Friday, 22 May 2009

Neda Board set to confirm approval of Metro Rail Transit line 7 next week

Cai U. Ordinario
Business Mirror

THE National Economic and Development Authority (Neda) Board is set to confirm the approval of the Metro Rail Transit line 7 (MRT 7) before the proponent, the consortium Universal LRT Corp., (ULC) submits the project for financial closing and then implementation.

Ruben Reinoso, Neda assistant director general for infrastructure said the Neda Board will meet next week and may already include MRT 7 on the agenda. However, Reinoso said he could not yet confirm the agenda and whether the rail transit project will be included.

After the Neda Board confirms the approval of the project and financial closure is made, the project can already begin. The project’s implementation has been hanging for more than seven years after the project was proposed.

Reinoso said it is expected that the Department of Transportation and Communications (DOTC) will make a presentation to the Neda Board concerning the Swiss Challenge which transpired late 2008.

However, no other bidder matched the proposal of ULC to the government at the Swiss Challenge. The DOTC is also expected to present the terms of agreement with ULC.

The MRT 7 is the country’s largest transportation project and will extend from North Avenue to Bulacan. Based on the concession agreement between the government and ULC, the MRT 7 will cost $1.235 billion and will link the LRT line 1 with MRT 3.

The 20-kilometer railway will begin in Tala, Caloocan City and pass through the La Mesa dam, Fairview, Batasan, Diliman, Philcoa, before ending at the North Avenue station of the MRT 3.

Once completed, the build-operate-transfer (BOT) project will serve an estimated2 million commuters in Quezon City and Caloocan City. This does not yet include motorists who will be plying a 17-kilometer, six-lane asphalt access road in Marilao, Bulacan, that will lead to the MRT 7 depot in Tala.

Apart from the railway project, the MRT 7 project has a real-estate component, which is estimated to cost $2.2 billion. The ULC will develop 900,000 square meters of commercial space and 2 million square meters of residential space during the concession period.

Initially, the proposal of the government to ULC was to post a 10-percent, or $120-million, performance bond on the MRT 7 and for the proponent for $2.5 billion in property taxes for the real estate and commercial development component of the project.

These were part of the four conditions set by the government through Neda for the project. The other conditions, which were agreed on, included that the bonds would be forfeited in favor of the government in the event that the proponent fails to fulfill its obligations and that ULC will undertake the committed real-estate development as programmed in the proponent’s business plan.

The agreement also provided that the government will pay $108 million every year to ULC as capacity fee payment for 20 years. The government has also committed to fare adjustments and will get a 30-percent revenue share on net passenger fares, 20 percent on advertising and commercial development fees, and 20 percent on income derived from real-estate development.

ULC will get 70 percent of the net passenger revenue after the operation and maintenance expenses, and 80 percent sharing in advertising and commercial development over the stations and real-estate development income.

The consortium is composed of Siemens AG of Germany, Alstom Corp. of France, China National Technical Import and Export Corp., EL International Holdings of Hong Kong, Earth Tech of Tyco International USA, Premier Gold of Japan, Redford Assets Ltd. of the SM Group, EEI Corp. of the Yuchengco Group, Penta Capital Management Corp., Merlin Pacific Capital Inc., TCGI Engineers and private investors such as George Go and former finance secretary Roberto de Ocampo.

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