Professional Documents
Culture Documents
Beijing, China
April 2011
Philippine Macro-economic
and Project Financing Indicators
Fiscal Policy, Public Debt and Lender’s Security Requirements
Fiscal Policy
Public Sector Guarantee should be limited to
1. In the long run, developing Asia must
1. Extreme Foreign exchange rate guarantee
rebalance its export growth model.
2. Extreme Inflation rate
2. Carefully designed fiscal stimulus can help
3. Tariff rate setting
restore stability and growth.
3. Infrastructure provides the opportunity to raise
employment and growth quickly.
http://www.investorsfriend.com/return_versus_gdp.htm
http://www.simplestockinvesting.com/SP500-historical-real-total-returns.htm
Debt Market and Project Financing Interest Rates
North
Triangle
Cubao
East Wood
Ayala Ortigas
Fort
Bonifacio
As of 2010, World Bank recommended The LRT/MRT systems that were identified after the completion of the
7% of GDP investment in infrastructure MMUTIS were determined to be market driven projects which are prime
which is greater than the 2% of GDP candidates for PPP undertaking with sovereign guarantees for tariff rate,
investment in infrastructure in the FX and Inflation.
Philippines
LRT1 and MRT3 Technical and Market-Driven Project
Comparison
LRT1
1980: Belgian ODA (PhP300million or US$16million) and
commercial (PhP700.0million or US$ 37.45million) 15 km, 18
stations and 32 LRVs
1996-1999: Japanese ODA Phase 1 ¥11billion (7 4-car LRVs) and
balance of debt payment is approximately US$59million
1999-2009 Japanese ODA Phase2 ¥22billion (12 4-car LRVs and
refurbishment of civil/electro-mechanical systems) and balance of
debt payment is approximately US$253.0million
2004: Belgian ODA €12.3million (Refurbishment of 63 LRVs and
spareparts) and balance of debt payment is approximately
US$17million
LRT1 ODA Debts are not tranferrable.
MRT3
Phase1: US$675million 16 km, 13 stations and 73 LRVs and
balance of equity rental fees is US$1.9billion
Phase2: US$15.0million to refurbish LRT1 North Extension Electro-
Mechanical systems
Procure $300million 75 LRVs phase 1 capacity expansion and
additional US$300million 75 LRVs for MRT3 Phase2.
Monumento to Caloocan Extension US$80million and US$
US$50million satellite depot.
• Original 25-year (2000 to 2025) backended Equity Repayment Profile isnt ideal based revenue and expense
matching and will result in a negative US$ 469million cashflow
• Traditional 10-year (2000 to 2010) Equity Repayment Profile is the ideal and will result in positive
US$366million cashflow.
Models for Integration and Re-Privatization
of Operation and Maintenance of LRT1 and MRT3
Hong Kong and German Transit Models
Philippine Experience (MRT3 and LRT1 projects)
Hong Kong MTR Model German Transit Model
Source: Hong Kong and German Financing Models to Minimize Subsidies for Foreign Exchange and Tariff Rate Risk for Market Driven Transit Systems in
the Philippines Rommel Gavieta; 2008 Metro Rail Conference Rome Terrappinn
London Tube PPP Model and
Swedish International Development Agency Water PPP Model
London Tube PPP Model
Government Financial Institution owns 23% of MRTC and 77% of the ERPs thru
Development Bank of the Philippines (DBP) and Land Bank of the Philippines (LBP).
DOTC has paid 16% of the US$ 2.4 billion in Equity Rental Payments to MRTC which
represents DOTC’s pro-rated ownership of the MRT3 Phase1 System as of yearend 2010.
(This can be validated by DOTC Comptrollership Service)
Government Options for
the Re-privatization of the MRT3
DOTC Options to Reduce its Sovereign Backed
Equity Rental Payment (ERP)s Obligations
MRTC Status Quo on Remaining Equity Rental MRTC Refinances Remaining Equity Rental
Payment Scenario Payment Scenario will save DOTCUS$318million
DOTC’s guarantee for payment of $2.01billion DOTC refinances $463million (NPV $192million)
(NPV $836million) ERP will remain until 2025 (as ERPs due to DBP and LBP with $192million
stipulated in DOJ letter to DOF dated May 8, 2007). Leveraged Balance Sheet Arbitrage structure
will save DOTC $211million (NPV $66million)
The proposed concession fee should be used by The proposed concession fee should be used by
DOTC to help defray payments for remaining DOTC to help defray payment of the $836 million
$2.01billion ERP obligation. refinancing of ERP obligation.
The concession fee that will be paid by PPP proponent will be used to pay
obligations of the DOTC which it guaranteed with the full faith and credit of
the Republic following a modified MWSS Privatization Model.
