Metro Rail Transit Corporation
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The Metro Rail Transit Corporation is a private consortium responsible for the maintenance of the Manila Metro Rail Transit System. It is also the original contractor for the MRT project. It runs the MRT in coordination with the Department of Transportation and Communications.
[edit] Formation and Purpose of Metro Rail Transit Corporation
The contract for building and leasing for the EDSA Rail Transit III, Phase I Project was first awarded in 1992 to a consortium of international sponsors headed by Mr Eli Levin, who was involved in installing the first light rail transit system in Manila in the mid-1980s. Mr. Levin incoporated EDSA LRT Corporation Ltd. ("ELCL") in Hong Kong as the initial contractual counterparty to the DOTC. Legal and other problems beset the project through the first quarter of 1995.
In June 1995, a newly-formed consortium of reputable Philippine companies purchased a majority stake in ELCL through EDSA LRT Holdings, Inc. ("ELHI"), a Philippine-registered company. It was also approximately at this same period that the consortium hired the professional services of a Chief Financial Officer and experienced international banker, Carlos C. Quirino, Jr., and engaged JP Morgan who together organized the financial structure of the Project and its highly complex financing plan.
The Philippine owners obtained control of roughly 85% of ELCL's voting stock. ELHI also formed and owns in its entirety a real estate development company ("DevCo") that acquired the rights to develop the 16-hectare depot site and 13 stations. In December 1995, ELCL's name was changed to Metro Rail Transit Corporation Ltd. ("Metro Rail") and ELHI was correspondingly renamed MRT Holdings, Inc.
A Philippines subsidiary of Metro Rail, Metro Rail Transit Corporation ("MRTC"), was later formed for the purpose of designing, constructing, testing, commissioning, and maintaining the EDSA Rail Transit III, Phase-1 system. An Accession Undertaking and an Assignment and Assumption Agreement was executed which gave MRTC all rights and obligations to the Project agreements during the debt repayment period and establish MRTC as the Project borrowing entity.
[edit] Role of the Department of Transportation and Communications (DOTC)
The DOTC is the primary policy, planning, coordinating, implementing, regulating and administrative entity of the Executive Branch of the Philippine Government for the promotion, development and regulation of transportation and communications systems in the Philippines. The department was formally reorganized and mandated to carry out its aforementioned functions under Executive Order No 125 in 1987. The DOTC’s general activities are funded through appropriations on an annual basis. The rental payments for the EDSA Rail Transit III Project under a Build-Lease-Transfer (BLT) Agreement are direct obligations of the Philippine Government – as such, these payments carry the full faith and credit of the Republic of the Philippines.
[edit] Project Description: MRT-3 Phase-1
Metro Manila has traditionally been the center of industrial and economic activity of the Philippines. The rapid urbanization of Metro Manila dramatically increased traffic in the central business district and adjoining areas. Before the MRT-3 Phase-1 Project, metropolitan commuter transport had been mainly conducted through the heavily and chronically congested roads. A large increase by all modes was expected as a result of buoyant economic activity in the mid-1990s, which in turn caused further transportation and environmental problems. In order to improve the conditions then and to minimize exacerbation of those conditions, the Philippine government looked into taking some measures to increase the capacity of its urban transportation and transit systems.
Epifanio de los Santos Avenue (“EDSA”) is the busiest transportation corridor in Metro Manila in terms of passenger traffic and commercial activity. EDSA is the backbone of Manila’s ground transportation system and one of the highest volume roads in the world.
EDSA extends from the Macarthur Highway at Monumento Circle, Caloocan City, in the north of Metro Manila to Taft Avenue in the south. It forms a semi-circular ring road connecting with a number of radial roads that lead to the metropolitan central business districts. EDSA cuts across the cities of Caloocan, Quezon, Mandaluyong, Makati, and Pasay, as well as the municipality of San Juan. There are also major centers of commerce and urban activity adjacent to the EDSA corridor which include Monumento/Balintawak, North Avenue, Cubao, Ortigas, Shaw, Guadalupe, Makati and Baclaran.
Through its 22-kilometer length, EDSA varies, in general, from 5 to 6 lanes wide in each direction. The outer two lanes of EDSA are designated for exclusive bus use. With bus volumes exceeding 11,000 per day (in 1995) these lanes were completely jammed and, when loading and unloading passengers, buses often triple and quadruple park, thus further blocking traffic in the remaining lanes normally used for passenger car traffic.
