-
8/12/2019 2002 Mass Transit Systems in Metro Manila Market, Financing, And Currency Risks Euromoney London Financing Mass Transit Systems (New Version)
1/36
MASS TRANSIT SYSTEMSIN METRO MANILA:
Market, Financing, and Currency RisksBased on Paper Entitled: Market Oriented Planning for Mass Transit Systems:
Private Sector Role in Metro Manila, Summer 2002, Journal of Structured and Project Finance
Rommel C. Gavieta MA (URP), MSc (Eng), UAP, PIEP
12thInternational Rail Finance Conference
Organised by Euromoney
October 28 and 29 2002
London, UK
-
8/12/2019 2002 Mass Transit Systems in Metro Manila Market, Financing, And Currency Risks Euromoney London Financing Mass Transit Systems (New Version)
2/36
Metro Manila Mass Transit Systems (MTS)
Market Development Drivers
-
8/12/2019 2002 Mass Transit Systems in Metro Manila Market, Financing, And Currency Risks Euromoney London Financing Mass Transit Systems (New Version)
3/36
THEMETRO R ILGROUPOctober 2002
Rommel C. GavietaEuromoney12the International Rail Finance Conference
Types of MTS Development Drivers
Market-Driven Supply (MDS) Development
an approach that avoids costly supply investment by matching existing demand
and supply through the market-oriented planning.
Non-MDS Development
a traditional approach to urban infrastructure development that embodies a
tendency to predict and provide services.
-
8/12/2019 2002 Mass Transit Systems in Metro Manila Market, Financing, And Currency Risks Euromoney London Financing Mass Transit Systems (New Version)
4/36
THEMETRO R ILGROUPOctober 2002
Rommel C. GavietaEuromoney12the International Rail Finance Conference
Socio-economic Characteristics inMetro Manila
In Developed Countries Public Sector investment in infrastructuredevelopment is at least 4% of GDP as compared to the Philippineswhich is 2% of GDP
Metro Manila has a population of 9.54 million over a 636 sq.km. area orGreater Manila Region will have a population of 25 million over a 41,500sq.km.
Metro Manila contributes 30% to the total GDP.
Metro Manila has 13% of the total national population on an area that isless than 1% of the total national land area.
Metro Manila earn $ 2,650.00 per capita while the national average isover $ 1,000 per capita.
Young and educated workforce and relatively big domestic market havein fact allowed the country to grow despite its low savings rate of barely
22% compared to East Asias average rate of 40%.
-
8/12/2019 2002 Mass Transit Systems in Metro Manila Market, Financing, And Currency Risks Euromoney London Financing Mass Transit Systems (New Version)
5/36
THEMETRO R ILGROUPOctober 2002
Rommel C. GavietaEuromoney12the International Rail Finance Conference
Urban Pattern of Metro Manila
Urban pattern followed the crescentshape of Manila Bay with 6circumferential roads and 6 radialroads
Public Transportation use in MetroManila is relatively high as compared
to Bangkok and Jakarta
Proposed infrastructure pattern isincomplete and currently underdevelopment
Delays are attributed to lack ofFunds and ROW acquisitionproblems.
-
8/12/2019 2002 Mass Transit Systems in Metro Manila Market, Financing, And Currency Risks Euromoney London Financing Mass Transit Systems (New Version)
6/36
THEMETRO R ILGROUPOctober 2002
Rommel C. GavietaEuromoney12the International Rail Finance Conference
Metro Manila Spatial Characteristics
The changing spatial characteristics of MetroManila along with its suburb, the Greater ManilaRegion are as follows:
Increased suburbanisation and sustained densityof inner areas with the stepping in of commercialactivities. Mass transit system in the inner corehas not improved and the environment hasdeteriorated.
Continued nodal development of Commercial
Business Districts (CBD) as well as squatter/slumcommunities, both of which exert strong butcontrasting influences on transportation.
Increased spatial separation between residencesand CBD and educational centers.
Unabated development of suburban areas ischaracterized by market corridor.
Unprepared and undeveloped infrastructure ofthe suburban area for the influx of the peopleinto the Greater Manila Area.
