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THE
entry of the group of mining magnate Salvador Zamora II
into the consortium building the MRT 7—a 23-kilometer
rail-transit system from the MRT 3 North Avenue station
in Quezon City to San Jose del Monte, Bulacan—has
boosted the certainty the line will be up and running in
mid- 2013 as planned.
Zamora’s
group, called La Costa Development Co., which includes
foreign partners, formally joined the Universal LRT
Corp. (ULC) consortium two days ago, and with its
investment, is now the controlling interest in the
$1.23-billon railway project.
“I am
glad to announce that the group of Zamora [La Costa
Development Co.], headed by Mr. Salvador Zamora II, with
their foreign partners, have agreed to join the project
as major investors and undertook to bring it to
completion at the earliest possible time,” said ULC
managing director Eli Levin at Wednesday’s contract
signing.
Levin
and his partners used to own 60 percent of ULC. “The
project required additional funding. When we set up the
consortium, we thought we could finish the project in
two to three years. We hired many consultants. A big
project like this requires big financing,” he said.
“Zamora’s group is now the controlling investor in the
project. In six months, we will increase the capital to
$320 million from the current paid-up of $32 million,”
said Levin. Levin’s interest in the group has been
reduced to 8 percent. The SM Group and the Velasco group
each has about 20 percent.
Two days
ago, ULC posted a $123.5-million performance bond, or 10
percent on the rail and road system investment. The
group will have to post another bond amounting to $250
million for the real-estate and commercial development
component of the project, which is estimated to cost
$2.5 billion.
The
railway project will be financed by a combination of
equity and borrowings. Equity in the total project cost
will amount to $309 million, export credit agency loans
at $800 million and other loans, $126 million.
“We have
received letters of intent from Asian Development Bank,
World Bank, Macquarie Bank of Australia, and many more.
They are all willing to participate in the financing of
the project. We now expect talks with them to be more
serious now that there is already a contract,” said
Levin.
The
railway with 14 stations will pass through Commonwealth
Avenue, Regalado Avenue, Qurino Avenue extension up to
its end at San Jose del Monte. A 22-kilometer access
road is planned into the project. The start of
construction is set in January 2010 and targetted for
completion in July 2013.
When
asked if Zamora’s group has expressed any intention to
shoulder by itself the $309-million equity investment,
Levin said, “It is their responsibility now. But I think
they will not be alone.” ULC agreed to make the
construction and operation “deficit-neutral” to ensure
that the government will not bear the brunt of the risks
in the project.
As part
of the deficit-neutral clause, ULC agreed to cut its
internal rate of return to 11.9 percent from 16.9
percent. The reduced rate of return means ULC will bear
the financial losses if passenger volume and
consequently revenues drop.
Based on
ULC’s business plan, the firm will have a development
that includes 7,300 residential units, 900 office units
and a 90,000-square-meter gross mall area in a
195-hectare estate in Bulacan. |
