The largest key infrastructure contract under the transportation agency has been inked on Thursday, with the private proponent vowing to complete the construction of the much-needed rail infrastructure in five years’ time.
The concession agreement for the P64.9-billion Light Rail Transit (LRT) Line 1 Cavite Extension project was signed on Thursday by executives of the Light Rail Manila Corp. (LRMC) and by state officials, allowing the concession to start rolling out its plans for the facility.
Leading the signing of the agreement was Transportation Secretary Joseph Emilio A. Abaya, who said the inking of the deal is testament to the government’s commitment to provide relief to commuters from the south of Manila.
“The signing of the agreement for LRT 1 Cavite Extension contract is proof of our firm determination to bring much-needed transport services for the people, despite the many obstacles along the way,” he said, citing the failed auction in 2013 and an ongoing dispute with a property developer.
The deal was also signed by Metro Pacific Investments Corp. (MPIC) Chairman Manuel V. Pangilinan and Ayala Corp. President and COO Fernando Zobel de Ayala, both of whom represented the private concessionaires.
The signing marks the end of the bidding and the start of the construction works. Under the 32-year concession agreement, the consortium will operate and maintain the existing line and construct an 11-kilometer extension from the present end-point at Baclaran to the Niog area in Bacoor, Cavite.
A total of eight new stations will be built along this route, which traverses the cities of Parañaque and Las Piñas up to Bacoor, Cavite.
In signing the agreement, the concessionaire agreed to invest P35 billion to construct the extension of line, which is envisioned to help ease the worsening traffic conditions in the Parañaque-Las Piñas-Cavite corridor.
The remaining P30 billion will be spent by the government to procure train coaches, construct and expand depots and the acquisition of the right of way. The extension is expected to enhance commercial development around the rail stations.
“An efficient transport system is a catalyst for growth and an extended LRT 1 running all the way to Bacoor will generate growth along the corridor. The LRT 1 has been in operation for over 20 years and today’s event brings forth the beginning of a new age for Metro Manila commuters,” Pangilinan said.
De Ayala said the line, being a vital component of the country’s transport network, will help ease the pressures brought about by the increasing development around Metro Manila.
“As we assume the responsibility for the operations of the train line next year, we hope to be able to deliver in due time a much improved riding experience that is safe and efficient for our daily rail commuters,” he said.
The two private concessionaires intends to finance the project through a combination of debt and equity. The group will be tapping local banks to bankroll 70 percent of the cost.
The local flagship of Hong Kong-based First Pacific Co. Ltd. has a market capitalization of P129.95 billion, while Ayala ended today’s trading with a market cap of P438.06 billion.
The deal is expected to have financial closure by the first half of 2015.
LRMC will start operating and maintaining the line by October next year, while the full completion of the entire project, including the plans of the private concessionaire to improve the whole system itself, is expected by 2019.
The concessionaire has forged partnerships with three leading French companies to deliver a world class rail transit system. Both Bouygues Travaux Publics and Alstom Transport are well known for their impressive track records in constructing mass rail transit systems in France and other parts of the world. RATP Group, operator of the Paris Metro, has been tapped as LRMC’s technical partner.
It took the government two years before successfully auctioning the deal off. It involved one failed auction and several delays on the bidding, which only saw a lone bid with a premium offer of P9.35 billion. The amount will be paid in tranches all throughout the concession period, with an initial 10 percent forwarded on Thursday.
“It’s no secret that there was a failed bid last year and although we have to revisit the terms of this contract to arrived at the point that is genuinely fair to both to the government and to the private sector. It’s also no secret that there is a legal challenges that we had to smooth out before finally awarding this project to LRMC,” the transport chief said.
Aside from the P65-billion Cavite Extension deal, the MPIC-Ayala tandem also won the P1.72-billion Automated Fare Collection System Project, which will effectively integrate the ticketing system in all three train systems in the Philippines.
So far, the transportation agency has awarded P84.12-billion worth of public-private partnership (PPP) projects. The department accounts for 27 of almost 60 key infrastructure deals in the PPP pipeline, which costs roughly P800 billion in investments.
The government aims to sign at least 15 contracts by the time President Aquino steps down from office in 2016.
On Thursday MPIC shares shed 14 centavos to close at P4.85 apiece, while Ayala stocks declined by P7, to end at P722.5 each.