Today, over 400,000 vehicles traverse the EDSA corridor transporting up to 1,200,000 passengers a day. Passenger traffic grew at an average rate of 9% per annum between 1985 and 1990. Going forward, a conservative grow rate in excess of 5% per annum was forecast for the Metropolitan Manila area. Metro rail’s ridership projections were based on an estimated 2% growth rate per year.
Many solutions for improving the then existing traffic flow and air quality problems of the EDSA corridor were studied by the Government of the Philippines through the DOTC. These problems were barriers to the further economic development of the Philippines and impediments to the quality of life for Metro Manila’s population.
The Urban Transport Development Program (“UTDP”) concluded that the best solution to the then worsening traffic problems along EDSA in the 1990s was a mass rail transit system. The UTDP study concluded that passenger demand for public transportation would soon exceed the capacity of a bus transportation system, thus requiring a high capacity rail-based transit system to handle growing passenger demand.
The EDSA Rail Transit system is the cornerstone of the DOTC’s integrated strategy for alleviating the chronic traffic congestion in Metro Manila and along the EDSA corridor in particular. The system was designed to carry initially in excess of 600,000 passengers per day or 185 million passengers per year initially, and is expandable to accommodate over 900,000 passengers per day or 300 million passengers per year.
The DOTC awarded the contract to Metro Rail Transit Corporation Ltd, formerly EDSA LRT Corporation Ltd., to build, lease, and transfer the EDSA Rail Transit system under the BOT laws of the Republic of the Philippines.
Metro Rail was responsible for the design, construction, equipping, testing, and commissioning of the system. This included the supply of the rail Vehicles, tracks, fare collection equipment, signaling, communications, power distribution, and the furnishing of other necessary equipment, facilities, and spare parts. Metro Rail was also responsible for constructing the necessary civil works for the system including fixed guideways, passenger stations, power substations, the rail vehicle storage depot and maintenance facilities, and other facilities required to make the system fully operational.
The Project, which is Phase-1 of a more comprehensive system, is located generally within the existing median of EDSA and extends for approximately 17 kilometers from North Avenue in Quezon City in the north, to Taft Avenue in Pasay City in the south. Phase-2 provides for the 5.2 kilometer extension of the system from North Avenue toward Monumento Circle in Caloocan City and an interconnecting loop through Ayala Center in Makati.
Upon completion and commissioning of the system, Metro Rail will deliver it to DOTC by way of a 25-year lease during which DOTC will be responsible for operating the system. Metro Rail will provide technical management assistance, maintenance and repair services.
DOTC will exercise “technical supervision” over the Project. DOTC has the right to monitor, inspect, check, study, and evaluate the progress and the quality of the activities and works to ensure that the system is designed, constructed, equipped, completed, tested, and commissioned in accordance with the plans, drawings, and specifications approved by them.
The DOTC is responsible for ridership support of the system, the establishment of fare rates, the collection of fees, and the operation of the system.
A fixed-price turnkey Engineering, Procurement and Construction contract (the “EPC” Contract”) for the design, procurement, and construction of the rail system was awarded to Sumitomo Corporation. The EPC Contract is a fixed-price, date-certain contract whereby Sumitomo Corporation will provide a single point of responsibility for the delivery of the entire rail system, inclusive of civil works, track works, operating systems and Rail Vehicles. Sumitomo Corporation used, as principal subcontractors, Mitsubishi Heavy Industries for the civil works, track works, and electro-mechanical work, and CKD Dopravini for the manufacturing, testing, and commissioning of the Rail Vehicles. Kaiser Engineers and Constructors, Inc. was retained by Metro rail to provide program management and technical supervision services for the design, construction management, and commissioning of the Project.
Guideways:
The Project occupies a 1-.5 meter wide section in the median of EDSA and is double-tracked for its entire length. Approximately 41% of the system was constructed at grade; the remainder of the route operates on elevated guideways except for one short tunnel and one depressed section provided to maintain roadway capacity.
