Republic of the Philippines DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS NAIA Expressway Project

INVESTORS’ BRIEFING 24 June 2011 The Investment Opportunity

• The NAIA Expressway Project, sponsored by the Department of Public Works and Highways (DPWH), is one of the priority projects of the Government of the Republic of the Philippines (ROP) under its Public-Private Partnership (PPP) Program.

• The Project is one of the components of the Metro Urban Expressway System that is intended to provide a high-standard expressway. The NAIA Expressway

. Will facilitate the efficient flow of existing and future traffic to and from the country’s premier international and domestic airport, the NAIA Complex. . Will link two major expressways serving . The Investment Opportunity

• The Republic of the Philippines (ROP), represented by DPWH, will be the direct counterparty in the Toll Concession Agreement (TCA).

• The Project features a toll rate structure that is competitive and affordable. Committed Government Support

• Conduct of a fully transparent and competitive procurement process following the Philippine BOT Law and its Implementing Rules and Regulations. • Government is prepared to provide financial support for CAPEX = Government Financial Contribution Committed Government Support

• ROW provided free and clear to Concessionaire by the pre-agreed timeline to be defined in the TCA • Guarantee on the issuance of the Toll Operations Certificate (TOC) from TRB • Guarantee on Toll Adjustment application. Advisors • Transaction Advisors: – Development Bank of the Philippines (DBP) – International Finance Corporation (IFC) • Technical Advisor: – Japan International Cooperation Agency (JICA)

• With assistance from: – Public-Private Partnership Center (PPP Center) Advisors • IFC in turn hired specialized consultants to complement the services offered by the Transaction and Technical Advisors of DPWH: – expressway technical specialists (LeighFisher), – international legal consultants (Hogan Lovells Singapore), and – local legal individual consultants Project Description

• Preparation of a Detailed Engineering Design. • Construction of an additional 4.6 km 4-lane viaduct, including ramps, toll plazas and operating equipment, from NAIA Terminal 3 to , over the existing roads of Sales Avenue, , Domestic Airport Road and NAIA Road. Project Description

• Adjustments to Phase I (600 meters) to make it compatible with Phase II. • The Operation and Maintenance of the entire NAIA Expressway (Phase I and Phase II) as an open-system tolled expressway. Project Description Toll Booth Configuration Project Rationale

• Vehicles travelling from the or to Roxas Boulevard or the Manila- Expressway have to pass through the existing NAIA roads or EDSA. • Roads around NAIA are already congested. • There is a need to ensure efficient travel to and from the airport terminals  this will support both business travelers and tourism. AVERAGE TRAVEL SPEED ALONG EXISTING NAIA ROADS

Manila-Cavite Coatal Road

Roxas Boulevard Terminal 1 Terminal EDSA Terminal 2 Terminal Terminal 3 Terminal L E G E N D

Over 30km/hr Over 20km ~ 30km/hr 10km ~ 20km/hr than 10km/hr Less Skyway / SLEX / Skyway Project Cost

• The estimated civil works cost for NAIA Expressway is approximately Php9.3 billion (USD 214 million). • The civil works cost was estimated based on similar Government and BOT projects implemented or tendered from 2010 up to the present. Bidding Framework for the Transaction Competitive and Transparent Process • Two Stage System: . Pre-qualification of Bidders based on technical, legal and financial criteria . Submission of Bids • Technical Proposal • Financial Proposal

Selection of bidder with the lowest required GFS as winning bidder Prequalification Requirements Competitive and Transparent Process • Technical Qualifications: – Construction Experience: • Similar Projects (expressways, viaducts, flyovers) totaling Php6B in last 10 years including at least 1 project with value of at least Php2B • Can be fulfilled by: – any Consortium Member with at least 10% interest – a Contractor (can propose up to five) – Toll Road Operation and Maintenance Experience and Interest in project & O&M company • 5 years of experience operating and maintaining toll roads • Minimum 10% interest in the project company and 20% interest in the O&M company Prequalification Requirements Competitive and Transparent Processments