-
8/12/2019 2002 Mass Transit Systems in Metro Manila Market, Financing, And Currency Risks Euromoney London Financing Mass Transit Systems (New Version)
7/36
Mass Transit System (MTS) Development Plan
-
8/12/2019 2002 Mass Transit Systems in Metro Manila Market, Financing, And Currency Risks Euromoney London Financing Mass Transit Systems (New Version)
8/36
THEMETRO R ILGROUPOctober 2002
Rommel C. GavietaEuromoney12the International Rail Finance Conference
Metro Manila TransportationDemand Pattern
MTS projects categorised asMetro Lines were found to beMDS capable.
MTS projects categorised asSuburban Lines were found to
be non-MDS capable
Public Transportation has amodal share of 78% which likeTokyo is high when compared toBangkoks 49% and Jakartas
55%
-
8/12/2019 2002 Mass Transit Systems in Metro Manila Market, Financing, And Currency Risks Euromoney London Financing Mass Transit Systems (New Version)
9/36
THEMETRO R ILGROUPOctober 2002
Rommel C. GavietaEuromoney12the International Rail Finance Conference
Metro Manila MTS Development Plan
Based on the Transportation
Study funded by JBIC the
following are the MTS projects
recommended for development:
Metro Lines
LRT-1: com pleted in 1984
LRT-2: under construct ion MRT-3: Phase I completed & Phase II
to be bui l t
LRT-4: und er negotiat ion
Suburban Lines
LRT-1 Extension: und er negotiat ion
South Rail: und er negotiat ion
North Rail: und er negotiat ion
-
8/12/2019 2002 Mass Transit Systems in Metro Manila Market, Financing, And Currency Risks Euromoney London Financing Mass Transit Systems (New Version)
10/36
THEMETRO R ILGROUPOctober 2002
Rommel C. GavietaEuromoney12the International Rail Finance Conference
MTS Project Description
Project Project Cost DescriptionMDS AND METRO PROJECTS
LRT-1 PhP 3.4 bn (1984) 15 km with 18 stations
LRT-2 PhP 31.4 bn (est.) 13.8 km with 11 stations
104 Light Rail Vehicles (LRV)
MRT-3 Phase I US$ 675.5 mn (2000) 16.9 km with 13 stations
73 LRVs
MRT-3 Phase II US$ 214.0 mn (2005) 5.1 km with 3 stations
48 LRVs
LRT-4 US$ 958.0 mn (est.) 22.6 km with 11 stations124 LRVs
NON-MDS AND SUBURBANPROJECTS
LRT-1 Extension US$ 842.5 mn (est.) 27 km with 13 stations
132 LRVs
South Rail PhP 14.2 bn (est) 50 km
North Rail PhP 42.1 bn (est.) Phase I: 42.7, Phase II: 4.9 km, PhaseIII: 11.6 km and Phase IV: 37.5 km
-
8/12/2019 2002 Mass Transit Systems in Metro Manila Market, Financing, And Currency Risks Euromoney London Financing Mass Transit Systems (New Version)
11/36
PUBLIC SECTORPROJECT FINANCING AND CURRENCY RISK
PERSPECTIVE
-
8/12/2019 2002 Mass Transit Systems in Metro Manila Market, Financing, And Currency Risks Euromoney London Financing Mass Transit Systems (New Version)
12/36
THEMETRO R ILGROUPOctober 2002
Rommel C. GavietaEuromoney12the International Rail Finance Conference
Public Sector Economic and Financial EvaluationParameters of Public-Private Partnerships
Based on the Transportation Study funded
by JBIC:
Projects with highest Economic IRRare metro-expressways (25% andabove) and MTS projects (15% to 20%).
Financial IRR for metro-expressways isnot high ranging between 4% to 12%
while MTS is moderate ranging from5% to 16%.
Private sector provides the capital forpump-priming the urban economy withthe development of MTS.
Public sector will benefit from the
development of down streameconomic linkages and the incrementalincrease in tax base as a result of theurban mass transit system project.
Concerns
Public Sectors lack of appreciation ofmaturity mismatches between maturityof obligations and MTS asset lifespan
Public Sectors should link sovereignenhancements to economic income
from the development of MTS projects
Public sectors evaluation of projectfocuses on project cost evaluation andtransparency of bidding process
-
8/12/2019 2002 Mass Transit Systems in Metro Manila Market, Financing, And Currency Risks Euromoney London Financing Mass Transit Systems (New Version)
13/36
THEMETRO R ILGROUPOctober 2002
Rommel C. GavietaEuromoney12the International Rail Finance Conference
Public Sector Concerns overDeficits due to Sovereign Enhancements
Growing fiscal deficits as a result of
mismatches between public revenuesand public expenditures.
