and the Sta. Rosa-Tagaytay Road. Moreover, it is expected to offi cial development assistance (ODA). The project will be support the economic development of the provinces of Cavite the 2nd most expensive project in the PPP pipeline. and Laguna, which are already seen as industrial and commercial centers in the south. In 2009, Region IV-A (Cavite-Laguna- On January 18, the NEDA (National Economic and Batangas-Rizal-Quezon) contributed 11.6% to the country’s Development Authority) Board approved the CALA Expressway. gross national output, 2nd only to the National Capital Region. The project involves the construction of a 47-kilometer (km) road The CALA Expressway project is currently awaiting the from Kawit, Cavite to the Mamplasan Exit of the South Luzon publication of the invitation to pre-qualify to bid, which will signal Expressway (SLEX) in Laguna (see box). The project had earlier the roll out of the project. This is expected to be published in March. been presented to the NEDA Board during the its meeting in late Once rolled out, the CALA expressway will be the 10th PPP project November 2012, but at the time only secured an “approval in to be bid out by the administration, and the 2nd most expensive principle” pending further review of costs. The administration project in the PPP pipeline following the LRT-1 South Extension explained that President Aquino had then wanted the costs project. Awarding is expected within the 3rd quarter of 2013, while verifi ed with a view to having the project built at a lower price. construction is scheduled to take place between 2014 and 2017. Since then, minor adjustments in project specifi cations have The Cavite section of the CALA Expressway was been made that considerably reduced project cost from P43.33 previously included in the 10 priority PPP projects of the billion to the NEDA Board-approved cost of P35.58 billion. administration which were originally slated for roll out in 2011. The reduced project cost may be attributed to structural modifi cations such as the reduced height of the embankments and the reduced length of the viaduct, among others. The original proposed length of the expressway has been retained at 47 km.

Once rolled out, the CALA expressway will support the economic development of Cavite and Laguna.

Philippine ANALYST February 2013 INFRASTRUCTURE 575

CAVITE-LAGUNA (CALA) EXPRESSWAY

Implementing Agency: Department of Public Works and Highways (DPWH)

Project Details: The project involves the construction of a 47-kilometer (km), 4-lane mostly at-grade expressway that that will connect the Manila-Cavite Expressway and the (SLEX) through the provinces of Cavite and Laguna. It is divided into 2 sections: a) PPP (Public-Private Partnership) Section: 28.9-km starting from Kawit, Cavite until Aguinaldo Highway at Silang, Cavite b) ODA (Offi cial Development Assistance) Section: 18.1-km starting from Aguinaldo Highway until the Mamplasan exit of SLEX

The PPP proponent will also be responsible for the operations-and-maintenance of the entire CALA Expressway.

Civil Works Timeframe: 2014-2017 PPP Structure: Build-Transfer-Operate (BTO)

Cooperation Period: 35 years, inclusive of construction

Project Cost and Financing: Total Cost: P35.58 billion PPP: P17.1 billion ODA: P7.5 billion Government: P10.1 billion (right-of-way fi nancing; 50% of independent consultancy cost) Status:  Approved by the NEDA Board on Jan. 18, 2013  Publication of Invitation to Pre-qualify to Bid expected in March.