The Project operates completely within a separate right-of-way, isolated from adjacent vehicular traffic. All vehicular movements crossing from one side of the EDSA Rail Transit right-of-way to the other does so either on roadway overpasses or underpasses. Motor vehicular crossing movements are accommodated only at existing major intersections. Pedestrian crossing of the EDSA Rail Transit right-of-way and of the EDSA roadway traffic lanes are provided at passenger stations and at pedestrian overpasses placed at strategic locations.
The average running time of the trains for one direction is estimated to be 30 minutes at an average speed of 40 km/h, including station stops. All trains stop at all stations. Station dwell time is estimated at 20 to 30 seconds. Maximum design speed on main line track is 65 km/h. The system will initially operate with a maximum of 60 cars during peak hours. The total fleet size is 73 vehicles to provide for scheduled and unscheduled maintenance activities. Although trains operate in one, two or three car consists, they do operate in three car consists in general, with four car consist operation expected with implementation of MRT-3 Phase 2.
Track:
The Project uses tracks made f standard low carbon UIC 54 “T” rail. Track gauge is at standard 1,435 mm. Trackwork is open track, either ballast and ties where the guideway is at grade, or depressed, and direct fixation on elevated guideway and tunnel construction. All rail is continuously welded by either the thermite process or electric flash-butt weld as per design specifications. Bolted joints are electrically bonded. Ties on ballast are made of concrete with treated wood for special trackwork.
Frequent track crossovers are provided to enable single-track operations and to by-pass mainline obstruction or maintenance problems. A pocket track for holding up to a four-car train is located within the confines of the elevated passenger station at Shaw Boulevard, approximately the mid-point of the route, as well as at the southern terminus at Taft Avenue. The pocket track provides for temporary storage of disabled cars, temporary storage of cars from a four car consist during non-peak hours, and mid-point turnback of trains dictated by scheduling needs or passenger loads.
Stations:
A total of 13 passenger stations were identified for the Project with stations located a major intersections or passenger transit points. Six of the stations were designed as passenger transfer stations for other proposed transit systems:
1. Quezon Avenue station for connection to Line 4;
2. Cubao station for connection to Line 2;
3. Shaw Boulevard station for connection to Line 5;
4. Ayala Station for connection to the Makati Loop LRT and Makati business district people mover;
5. Magallanes station for connection to South Rail of PNR; and
6. Taft Avenue station for connection to existing Line 1.
The majority of the station platforms have adjacent side platforms except for 3 stations that will utilize bi-directional center platforms. Two station platforms are located at grade, two are below grade and the remaining nine are located on elevated structures. Al station platforms are accessed from a course level that is constructed directly over or under the station platforms. For most elevated stations with side platforms, the concourse is accessed directly at the platform level. Access to the concourse areas is by stairs and, where required, by escalators connected to the sidewalk areas along the outside edge of the EDSA right-of-way. There is also elevator access to the platform areas as well as sidewalk areas for the walking impaired.
The concourse is divided into two areas: a) a “paid”, or secured area that is accessed by passengers who have purchased and inserted a fare ticket into one of the available entry gates, and b) an “unpaid”, or public area that accommodates ticket vending machines, kiosks for retail use, other commercial vending machines, and travel information relating to the rail route and other local transportation. Provision is made for advertising panels and pedestrians.
Staff offices and other accommodations are licensed within the “paid” area of the concourse. Public pay telephones are provided in both “paid” and “unpaid” areas.
Passengers departing the rail system leave the “paid” areas through exit gates into the “unpaid” areas. Access to the concourse level from floors above the concourse is from the “unpaid” public areas only.
Passenger stations are spaced at approximately 1,300 meters on average, with the closest station spaced at approximately 732 meters and the farthest spaced at 2,361 meters. Station widths vary by location. Passenger platform lengths of approximately 130 meters in each direction are provided to accommodate the ultimate four-car rail vehicle consist.
In general, the platform areas are clear of all obstructions and furniture. The minimum distance from the platform edge to any isolated obstruction is 2 meters. Provisions were made for communications equipment, closed circuit television (“CCTV”) for security monitoring, fire hydrants and hoses, wash-down bibs, station identification signs, route information signs, and track-side advertising panels. Provisions are made too between end-to-end island platforms for signaling and equipment rooms. Stairwells are located at platform ends and stairs and escalators are located at strategic points along the length of the platform.