Fiscal deficits blurring Public Sectors
appreciation of MTS Project Economicand Financial Returns.
Growing awareness about currencymismatches between source of funds andproject revenues.
Public Sector debt in local currencydoubled from the date of signing of theloan and concession agreement to thefirst date of debt and equity payments.
Phase I & II Financial, Economic and Health & Welfare Benefit Cash
Flow
Assumptions: Ridership figures are based on DOTC projectionsAverage Ph1 fare: PhP12.50 increasing at 3% p.a.
Average Ph1 & Ph2 fare: PhP 19.00 from 2004 and increasing at 3% p.a.Average distance: Ph1 and Ph2 (11 km), Ph1 (8 km)PhP51.00/US$ @ 2001
Assumes 48 LRVs for Ph2 through ODA Financing
-
1 0 0 , 0 0 0
2 0 0 , 0 0 0
3 0 0 , 0 0 0
4 0 0 , 0 0 0
5 0 0 , 0 0 0
6 0 0 , 0 0 0
7 0 0 , 0 0 0
8 0 0 , 0 0 0
9 0 0 , 0 0 0
2 0 0 6 2 0 0 9 2 0 1 2 2 0 1 5 2 0 1 8 2 0 2 1 2 0 2 4 2 0 2 7
H e a l t h & W e l fa r e B e n e f i t
E c o n o m i c B e n e f i t
P h a s e I & I I R e v e n u e s
P h a s e I & I I D e b t + E q u i t y I n s t a l lm e n t P a y m e n t s
US$ 000s
Year
-
8/12/2019 2002 Mass Transit Systems in Metro Manila Market, Financing, And Currency Risks Euromoney London Financing Mass Transit Systems (New Version)
14/36
THEMETRO R ILGROUPOctober 2002
Rommel C. GavietaEuromoney12the International Rail Finance Conference
Currency Risk and its effect onPublic Sectors Fiscal Position
0
50
100
150
200
250
300
350
400
450
2000 2003 2006 2009 2012 2015 2018 2021 2024
Cost + lease rentals (Ph2)
Cost + lease rentals (Ph1)
Revenues (Ph1+Ph2)(PhP40/$)Revenues (Ph1 + Ph2)(PPP)
Revenues (Ph1)
0
50
100
150
200
250
300
350
2000 2003 2006 2009 2012 2015 2018 2021 2024
Cost + lease rentals (Ph2)
Cost + lease rentals (Ph1)
Revenues(Ph1+Ph2)(PhP50/$)
Revenues (Ph1 + Ph2)(PPP)
Revenues (Ph1)
Phase I & II @ PhP40/$ Phase I & II @ PhP50/$
-
8/12/2019 2002 Mass Transit Systems in Metro Manila Market, Financing, And Currency Risks Euromoney London Financing Mass Transit Systems (New Version)
15/36
THEMETRO R ILGROUPOctober 2002
Rommel C. GavietaEuromoney12the International Rail Finance Conference
Public Sector Fiscal Position
Public Debt is classified into two: Directand Indirect Obligations of the Republic.Direct Obligations is automaticallyappropriated annually while indirectobligations are subject to appropriationsrisk.
Public Sector must understand that it islike an ordinary borrower where it lacksthe resources needed to finance high net
present value or MDS projects.
Public Sector debt is 61% of GDP in 2001.Obligation at present does not includeobligations as a result of indirectsovereign enhancement for MTS projects.