Sources: PPP Center, DPWH, Press statements

Philippine ANALYST February 2013 58 INFRASTRUCTURE

STATUS OF BIG TICKET INFRASTRUCTURE PROJECTS AS OF FEBRUARY 2013

IMPLEMENTING FUNDING CIVIL WORKS PROJECT TITLE PROJECT COST STATUS / ISSUES AGENCY SOURCE TIMEFRAME 29.50% of civil works accomplished as of Jan. 25, comprised of work on Segment 1. Discussions among DPWH, Ayala Corp. and SLTC -SLEX Link Road DPWH PPP 2012-2014 P1.96 billion on Segment 2 design revisions are reportedly progressing positively. Project Ayala Corp. expects this will be resolved within 1Q2013, with civil works eyed to start within the same period. Notices to Proceed with the civil works have been issued for 713 PPP for School P16.4 billion out of 2,496 sub-projects (29% of project scope). Construction is Infrastructure Project DepEd PPP 2013-2014 expected to take place within 14 months, including a 2-month (PSIP) Phase 1 allowable delay. 4 groups pre-qualifi ed to bid: Light Rail Manila Consortium, SMC Infra Resources Inc., DMCI Holdings Inc. and MTD-Samsung LRT-1 South Extension DOTC-LRTA PPP/ODA 2013-2017 P59.2 billion Consortium. Pre-bid conference held on Feb. 21. Bid submission pushed back from March to May 27. 4 groups pre-qualifi ed to bid: ACI Consortium, IL & FS Transportation Networks Limited, Manila North Tollways Corp., and NAIA Expressway Phase II DPWH PPP 2013-2016 P15.86 billion Optimal Development Infrastructure, Inc. Bid submission deadline moved from Feb. 24 to April 8. Awarding is expected by May 2013. Angat Hydro Electric Power Plant Auxiliary Turbines MWSS PPP 1 ½ years P1.16 billion So far, 12 fi rms have expressed interest to bid for the project. 4 & 5 (Rehabilitation and O&M) DepEd has formed an inter-agency pre-qualifi cation, bids and PPP for School awards committee (PBAC), and a technical working group to Infrastructure Project DepEd PPP 1 year P13.1 billion undertake bidding and procurement. Pre-qualifi cation of bidders is (PSIP) Phase 2 ongoing. So far, 9 fi rms, including the 2 proponents of PSIP I, have expressed interest to bid for the project. DOTC has amended the project’s bid criteria by partially lifting Mactan-Cebu International the restriction on the participation of airline operators and 2013-2015 Airport Passenger Terminal DOTC-MCIAA PPP P17.52 billion airline-related fi rms in the bidding. Submission of pre-qualifi cation (Phase 1) Building documents was moved to March 22. So far, there are 11 prospective bidders. NLEX-SLEX Connector Road Approved by the NEDA Board on Jan. 18. Terms for Swiss challenge DPWH PPP 2013-2016 P25.56 billion Project are being prepared and are expected to be published in March. Approved by the NEDA Board on Jan. 18. Invitation to pre-qualify CALA Expressway DPWH PPP/ODA 2014-2017 P35.58 billion and bid expected to be published in March. The project had been “approved in principle” by the TRB, but evaluation of project ownership (ownership arrangement, e.g. Skyway Stage 3 DOTC-TRB PPP 2013-2015 P25.4 billion joint venture) is still pending. Once approved, TRB will endorse the project to Pres. Aquino for fi nal approval. DBM has released P1.89 billion to the DOTC for the NAIA-3 rehabilitation, following DOTC’s signing of a memorandum of NAIA-3 Upgrading and Full agreement with Takenaka Corp. Takenaka will undertake the DOTC NG 1 year P1.89 billion Operationalization completion, renovation and upgrade of NAIA-3, including the development of 23 airport systems. Full operationalization is expected by yearend. MWSS is presently looking into the viability of the project and possible fi nancing options. A market sounding with the transaction New Centennial Water MWSS -- -- P85 billion advisor group led by RebelGroup will be conducted in March. The Source Project revival of the Laiban Dam was identifi ed as a likely component of the project. Clark Airport CIAC had said that it will present the project proposal to the NEDA- DOTC-CIAC -- 3 years P6 billion (Budget Terminal) ICC in March. Financing scheme has yet to be determined. PPA has completed the master plan and feasibility study (FS) for a proposed bulk cargo handling facility to be located north of the South Harbor. The master plan and FS will be presented to the New bulk cargo facility PPA -- -- P43.3 billion DOTC in March, and to oil fi rms which are seen to benefi t from the project. The proposed project is being eyed as an alternative to the Pandacan oil depot. BCDA will present to the NEDA in March the completed pre- feasibility study (FS) for the 12.56-km monorail project. Bonifacio Global City 2016 BCDA -- P70 billion Preparation of the pre-FS started in Sept. 2012 with a grant from (BGC)-NAIA-3 Monorail (completion) the METI (Japanese Ministry for Economy, Transportation and Industry). Mode of fi nancing has yet to be determined. DOTC is rebidding the P350-Mn contract for the consultancy services for the project, after the fi rst auction resulted in a failed bid with only 1 bidder. The bidding deadline was reset to March LRT-2 East Extension DOTC-LRTA ODA/NG 2013-2016 P9.76 billion 7. The winning bidder will be responsible for creating a detailed engineering design for the project, as well as supervising civil works.

Philippine ANALYST February 2013 INFRASTRUCTURE 595

The NIA Board has reportedly approved the application of energy fi rm Kaltimex Energy (Singapore) Ltd. to carry out the Balintingon Reservoir NIA ODA/NG -- P13.6 billion project subject to the condition that the fi rm would soon submit Multi-purpose Project documents showing it has the legal, technical and fi nancial capability to undertake the project. This is a 3-phased project involving the expansion of NLEX. Proponent MNTC held groundbreaking for Segment 9 on Feb. 7. Segment 9 is a P1.7-Bn, 2.4-km road spanning Valenzuela City Harbor Link DPWH PPP 2013-2016 P10 billion to MacArthur Highway. It is eyed for completion by yearend. Right-of-way acquisition for Segment 10 is ongoing, and detailed engineering design for Segment 8 is being prepared. Pres. Aquino ordered that the project be put on hold and subject to further study. The President called for additional measures EDSA Rehabilitation DPWH NG 2 years P3.1 billion to mitigate inconvenience to motorists while civil works is being undertaken. The project involves the concrete re-blocking and asphalt overlaying of the 23.8-kilometer road. Pres. Aquino visited the project site on Feb. 26 to inspect project Laguindingan Airport ODA/NG P7.9 billion progress. The airport is expected to begin operations on April DOTC 2008-2013 Development (Const.) (Const.) 30. Meanwhile, the project structure for the O&M has yet to be fi nalized.

Philippine ANALYST February 2013