Depot:
The Rail Vehicle storage yard, maintenance facilities and operations center for the project is situated on 16 hectares of land located at North Triangle at the intersection of EDSA and North Avenue, and adjacent to the northern terminus of the system.
A spur line (depot yard leads) from the mainline tracks, across the north-bound EDSA traffic lanes, provide access to the depot, which is underground and below a mixed use commercial development.
Trains entering the depot continue on the depot run-around track to the yard storage rack ladders or to the yard maintenance facilities. All Trackwork in the depot area is open and, with the exception of he elevated guideway approaches into and out of the depot site, all trackwork in the dept area is supported on ties and ballast.
Within the depot boundary, there are facilities to provide for light and heavy maintenance, as well as administration offices, services and plant, storage, and an internal road network. The depot construction provides ladder tracks for the storage of 81 RVs. Space for the future storage of an additional 40 RVs is provided.
The light maintenance facility contains three bays, each equipped with high-level platforms to provide easy access to the roof equipment. An underfloor wheel lathe is provided to enable wheel defects to be corrected without the removal of the wheel set from the vehicle. Trains may enter or leave through either end of the light maintenance facility.
The heavy maintenance facility provides for all vehicle lifting and component repair. The facilities include truck cleaning and repair, electrical and body component repair, spare parts storage, and other maintenance functions. There is one bay to provide equipment to lift a vehicle, service bays are equipped with underfloor pits for the demounting of under-frame components.
Separate facilities are provided for body repair as well as for maintenance-of-way repair, road/rail (non-revenue) vehicle storage and maintenance, administration offices, train dispatcher control room, day room for train operators, and employee and visitor parking.
Signals:
The signal system installed is of a non-permissive, automatic block signal (“ABS”) type with two aspect signals. Switch indicators are located to protect train movements against mainline facing point track switches. Interlocking systems are provided to ensure safe movement of trains in and out of the two terminal stations, the pocket track at the Shaw Boulevard station, and the depot.
The signal system is coupled with an automatic train protection (ATP system that is installed to advise the train driver with electronic displays of the maximum permitted speed. Data collected from the signaling equipment and line description is transmitted to the train through beacon transmission units. These data are used to compare actual speeds received from the on-board tachometer and to compute the on board speed supervision of the train in real time. Data such as maximum permissive speed are displayed on the driver’s ATP panel and an alarm is sounded to warn the driver when the train approaches an over-speed condition. The ATP system automatically applies the braking systems of any train that exceeds permitted speeds.
The on-board ATP system is designed as fail safe. The ATP applies the emergency brake whenever an unsafe condition is detected. Speed restrictions such as maximum permitted speeds for sharp curves, crossovers, turnout tracks and station entrance speeds are transmitted and computed as line description data to ensure trains d not exceed the speeds at these critical sections.
To permit train movement under ATP failure modes a sealed switch can be activated by the driver which allows the train to operate in a speed restricted ATP by-pass mode. The full ATP protected mode is operable in non-signalled trackage such as a construction area. Train operations in the Depot are implemented by activating the “Depot Running” mode which restricts the train to the safe depot running speed.
Communications:
The communication system of the Project consists of the following:
• A private automatic branch exchange (“PABX”) system;
• Radio communication system;
• Train-borne address (“PA”) system;
• Station loud-speaker system; and
• Station closed-circuit television (“CCTV”) system.
The PABX telephone system is the primary means of communications between staff personnel, the control center, and each of the passenger stations. Extension telephones are installed in the offices of the administration building, depot areas and at each station within the system.
The radio system basically provides for communications on emergency, operational, and maintenance issues within the rail system. The base station is located at the administration building and other appropriate locations. Rapid coverage is provided for the entire MRT-3 right-of-way. A radio control panel is provided in the operations control room that allows communications between dispatcher/supervisor, maintenance personnel and train operators.
The train-borne PA system permits single direction broadcasting of messages by the train operator to passengers. Cab-to cab two-way communications between cab ends of a single car or multiple car consist is provided to facilitate communications between train operating personnel at either ends of the train by the use of a train-lined telephone.
Loud speakers are located at strategic points on both the concourse and platform levels to permit the broadcast of messages from a station agent, at a single station, or from the dispatcher/system supervisor at multiple stations or at all stations.