Philippine Debt
18.5
34.9
Public Sector Debt
Private Sector Debt`
10%
90%
Short Term
Loans
Medium and
Long Term
Loans
Philippine Debt Maturity Profile
-
8/12/2019 2002 Mass Transit Systems in Metro Manila Market, Financing, And Currency Risks Euromoney London Financing Mass Transit Systems (New Version)
16/36
PRIVATE SECTOR PROJECT FINANCING
-
8/12/2019 2002 Mass Transit Systems in Metro Manila Market, Financing, And Currency Risks Euromoney London Financing Mass Transit Systems (New Version)
17/36
THEMETRO R ILGROUPOctober 2002
Rommel C. GavietaEuromoney12the International Rail Finance Conference
MTS Project Financing Schemes
Project Project Cost Description
MDS AND METROPROJECTS
LRT-1 Government Project Belgian and Swiss ODA with Commercial Loan fromLloyds
LRT-2 Government Project Japanese ODA and Government Equity
MRT-3 Phase I Build Lease Transfer Japanese and Czech ECA, Commercial Loans andPrivate Equity
MRT-3 Phase II Build Transfer Japanese ECA, NEXI & Commercial Loan and PrivateEquity
LRT-4 Build Transfer and Build Own andOperate
French ECA and Commercial Loans
NON-MDS ANDSUBURBAN PROJECTS
LRT-1 Extension Joint Venture Agreement betweenPrivate Company and GovernmentCorporation
Canadian ECA, Commercial Loans and PrivateEquity
South Rail Government Project Korean ODA and Government Equity
North Rail Government Corporation Project Japanese ODA and Government Corporation Equity
-
8/12/2019 2002 Mass Transit Systems in Metro Manila Market, Financing, And Currency Risks Euromoney London Financing Mass Transit Systems (New Version)
18/36
THEMETRO R ILGROUPOctober 2002
Rommel C. GavietaEuromoney12the International Rail Finance Conference
Unbundled Internal Rate of Return (IRR) for the
MRT-3 Phase II Project
DOF Offered Equity Investment Premium 10.44% or 1,044 basis points (bp) p.a. Philippine Debt Paper with a 25-year tenor and at an interest rate of 10.44%
Equity Liquidity Risk Premium 1.5% or 150 bp p.a.
Financial Closure Risk (1.5% or 150 basis points (bp) Premium US$ 30 million or 14% of the US$ 214 million proposed Total Project Cost (TPC) for potential advances
for design, construction mobilisation and construction if financial closure is not achieved six months fromeffectiveness of the Build Transfer (BT) Supplemental Agreement
Construction Completion Risk (1.5% or 150 bp Premium) US$ 13 million or 6% of the TPC for additional interest During Construction costs in the event the project
is not completed on time due to MRTCs fault and theUS$ 10.9 million or 5% of the TPC for claims from
government for the first debt re-payment in the event the project is not completed on time due to MRTCs fault.
Cost Overrun Risk (1.5% or 150 bp Premium) US$ 14.6 million or 6.8% of TPC claim from EPC Contractor for escalation of the EPC Cost from 1997 and
US$ 4.0 million or 1.9% of TPC claim from the EPC Contractor for Foreign Exchange losses due to thepegging of the exchange rate at JPY 121.50 to US$ 1.00 in 1997.
Light Rail Transit Project investment Risk (1.0% or 100 bp Premium)
At present, the capital market is wary of the Light Rail Projects in Southeast Asia in light of the recent debtrestructuring talks for the LRT projects in Bangkok and Kuala Lumpur. This has increased the investmentpremiums for any appetite, if any, for future LRT projects in Southeast Asia.
-
8/12/2019 2002 Mass Transit Systems in Metro Manila Market, Financing, And Currency Risks Euromoney London Financing Mass Transit Systems (New Version)
19/36
THEMETRO R ILGROUPOctober 2002
Rommel C. GavietaEuromoney12the International Rail Finance Conference
Comparative YieldsMRT-3 Project Yield: 15%
(Assumes completion and other risks)
Average Yields from 8-12-1992 to 08-12-2002 Dow Jones Industrial Average: 10.16 (USA)
NASDAQ Composite Index: 8.62% (USA)
S&P 500 Index: 8.08% (USA)
S&P Railroad Index: 7.30% (USA)
Hang Seng Index: 5.32% (HK)
STI Index: 2.02% (Singapore)
Kuala Lumpur Composite Index: -2.20% (Malaysia)
Philippine Composite Index: -9.71% (Philippines)
Jakarta Composite Index: -9.71% (Indonesia) Thailand Stock Exchange Index: -11.61% (Thailand)
-
8/12/2019 2002 Mass Transit Systems in Metro Manila Market, Financing, And Currency Risks Euromoney London Financing Mass Transit Systems (New Version)
20/36