• Financial Qualification – Lead Member must be largest member and have at least 33% stake in the Consortium – Lead Member’s Net Worth: P 1.2 billion – Lead Member’s Taxable Income: P 580 million – Ability to borrow at least P 4.8 billion Concession Structure • Build-Transfer-Operate (“BTO”) variant under the BOT Law • Toll Concession Agreement Scheme: – Concessionaire will Finance, Build, Operate and Maintain Phase 1 and Phase 2 as one open system. – 35 year concession, inclusive of design and construction. – Legal transfer of ownership of NAIA Expressway to DPWH after construction. – DPWH to procure and deliver in a timely manner the required ROW and GFS. Key Commercial Terms • Concessionaire Obligations for the 35 year concession period: – raise financing and achieve financial close within 1 year from the signing of the TCA; – Prepare the Detailed Engineering Design (DED) within 10 months from signing of the TCA; – construct the Phase I adjustments and Phase II works within 2 years from approval of the DED; Key Commercial Terms

– operate and maintain Phase I and Phase II; – assume the commercial risks of the Project; and – turn-over the NAIA Expressway in good condition to DPWH at the end of the concession period. Key Commercial Terms

• The bid parameter will be the lowest required GFS. • The selection of the Independent Consultant (IC) will be done by DPWH from a shortlist of firms to be approved by the Concessionaire. The cost of the IC shall be borne equally by DPWH and the Concessionaire. • There will be two (2) sets of tolls for the Expressway, one applied on the main expressway and the other for the segment between Terminal 3 and the Skyway. Key Commercial Terms

• Opening tolls will be set by DPWH and approved by TRB. The approved toll rates will be disclosed during the tender process. • Periodic toll adjustments shall be made bi-annually and based only on a domestic inflationary index • A performance regime on O&M will be defined in the TCA with payment obligations for not meeting KPIs. • Force majeure shall be a risk that will be shared by both the Concessionaire and DPWH. Key Risk Allocation Matrix

Risk/Responsibility Allocation Remarks Traffic Concessionaire No traffic guarantee Compensation provided for disallowance of Toll & Adjustment Implementation DPWH adjustment based on agreed formula Project Financing Concessionaire and DPWH Private financing and GFS, respectively Relief provided for domestic inflation through Inflation & Foreign Exchange Concessionaire Toll Adjust formula Free and clear, delivered by pre-agreed Basic ROW Acquisition & Delivery DPWH timeline Performance Security for Construction Design/Construction Concessionaire posted in favor of DPWH KPIs set with corresponding penalties for Operation/ Maintenance Concessionaire non-compliance, Performance Security for Operations posted in favor of DPWH Political Risks DPWH Limited events Relief provided to Concessionaire on O&M performance of obligations, procedure and Force Majeure Concessionaire and DPWH mechanism for addressing impact of FM events to be provided in the TCA At pre-agreed conditions, testing & Turn-over at the end of Concession Concessionaire acceptance regime included in TCA Foreign Ownership and Management • The Philippine Constitution, provides that no franchise, certificate or any other form of authorization for the operation of a public utility shall be granted except to citizens of the Philippines or to 60/40 companies. • Foreign ownership and management is NOT PROHIBITED on the level of the Concessionaire. • However, the Facility Operator MUST BE at least 60% Filipino owned and controlled. Indicative Timetable 2011 July - Publication of Invitation to Participate and Bid August - Pre-qualification Conference September - Submission of Qualification Documents Notice of Pre-qualification Release of Draft Concession Agreement to Pre-qualified Bidders October - Pre-bid Conference December - Release of Final Concession Agreement to Pre-qualified Bidders

2012 January - Submission of Bid and Issuance of Notice of Award March - Signing of the TCA

2013 March - Approval of the Detailed Engineering Design and Delivery of ROW April - Start of Construction

2015 April - Start of Operations

2048 March - Turn-over of the NAIA Expressway to DPWH THANK YOU Toll Rate Adjustment

Periodic toll adjustments shall be made bi-annually and based only on a domestic inflationary index based on the following formula:

TRn= TRo [(CPIn/CPIo)] where:

TRn = new Toll Rate as adjusted

TRo = old Toll Rate as of the last adjustment

CPIn = CPI for month of the new review date issued by the NSO

CPIo = CPI for the month of the last review date issued by the NSO