The CCTV system provides the train operators with cameras and monitors from which they can view passengers boarding and alighting the trains. Additional station cameras and monitors have been provided to enable the station controller to view passenger movements on the platforms, concourses, and within the elevators.
Traction Electrification System (TES):
Each of the eight TES system substations are supplied with power by the Manila Electric Company (MERALCO), the major supplier of rail power in Metro Manila.
The stations at which TES substations are located are the Depot (also powers North Avenue), Kamuning, Santolan, Ortigas, Guadalupe, Ayala, Magallanes and Taft. Each TES substation is equipped with one or two 3,000 kW 750V rectifier units, connected in parallel to a 750V DC switchboard, and a 34.5 kV/480V auxiliary transformer to supply traction and station power requirements, respectively.
The 750 V DC switchboard delivers traction power to the overhead contact system (“OCS”) via four circuits. The auxiliary transformer supplies low voltage power through a low voltage switchboard to station equipment and the Project facilities requiring low voltage power.
The OCS is a weigh-tensioned overhead electrical power system consisting of 170 mm hard-drawn copper contact wire, supported by droppers hung from a catenary messenger wire which is strung freely from span to span with a catenary sag. The span supports are mounted on poles places with approximately 30 to 50 meter spacing. Pole supports are in most locations positioned between the tracks and will simultaneously support the OCS wires for both north-bound and south-bound trackways. The nominal contact wire voltage is 750 V DC with a nominal range of 500 V DC to 900 V DC. Each section of overhead line is fed from two substations via high-speed circuit breakers. For sections fed from one substation only, a means of parallel feeding is provided to overcome any feeding equipment failures. The OCS system is sectioned with the use of isolators to permit a section to shut down while not affecting the entire system.
Mounted single-pole, single throw no-load break disconnect switches are used at track crossovers. The traction current return is through steel running rails with cross bonds to ensure parallel utilization of the four rails.
The OCS system in the depot yard consists of a single contact wire supported by cross spans. OCS power within the yard and within the maintenance facilities are isolated from each other and from the mainline OCS.
Rail Vehicles:
The Rail Vehicles for the Project are 73 cars supplied by CKD Dopravni Systemy, a.s. of the Czech Republic. The vehicle is an RT805M double-articulated light rail vehicle.
The cars are eight-axle, three-section, double-articulated cars, single-ended cab-operated, and can be operated as single units or in multiple units of two, three or four car consist.
Cars are driven by two IGBT transistor choppers, powered by eight self-ventilated traction motors of 64.5 kW rating. The cars are provided with regenerative capabilities and dynamic braking. Acceleration and braking are controlled manually by the operator using a hand controller. Power and braking are each controllable through a series of seven steps.
Five double-leaf braking plug doors are provided on each side of the cars. The doors have sensitive edge protection devices and are operated electrically. The center three doors have a clear open width of 1,255 mm, while the two end doors provide 861 mm of clear width.
All cars are provided with roof-mounted air conditioners. Air-conditioning is provided by three modular roof-mounted units for the passenger compartment, and a separate, smaller roof-mounted unit for the operator’s cab.
The car is constructed of corter steel with a primed and painted exterior. Interior lighting is by inverter-supplied fluorescent fixtures. Each car has longitudinal seating for 80 passengers. Under crush-loading conditions, each car can carry 394 passengers. Train capacity for the initial car trains was 1,182 passengers.
Each car has three separate braking methods: Service brake, Emergency brake, and Safety brake applied as follows:
• Electro-dynamic braking from the maximum speed of 65 km/h down to 4 km/h;
• Mechanical/friction brake (4 km/h + 0 km/h);
• A spring-applied, electrically held off, mechanical disc brake on the traction motor drive shaft; and
• Mechanical friction and track brake.
Service braking uses the electro-dynamic braking until it fades out at 4 km/h, when the mechanical brake provides the final stop and holds the car at rest. Emergency braking is the combination of service brakes and track brakes. Safety brakes are provided by the mechanical brakes and the track brakes in the event of failure of the electro-dynamic brakes.
[edit] The BLT Agreement
The BLT Agreement was signed by DOTC and Metro Rail on August 8, 1997 and amended on October 16, 1997. It constitutes a restatement of similar agreements dating back to the first such contract, which was signed on November 7, 1991. That agreement was restated on April 22, 1992, and the restated agreement was supplemented on May 6, 1993, and amended on July 28, 1994 and May 1996. Another restatement was signed on October 3, 1996. All the terms in those prior agreements were superseded by the provisions of the BLT Agreement.