Financing Structure of EDSA MRT-3
-
8/12/2019 2002 Mass Transit Systems in Metro Manila Market, Financing, And Currency Risks Euromoney London Financing Mass Transit Systems (New Version)
21/36
THEMETRO R ILGROUPOctober 2002
Rommel C. GavietaEuromoney12the International Rail Finance Conference
Financing Structure of EDSA MRT-3Phase I Project
Asset Transfer to DOTC)
Phase I
Debt US$485.5 M
EquityUS$ 190.0 M
Contingent obligation subject to GAA
Build Lease Transfer Agreement
EDSA MRT-3
Project Completion Phase I
Debt direct
obligation of ROPROPSecurity- Equity Swap
Phase II
Government
PhP 2.0 B
Debt
US$ 175 to
185 M
Advances
US$ 40 to 60 M
Direct Appropriation
Supplemental BT with ROPSecurity-Advances Swap Option
Contingent obligationsubject to GAA
-
8/12/2019 2002 Mass Transit Systems in Metro Manila Market, Financing, And Currency Risks Euromoney London Financing Mass Transit Systems (New Version)
22/36
THEMETRO R ILGROUPOctober 2002
Rommel C. GavietaEuromoney12the International Rail Finance Conference
Build Transfer (BT) Security StructureLenders
Fare boxRevenue
Collection
Asset
Republic of the Philippines
Performance Undertaking
Department of Finance
Metro Rail Group
Advances 20% of Total Project cost
Asset
Republic of the Philippines
Performance UndertakingDepartment of Finance
Fare boxRevenue
Collection
-
8/12/2019 2002 Mass Transit Systems in Metro Manila Market, Financing, And Currency Risks Euromoney London Financing Mass Transit Systems (New Version)
23/36
THEMETRO R ILGROUPOctober 2002
Rommel C. GavietaEuromoney12the International Rail Finance Conference
Private Sector Incentives from the Public Sector
1. Indirect sovereign enhancementfor repayment of US$ 500.0
million debt:
Low front-end fees and premia for ECAguarantee/insurance
Low interest rate spreads from foreignand domestic commercial banks
Access to ECA loans
Extended tenor offered by the PhilippineForeign Currency Deposit Unit (FCDU)banks with back-ended repayment profile
No requirement for cashflow to coverdebt service by more than one time
No requirement for debt service reserveaccounts.
Lessons Learned
Indirect sovereign enhancementclassified debt repayment as a contingentliability of the public sector that makesdebt repayment subject to appropriationrisks.
Debt repayment is a continuingmanagement concern of the privatesector to ensure smooth transmittal ofdebt payment every time it is due.
-
8/12/2019 2002 Mass Transit Systems in Metro Manila Market, Financing, And Currency Risks Euromoney London Financing Mass Transit Systems (New Version)
24/36
THEMETRO R ILGROUPOctober 2002
Rommel C. GavietaEuromoney12the International Rail Finance Conference
Private Sector Incentives from the Public Sector
2. Guaranteed Internal Rate ofReturn for an investment of US$210.0 million:
The allocation of project and market risksaway from lenders allows extremelyattractive financing terms and conditions
Extended tenor for domestic and foreigninvestors with a back-ended repaymentprofile.
Lessons Learned
Equity repayment is subject to Fareboxrevenue and government appropriation
Government appropriation is subject toappropriation risks.
Farebox revenue is subject to currencymismatch between source of equity andsource of revenue.
Domestic and Foreign investor unable toliquefy its receivables due to anundeveloped domestic debt security market
Due to the tenor and equity rental repaymentprofile domestic investors are seeking funds
from the insurance sector.
-
8/12/2019 2002 Mass Transit Systems in Metro Manila Market, Financing, And Currency Risks Euromoney London Financing Mass Transit Systems (New Version)
25/36
THEMETRO R ILGROUPOctober 2002
Rommel C. GavietaEuromoney12the International Rail Finance Conference
Private Sector Incentives from the Public Sector
3. Market and Fare Setting Risk
The allocation of market risk and faresetting risk away from the Lendersallowed for competitive financing termsand conditions.
Fare setting is a politically sensitive
concern that affects revenue butenhances economic benefits.
Fare setting makes revenue an elasticthat affects market share.
Lessons learned
Lack of appreciation that domesticpolitical constraints usually starts bitingbefore any technical capacity constraintsis reached.