Savings for DOTC as Rationale in Re-Privatizing
the Operation and Maintenance of MRT3 Phase1 System
MRT LRT1
Total annual operating and maintenance budget is Total cumulative annual operating and
US$ 435million or an average of US$ 43.5.0million maintenance budget US$458million or an average
from 2011 to 2025. (Maintenance fee includes a of US$ 45.8million from 2011 to 2025.
guaranteed 80% availability requirement),
Maintenance fee does not include a guaranteed 80%
Total amortization for a ten year US$375million loan system availability.
with a 5% interest rate for MRT3 Phase1 Capacity
Expansion Project is US$596million (procurement of Total amortization for a ten year US$1.53billion loan
75 Trains) with a 5% interest rate for LRT1 South Extension
Project is US$1.2billion (procurement of 50 LRVs
Total amortization for a ten year US$ 400million with a and develop 16km guideway)
5% interest rate for MRT3 Phase2 Project is
US$508million. (procurement of 75 trains, retrofit of Total amortization for a ten year US$174mllion loan
5.5 km LRT1 Extension from North to Monumento and with a 5% interest rate for LRT1 North Extension
extend MRT3 from Monumento to PNR Caloocan Project is US$222million (to develop 5.5km
Station) guideway)
TOTAL SAVINGS FOR THE PUBLIC SECTOR IN TOTAL SAVINGS FOR DOTC IS US$2.162ILLION IN
PRIVATIZING THE OPERATION AND OPERATINNG/MAINTENANCE AND NEW
MAINTENANCE OF THE MRT3 SYSTEM IS PROJECT EXPENSES
US$1.431BILLION
Re-Privatization Strategies for the DOTC of the
Operation and Maintenance of the LRT1 and MRT3 Systems
Proposed Options for Public Private Partnership Modes to Reduce DOTC’s subsidy for Maintenance
and Operating Expenses
Separately, DOTC should refinance the remaining US$ 2.0billion Equity Rental Payments (ERP)s due
to MRTC by triggering the conditions set under the Equity Value Buyout provisions of the Build,
Lease and Transfer Agreement.
Conclusion
Conclusion
Based on the Immediate effect on providing a more efficient public service, the
refinancing of MRTC Equity Rental Fees is the most advantageous to the DOTC
because:
The integration and re-privatization of the MRT3 and LRT will save DOTC/LRTA a total of of US$3.5 billion
in additional government guarantee to finance expansion and improvement plans of the LRT1 and MRT3
Systems.
Option 1 and 4 strategies for privatizations appears to provide the most advantageous conditions to the
DOTC legally, financially and technically.
Regardless of the what options the DOTC takes the refinancing of the ERPs is paramount to reduce
subsidy to the MRT3 Phase System and enable the DOTC gain unencumbered and immediate ownership
of the MRT3 Phase1 System
The refinancing of rhe ERPs will save the DOTC at least $250 million in NPV by refinancing the remaining
$1.8billion Equity Rental Payments
DOTC can immediately privatize without any legal obstacles the MRT3 Phase1 System
DOTC will be able to realize for the public a more efficient and safe public service to the combined 850,000
passengers a day ridership of LRT1 and MRT3.
Thank you
Project Financing after 2008 Global Financial Crisis
• NPV of PPP developed MRT3 is less than NPV of original ODA developed LRT2 project (with cost overruns.
• NPV of normalized PPP developed MRT3 almost equal to NPV of ODA developed LRT2
• NPV of normalized PPP developed MRT3 is less than NPV of ODA developed LRT2 (using MRT3 project cost) with
cost overruns
MRT3 Additional Ridership Capacities and Projections
(2009 to 2025)
1,600,000.00
Phase 1 ridership
400,000.00
200,000.00
-
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17
• Phase 1: 73 LRVs for 400,000 passengers a day capacity at 3-car train 3.5 minute headway
• Phase1 with Capacity Expansion: with 75 additional LRVs for 850,000 passengers a day capacity at 4-car train 2.0
minute headway
• Phase1, Phase with Capacity Expansion and Phase2: with additional 75 LRVs for 1.25 million passengers a day
capacity at 4-car train 2.0 minute headway
27
Equity Effective Rates of Return
http://www.investorsfriend.com/return_versus_gdp.htm
Bosworth, Collin, Chodorow-Riech; Returns On Fdi: Does The U.S. Really Do
Better?; Working Paper 13313
http://www.nber.org/papers/w13313
http://www.simplestockinvesting.com/SP500-historical-real-total-returns.htm
Potential Sources of MRT3 Phase1 Concern for the DOTC