NAIA Expressway Project INVESTORS’ BRIEFING 24 June 2011.

NAIA Expressway Project

INVESTORS’ BRIEFING24 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 (GOP) under its Public-Private Partnership (PPP) Program.

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

Project Name Length(km)

Subic-Clark-Tarlac Expressway 93.77

North Luzon Tollway 82.62

C-5 Expressway (Segment 8.1) 2.34

Metro Manila Skyway, Stage 1 9.30

SLEX (Magallanes-Alabang) 13.43

Manila Cavite Toll Expressway 6.75

South Luzon Tollway 36.03

Manila-Cavite Toll Expressway (R-1 Extension) 7.00

Metro Manila Skyway, Stage 2 6.86

Southern Tagalog Arterial Road (STAR) 42.00

EXISTING : 300KM

Project Name Length(km)

Tarlac-Pangasinan-La Union Toll Expressway 88.58

C-5 Expressway (Segment 8.2, 9 & 10) 19.92

NlLEx-SLEx Connector 13.34

NAIA Expressway 5.2

PLANNED/ON-GOING CONSTRUCTION : 127KM

6

Proposed HSH Network in MM and its 200km Sphere

7

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 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 grant contribution for CAPEX or the Government Financial Support (GFS)

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)

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

• Construction of an addition 4.6 km of 4-lane viaduct from NAIA Terminal 3 to Roxas Boulevard, over the existing roads of Sales Avenue, Andrews Avenue, Domestic Airport Road and NAIA Road.

• Upgrading of Phase I (600m) to Phase II standards.

• Provision of ramps to and from NAIA Road, Terminal 3 and other strategic locations.

Project Description

• Provision of toll plazas, plus additional toll operating equipment and safety facilities for the DPWH-constructed Phase I to standards compatible with those of Phase II.

• Preparation of a Detailed Engineering Design.• The Operation and Maintenance of the entire

NAIA Expressway (Phase I and Phase II) as an open-system tolled expressway.

Project DescriptionMinimum Expressway Configuration

Project DescriptionToll Booth Configuration

Project DescriptionKey Characteristics

Elements Characteristics

Phase 1 (existing, for adjustments) 0.6 km

Phase 2 4.6 km

Total Length (Phase 1 & 2) 5.2 km

No. of Lanes 4 lanes

Ramps 5 on and 5 off

Concession period 35 years

Construction period 2 years

Preparation of the Detailed Engineering Design 10 months

Operation start year 2015

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.

AVER

AGE

TRAV

EL S

PEED

AL

ON

G E

XIST

ING

NAI

A RO

ADS

Less than 10km/hr

10km ~ 20km/hr

20km ~ 30km/hr

Over 30km/hr

L E G E N D

Roxa

s Bo

uleva

rd

Skyway / SLEX

Terminal 1

Terminal 2

Terminal 3

Mani

la-C

avi

te C

oata

l Road

EDSA

Project Cost

• The estimated civil works cost for NAIA Expressway is approximately Php9.3 billion.

• 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

• The international competitive bidding for the Project will be conducted strictly in accordance with the rules and procedures of the BOT Law and its Revised IRR

• Two Stage System: • Pre-qualification of Bidders based on technical,

legal and financial criteria

Bidding Framework for the TransactionCompetitive and Transparent Process

• Two Envelope System:– Only those Bidders who pre-qualify will

be eligible to formally submit their technical and financial proposals• Technical Proposal• Financial Proposal

– Selection of bidder with the lowest required GFS as winning bidder

Concession Structure• Build-Transfer-Operate (“BTO”) variant under the BOT Law

• Toll Concession Agreement Scheme:– Concessionaire will Finance, Build, and Operate and Maintain the

adjusted Phase 1 and completed Phase 2 as one open system.

– 35 year concession period, inclusive of construction period.

– Legal transfer of ownership of NAIA Expressway to DPWH will be automatic upon issuance of Certificate of Final Construction

– Toll Structure Competitive and Affordable: Opening tolls set by DPWH and approved by TRB. Periodic toll adjustments shall be made bi-annually and based only on a domestic inflationary index

– DPWH to procure and deliver in a timely manner the required ROW and GFS to partially cover the capital cost of implementing the Project

Key Commercial Terms• Concessionaire Obligations for the 35

year concession period:– raise financing for the balance of the Project cost

(not covered by the GFS) and achieve financial close within 1 year from the signing of the TCA;

– design the Phase I adjustments and Phase II works;

– construct the Phase I adjustments and Phase II works within 2 years from approval of the Detailed Engineering Design;

Key Commercial Terms

– operate and maintain Phase I and Phase II to defined levels of performance standards;

– collect the authorized toll from users of the NAIA Expressway which shall be operated as an open system;

– assume the commercial risks; and– turn-over the NAIA Expressway in good condition

to DPWH at the end of the concession period.

Key Commercial Terms

• DPWH Obligations for the 35 year concession period:– procure and deliver in a timely manner the

required ROW;– subject to Concessionaire compliance with pre-

defined obligations, ensure the grant of the TOC from the TRB

Key Commercial Terms– assist the Concessionaire in securing necessary

national government consents for the Project;– provide to the Concessionaire the agreed GFS

based on pre-agreed milestones, which will be defined in the TCA; and

– ensure the application of the toll adjustment formula prescribed in the TCA and provide compensation in the event of disallowances of authorized computed tolls.

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 to and from Terminal 3.

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.

• A performance regime related to efficient flow of traffic, ride quality, safety, security and cleanliness will be defined in the TCA and payment obligations will be imposed on failure to meet Key Performance Indicators.

• Force majeure shall be a risk that will be shared by both the Concessionaire and DPWH.

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

Key Risk Allocation MatrixRisk/Responsibility Allocation Remarks

Traffic Concessionaire No minimum traffic guarantee

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

Project Financing Concessionaire and DPWH Private financing and GFS, respectively

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

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

Design/Construction ConcessionairePerformance 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 ConcessionaireAt 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 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 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