Securitisation and Convertible Bonds
-
8/12/2019 2002 Mass Transit Systems in Metro Manila Market, Financing, And Currency Risks Euromoney London Financing Mass Transit Systems (New Version)
26/36
THEMETRO R ILGROUPOctober 2002
Rommel C. GavietaEuromoney12the International Rail Finance Conference
Securitisation and Convertible BondsBuild Lease and Transfer (BLT) Build and Transfer (BT)
Government Guarantees
Lenders
US$ 485.5 M
Private Sector
US$ 190 M
ProjectCompletion
Government Guarantee 15%IRR over 25 years
Private Sector SecuritisesEquity Cash Flow
Government Guarantees
Project Completion
LendersUS$ 181.5 M(Loan Guarantee)
Private SectorUS$ 16.2 M
(paid in US$government bonds)
Convertible Bond
Peso equivalentof US$ 16.2 M
-
8/12/2019 2002 Mass Transit Systems in Metro Manila Market, Financing, And Currency Risks Euromoney London Financing Mass Transit Systems (New Version)
27/36
FUTURE PARADIGM FOR PRIVATE ANDPUBLIC SECTOR PARTNERSHIP IN THE
DEVELOPMENT MTS PROJECTS
Recommendations to Improve
-
8/12/2019 2002 Mass Transit Systems in Metro Manila Market, Financing, And Currency Risks Euromoney London Financing Mass Transit Systems (New Version)
28/36
THEMETRO R ILGROUPOctober 2002
Rommel C. GavietaEuromoney12the International Rail Finance Conference
Recommendations to ImproveGovernments Absorptive Capacity in
the Implementation of BOT Projects
BOT law was enacted to address government financial constraint and facilitate privatesector investment into infrastructure/transportation sector. It would be ideal for theprocessing of project proposals to focus on to economic benefits and prioritization of BOTprojects.
Technical and financial viability be measured on the basis of compliance to performancestandards and not on detailed specifications.
Government to recognise that its participation in the financial road-show will result in lowerinterest spreads and ultimately reduce project cost.
Strict implementation of the RA regarding the acquisition of property for governmentsponsored projects by government and acquisition cost for ROW should be made part ofproject cost.
NEDA to endeavor to obtain ODA funds from donor countries approximately 5% of the totalODA loans for project identification, feasibility studies, master planning at local and regionallevels, and monitoring and evaluation.
Private Sector View of the
-
8/12/2019 2002 Mass Transit Systems in Metro Manila Market, Financing, And Currency Risks Euromoney London Financing Mass Transit Systems (New Version)
29/36
THEMETRO R ILGROUPOctober 2002
Rommel C. GavietaEuromoney12the International Rail Finance Conference
Private Sector View of thePublic Sector in MTS Development
Public Sectors constancy in incorporating into the annual budget thecontingent liability for paying obligations due to MTS projects.
Public Sector should enact legislation that will promote the development of adomestic debt security market.
Public Sectors constancy in the interpretation of contractual obligations by thePublic Sector.
Private Sectors understanding that sovereign enhancement is a finite resourceof the Public Sector
Private Sectors earlier lack of understanding of indirect sovereign
enhancements
-
8/12/2019 2002 Mass Transit Systems in Metro Manila Market, Financing, And Currency Risks Euromoney London Financing Mass Transit Systems (New Version)
30/36
THEMETRO R ILGROUPOctober 2002
Rommel C. GavietaEuromoney12the International Rail Finance Conference
ODA and ECA-Commercial Loan Comparison
US$ million ECA &
CommercialLoan
ODA Loan
Principal 181.5 157.5
Interest 57.8 88.3
Total Debt 239.4 245.8
PhP million
Principal 11,520.0 19,037.0
Interest 3,497.0 7,821.0
Total Debt 15,016.0 26,858.0
NPV of totalDebt installmentrepayment
11,812.0 8,882.0
Same Project Cost Comparison
US$ to PhP exchange rate was assumed to
be 3% per annum which may not reflectreality as experienced during the Asian Crisisand political upheavals.
ECA and Commercial loans would havealready been repaid
From an NPV perspective, ODA financing isbetter because of the backended repaymentschedule
However, MTS Projects funded by ODA and
administered by Government is generally at
least 50% over budget and completed at
least 100% over the original project
schedule. In this regard, the full benefits of
ODA financing is not fully realised.
