NAIA Expressway Project

INVESTORS’ BRIEFING24 June 2011

Republic of the Philippines

DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS

The Investment Opportunity

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

• The Project is one of the components of the MetroManila Urban Expressway System that is intended toprovide a high-standard expressway.

Will facilitate the efficient flowof existing and future traffic toand from the country’s premierinternational and domesticairport, the NAIA Complex.

Will link two major expresswaysserving Metro Manila.

The NAIA Expressway

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 Roxas Boulevard, over the existing roads of Sales Avenue, Andrews 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 DescriptionToll Booth Configuration

Project Rationale

• Vehicles travelling from the South Luzon Expressway or Skyway to Roxas Boulevard or the Manila-Cavite 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.

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Less than 10km/hr

10km ~ 20km/hr

20km ~ 30km/hr

Over 30km/hr

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Terminal 1

Terminal 2

Terminal 3

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EDSA

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 TransactionCompetitive 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 RequirementsCompetitive 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 RequirementsCompetitive 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 andMaintain Phase 1 and Phase 2 as one open system.

– 35 year concession, inclusive of design andconstruction.

– Legal transfer of ownership of NAIA Expressway toDPWH after construction.

– DPWH to procure and deliver in a timely manner therequired 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 MatrixRisk/Responsibility Allocation Remarks

Traffic Concessionaire No traffic guarantee

Toll & Adjustment Implementation DPWH Compensation provided for disallowance of adjustment based on agreed formula

Project Financing Concessionaire and DPWH Private financing and GFS, respectively

Inflation & Foreign Exchange Concessionaire Relief provided for domestic inflation through Toll Adjust formula

Basic ROW Acquisition & Delivery DPWH Free and clear, delivered by pre-agreed timeline

Design/Construction Concessionaire Performance Security for Construction posted in favor of DPWH

Operation/ Maintenance ConcessionaireKPIs set with corresponding penalties for non-compliance, Performance Security for Operations posted in favor of DPWH

Political Risks DPWH Limited events

Force Majeure Concessionaire and DPWH

Relief provided to Concessionaire on O&M performance of obligations, procedure and mechanism for addressing impact of FM events to be provided in the TCA

Turn-over at the end of Concession Concessionaire At pre-agreed conditions, testing & 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 utilityshall 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 Timetable2011July - Publication of Invitation to Participate and BidAugust - Pre-qualification ConferenceSeptember - Submission of Qualification Documents

Notice of Pre-qualificationRelease of Draft Concession Agreement to Pre-qualified Bidders

October - Pre-bid ConferenceDecember - Release of Final Concession Agreement to Pre-qualified Bidders

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

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

2015April - Start of Operations

2048March - 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