The BLT Agreement governs the relationship between Metro Rail and DOTC during the Project’s two major phases, construction and revenue service. During the construction phase, Metro Rail was obliged to construct the Project (Phase 1) and to complete that construction by a certain date (the “Date Certain”). The construction was to be accomplished in accordance with the specifications and drawings approved by the DOTC and the completed system capable of achieving certain capacity requirements. Metro Rail was also obligated to provide all equipment that was to be used in the system, including the rail vehicles.
The DOTC’s obligations during the construction phase included granting Metro Rail access to the Project site (including relocating squatters and other persons from the Depot area) and ensuring that certain work to be performed by the Department of Public Works and Highways (“DPWH”) was completed properly and on time. In addition, the DOTC accepted the responsibility for certain events that could delay completion of the system. Should such events occur, DOTC would be responsible for paying the costs of the event and the delay it causes, and the date by which Metro Rail is obliged to complete construction would be adjusted.
After completion, Metro Rail was obligated to lease the system to DOTC, who would operate the system, with Metro Rail providing the maintenance. DOTC was required to make payments of Rental Fees to Metro Rail, and these were broken down into several different portions. One significant part was intended to repay the loans taken out to finance the Project (“Debt Rental Fees”).
The BLT Agreement was divided into two phases. The “Construction Period” ran from the moment that work, including design work, on the Project began and ended on the date (the “Completion Date”) that the rail system was certified as having successfully completed all Commissioning Tests. The “Revenue Period” began on the Completion Date and continues until the 25th anniversary of the Completion Date.
Metro Rail was obligated to construct Phase-1 of the Project and complete that construction by July 31, 1999 with the completion of certain testing and training required by January 31, 2000 (the “Final Completion Deadline”). However, due to right-of-way issues requiring more time on the part of DOTC to solve, these deadlines were extended but Metro Rail successfully met project completion in any case.
The construction of Phase-1 incorporated, pursuant to paragraphs 3.1 and 4.1 of the BLT Agreement, design, construction, equipping, completion, testing and commissioning, including providing the Rail vehicles, other equipment, spare parts, and the performance of all civil works to produce a complete operational modern rail system. The final rail system would have to be capable of carrying the capacity designated in Paragraph 2.3 and Annex B-3 of the BLT Agreement, which was 540,000 passenger trips per day assuming 20 trains carrying 1,182 passengers with 3-minute headways. Metro Rail’s construction mandate was to be in accordance with the Project Scope in Annex B-1, The LRV (Light Rail Vehicle) Technical Specifications in Annex B-2, the Performance Specifications in Annex B-3, and the Drawings in Annex D of the BLT Agreement. All other drawings or specifications used in construction of this system were to be submitted to DOTC for their approval.
There are several distinct and separate rental streams payable by the DOTC to Metro Rail under the BLT Agreement. There is a rental stream for giving Project sponsors its equity return which is payable for 25 years after the Project’s completion – as the sponsors will receive rental payments from the DOTC, they are insulated from any fare and/or ridership risks. There is a separate rental stream for debt service payments to lenders. This stream of rental is payable at Date Certain irrespective of whether the Project was completed or not, and whether or not it is properly maintained thereafter. This rental stream was assigned absolutely and irrevocably to Project lenders under a Deed of Assignment and consented to by the Republic of the Philippines through the Consent document. The Republic further affirmed its obligations under the BLT Agreement through a separate Undertaking Letter issued directly to Project lenders. The Project was therefore structured to give lenders the equivalent of a sovereign credit. The rental payments for maintenance are payable to Metro Rail for amounts due from Metro Rail to Sumitomo Corporation (the EPC Contractor) under a Maintenance Agreement. There was also another rental stream for compensating Metro Rail for its administrative overhead subject to a budget review by the DOTC.