Light Rail Vehicle Financing Option
-
8/12/2019 2002 Mass Transit Systems in Metro Manila Market, Financing, And Currency Risks Euromoney London Financing Mass Transit Systems (New Version)
31/36
THEMETRO R ILGROUPOctober 2002
Rommel C. GavietaEuromoney12the International Rail Finance Conference
Light Rail Vehicle Financing Option
Performance Undertaking (DOF)
ODA Financing
85% project cost financing
Metro Rail GroupAdvance 15% ROP
counterpart fund
Republic of the Philippines
(ROP)
Light Rail VehicleSupplier
MRT - 3 Phase II
-
8/12/2019 2002 Mass Transit Systems in Metro Manila Market, Financing, And Currency Risks Euromoney London Financing Mass Transit Systems (New Version)
32/36
THEMETRO R ILGROUPOctober 2002
Rommel C. GavietaEuromoney12the International Rail Finance Conference
Current and Future Development
1. Segregation of Onshore Cost fromOffshore Cost
2. Matching of loan maturity withcorresponding asset development
3. ODA financing for MDS-based MTS
Projects
4. Develop domestic debt security market
1. Public Sector is pushing for domesticloans or equity investment for onshorecost to reduce currency risks.
2.a. Public Sector to promote long term ODAloans for civil and system works.
2.b. Public sector to promote ECA andCommercial loans for LRV acquisition.
3.a. Private sector to advance for
government the 15% counterpart fundsand project management for PublicSector.
3.b. Secure request from ODA facility forfunds for ROW acquisition and utilityrelocation.
4. Private Sector raises capital and debtfrom domestic debt security market todevelop domestic savings at the grassroots. (bonds, commercial papers andothers)
-
8/12/2019 2002 Mass Transit Systems in Metro Manila Market, Financing, And Currency Risks Euromoney London Financing Mass Transit Systems (New Version)
33/36
The End
ODA P j t I l t ti I
-
8/12/2019 2002 Mass Transit Systems in Metro Manila Market, Financing, And Currency Risks Euromoney London Financing Mass Transit Systems (New Version)
34/36
THEMETRO R ILGROUPOctober 2002
Rommel C. GavietaEuromoney12the International Rail Finance Conference
ODA Project Implementation Issues
Major Factors Contributing to Implementation Delays
Public Sectors fiscal deficits is affecting absorption capacity for approved ODAfacilities
Right-of-way Acquisition/Resettlement Problems - difficulty in resolvingproblems is a result of the lack of coordination among government and propertyowners.
Transport Sector has 32% share of approved ODA Financing facilities.
ODA projects are PhP 30.0 billion over budget as of 2002. In the case of DOTC,seven (7) projects are PhP 11.7 billion over budget (BW p 13 Yap, Cecile)
Public Sector use of ODA financing for MDS potential projects when ODAfinancing can be be channeled for civil works components of MDS projects or
Non-MDS projects.
Project Development Concerns
-
8/12/2019 2002 Mass Transit Systems in Metro Manila Market, Financing, And Currency Risks Euromoney London Financing Mass Transit Systems (New Version)
35/36
THEMETRO R ILGROUPOctober 2002
Rommel C. GavietaEuromoney12the International Rail Finance Conference
Project Development Concerns
Foreign Exchange Rate Risk
Perceived higher political riskdue to September 11 eventand domestic events.
None performing assets andshallow domestic debt market
Initial limited demographicand ridership data for marketand feasibility studies
Regulatory risk related toimplementation tariff ratesimposition
Market and Financing Closure Risk
Long gestation for projectdevelopment
Long learning curve for privateand public partnership to reachfruition.
Project Development Closure Risk
Project Completion Risk
Delivery of Right of Way alongthe guide-way and the stationentrance footprints
Coordinating Design andConstruction activities with otherflagship projects.
-
8/12/2019 2002 Mass Transit Systems in Metro Manila Market, Financing, And Currency Risks Euromoney London Financing Mass Transit Systems (New Version)
36/36
THEMETRO R ILGROUPOctober 2002
Rommel C. GavietaEuromoney12the International Rail Finance Conference
Risk Allocation Matrix
BOT BLT/BT ODA
Risk Proponent Government Proponent Government Government
ProjectDevelopment
FinancialClosure
Completion
ROW
Market
Currency
Operations
andMaintenance