The Manila Light Rail Transit 1 (LRT1) Extension, Operations and Maintenance PPP Project, jointly advised by the Development Bank of the Philippines (DBP), in partnership with the International Finance Corporation (IFC), was recently awarded the Asia-Pacific Rail Deal of the Year 2016 at the IJGlobal Awards ceremony on 9 March 2017 held in Singapore.
DBP and IFC advised the Department of Transportation in the structuring, tendering, and eventual award of the PPP contract for this Php65-billion Project, which is still the largest awarded PPP project of the Philippine Government to date. The contract requires the private partner to rehabilitate the existing LRT1 system to meet key performance standards; construct an 11.7-km extension of the line from Baclaran to Niog in Bacoor, Cavite with 8 new stations; and operate and maintain the entire line for the duration of the 32-year concession, including any fleet upgrades or replacements as may be necessary to meet contractual performance standards.
For its part, Government will provide the right-of-way required for the construction of the extension; deliver new light-rail vehicles to service the system; and construct a satellite depot, the latter two to be obtained through Official Development Assistance (ODA) from the Japan International Cooperation Agency.
The PPP contract was signed on 2 October 2014 with the winning bidder, Light Rail Manila Corporation (LRMC), and the LRT1 system was turned-over for operations and maintenance on 12 September 2015. LRMC — composed of Metro Pacific Investments Corporation, AC Infrastructure Holdings Corporation of the Ayala Group, and Macquarie Infrastructure Holdings (Philippines) Pte. Limited — brought in global experts in the field such as RATP Development S.A. that currently operates and maintains the Paris Metro composed of 16 lines, with 214-km of track and 300 stations.
As transaction advisor to the Department of Transportation, DBP and IFC safeguarded the interests of Government while at the same time ensured that the transaction remained commercially viable and bankable. Even though there was eventually only one bidder, the competitive tension raised during the tender process participated in by six groups, resulted in a Php9.35-billion premium payment to Government rather than a capital subsidy. Further, the bankability of the project can be seen by the successful Php23.5-billion, 15 year long-term debt fund-raising for the project by LRMC participated in by six local banks.
The DBP team for this transaction was led by its Investment Banking Department which specializes in financial and transaction advisory, project finance, and loan syndications, among others. The DBP-IFC team was supported by external specialist consultants, namely: URS (technical consultant, now AECOM), Pinsent Masons – MPillay (international legal consultant), and C&G Law (local legal consultant).
The IJGlobal Awards recognizes and celebrates outstanding deals and institutions from the world of infrastructure finance, and acknowledges key public and private sector players in the region for their performance, innovation, and excellence. The judging panel is composed of industry leaders in various areas of international infrastructure finance, including lawyers, technical advisors, and finance experts. IJGlobal is a leading online database of infrastructure and project finance transactions and assets building upon Euromoney Institutional Investor’s Infrastructure Journal and Project Finance publications.