[edit] MRT-3 Phase-1 Project Brief
Metro Rail:
► Invested US$ 190.0 million in project
► Equity Rental payments started in August 2000
► Back-ended Equity Rental Payment (recovered equity is 3.6% in 15 years and 12% in 20 years)
► Assumed Project Completion Risk (not available in LRT1 and LRT2 projects)
► Assumed LRV availability risk (not available in LRT1 and LRT2 projects)
► Phase I system is fully operational & serving an average of 250,000 passengers per day. This was above projected ridership for the first year.
DOTC:
► Coordination with DOF and NEDA for approval of BLT Coordination with the DPWH, MMDA and Local Government Units (LGUs) for project implementation
► Coordinate with MMDA for traffic management
► Secure Right-of-Way (ROW) along EDSA, North Triangle Depot and Station entrances
[edit] Key Financial Aspects of the BLT Agreement
The BLT Agreement provides a sovereign credit to lenders of the Project. It accomplished this objective first by ensuring that the DOTC would make debt rental payments to Metro Rail irrespective of circumstances and second, by ensuring that the rental payments are available to Project lenders irrespective of circumstances.
This was achieved through the following multi-prong mechanism:
a. First, the contractual obligation of the DOTC under the BLT Agreement carries the full faith and credit of the Philippine Government.
b. Second, the DOTC is obligated to make rental payments for debt servicing irrespective of whether the Project was completed or whether its is operating or maintained successfully. The BLT Agreement clearly stipulates that the debt rental payments equal to all amounts due under the loan agreements, including upon any acceleration, and are of an “absolute and unconditional” nature.
c. Third, the debt rental fees are supported by a standby letter of credit issued by the Philippine National Bank to lenders and are drawable if the DOTC fails to make rental payments for debt service in a timely manner. The letter of credit mechanism obviates the need for the DOTC to obtain annual appropriations from Congress.
d. Fourth, the debt rental payments are irrevocably assigned by Metro Rail and paid directly by the DOTC to lenders. The assignment was executed through a Deed of Assignment and consented to by the DOTC. As the assignment is an absolute and irrevocable assignment, both the assignment and the obligations of the DOTC under the BLT Agreement cannot be disturbed in an event of bankruptcy of Metro Rail.
e. Last, the foregoing obligations of the DOTC are supported by a freestanding Undertaking issued by the Department of Finance and issued directly to lenders.
[edit] The Financial Structure of the Project
The structural components of the financing plan (also known as the "Total Project Cost" structure or TPC) were drawn up jointly by the Project’s Chief Financial Officer and JP Morgan. It consisted of the following items organized under these general categories:
a. Engineering, Procurement and Construction (EPC) costs
b. A DOTC Administrative Budget
c. Metro Rail’s Construction Budget
d. Project Contingency
e. Financing Fees and Insurance Risk Premia
f. Interest During Construction.
DOTC was also responsible for certain taxes (“DOTC Responsible Levies”) that could be imposed upon the Project both before and after completion. DOTC Responsible Levies included Philippine VAT, withholding taxes, Philippine taxes imposed on Phase-1, including real estate taxes, documentary stamp tax and taxes on the import of goods and equipment directly related to the Project. If DOTC Responsible Levies other than VAT were imposed on the Project during the Construction Period, DOTC would reimburse Metro Rail for such costs within a reasonable period after it receives evidence of Metro Rail’s payment of such taxes.
[edit] Project Funding Components
A breakdown of the key funders and tranche funding components of the MRT-3 Phase-1 Project were as follows:
[edit] Salient Financing Features of the Project
The Project was financed on extremely competitive terms, with equity rentals significantly back-ended over a 25-year period.
[edit] Projected Cashflows of the Project
The table below conveniently integrates cash flow streams, over a 25-year period, for equity rentals, revenues, principal repayments, interest, operating and maintenance costs, and cumulative subsidies.
[edit] The Project Principals
Metro Rail is majority-owned through a holding company (MRT Holdings, Inc. or “MRTHI”), by a Filipino consortium comprising of the following members (the "Principals), most of which are among the leading public and private companies in the Philippines.
Ayala Land, Inc. (“ALI”):
A leading diversified real estate company which is one of the largest publicly-listed companies on the Philippine Stock Exchange and a subsidiary of one of the largest corporations in the Philippines, Ayala Corporation. Its original equity holdings in Metro Rail (the Project company) were 15.8%.
Anglo-Philippine Holdings Corporation ("APHC”):
A company with substantial interests in oil and mineral exploration and in infrastructure development. APHC’s original stake in the Project was 15.8%.
Fil-Estate Management, Inc. (“FEMI”):
A Philippine property development and real estate company headed by Metro Rail Chair Robert John L. Sobrepena which was listed on the Philippine Stock Exchange in 1995. FEMI’s original equity stake in the Project combined with its affiliate, Fil-Estate Properties, Inc., was 22.8% in the Project. FEMI also acts as Chair of Metro Rail.
Ramcar, Inc. (“Ramcar”):
The largest fully-integrated automotive battery manufacturer in the Philippines and in the ASEAN region. Ramcar’s original equity stake in the Project was 15.8%.
Greenfield Development Corporation (“GDC”):
GDC is the investment arm of United Laboratories, the largest manufacturer of Pharmaceuticals in the Philippines. GDC’s original equity stake was 13.6% of the project.
DBH Incorporated (“DBH”) and Allante Realty and Development Corporation (“ARDC”):
DBH and ARDC are privately-held real estate development companies in partnership in project developments with the FEMI group. They originally had a combined equity stake of 8.1% in the Project.
[edit] The Key Management Team Members: Construction, Operations and Financial Management
From September 1995 to March 2002, Metro Rail oversaw the construction, financing and operational management of the Project. On December 15, 1999 Metro Rail commenced operations (soft opening) of the MRT-3 Phase-1 System operating 10-stations from Buendia to North Avenue. The Project was formally inaugurated on July 15, 2000 (all 13 stations) as scheduled and within the DOTC-approved budget.
Laurence Weldon, President and Chief Operating Officer of Metro Rail, oversaw all aspects of construction of the Project. Mr. Weldon was previously connected as project manager of the Los Angeles “Blue Line” Rapid Transit Project before he joined Metro Rail in July 1995. In Manila, he was supported by Robert Ball, Vice-President of Technical Services, William Lathrop, Walter Mergelsberg and Harry Redstone and their teams for the engineering aspects of the Project. After the Project was completed in February 2000, Messrs. Weldon, Ball, Lathrop, Mergelsberg and Redstone moved on successfully to accept assignments in other rail-related and large infrastructure projects outside of the Philippines.
In addition to other executive management level positions and responsibilities in MRTHI and MRTDC, Carlos C. Quirino, Jr., the Executive Vice-President and Chief Financial Officer of Metro Rail also assumed the responsibility of developing the Project and financial cost structure of the entire MRT-3 Phase-1 Project. He acted as lead negotiator with the support of a team of technical experts and other advisors in arranging project financing totaling US$ 675.5-million from the Japan Bank for International Cooperation (formerly Japan Export-Import Bank or “JEXIM”), Investicni a Postovni Bank of the Czech Republic, a consortium of Foreign Currency Deposit Unit (“FCDU”) banks led by Citibank, Bank of the Philippine Islands, Far East Bank, ING Bank, Metrobank and the Philippine Government under a Sovereign Credit basis whose blended all-in financing cost amounted to only 4.72% p.a. over the entire life of the loan facilities.
In addition, Mr. Quirino was also tasked with controlling and arranging all Project-related disbursements, reviewing and coordinating substantial amendments to some very complex legal documentation, arranging letters of credit and seeking bids for hedges in several currencies with foreign banks. He was the only senior level Filipino executive involved in all three MRT-related companies. After 7 years of dedicated service to the Project and its Principals, Mr. Quirino opted to retire capping a long and distinguished career in banking, investments, project and financial management in order to spend more time raising his children and also to pursue other personal interests. In a Letter of Citation for Mr. Quirino on his last day of work, Metro Rail Chair Robert John L. Sobrepena expressed the gratitude of the Consortium’s Board “for the service he rendered to the companies, dedication to his jobs, being a faithful overseer of all its funds and other resources and the timely completion of the MRT-3 Phase-1 Project that was well within budget due to no small part to his diligent stewardship of the Project’s and other financial resources”.
To-date, the MRT-3 Phase-1 Project continues to remain the yardstick by which other electrified mass rail transit projects in the Philippines and other countries are measured against in terms of both project timetable completion and budget compliance criteria.
[edit] The EPC Contractor and Rail Vehicle Contractor
Profile of Sumitomo Corporation:
Metro Rail entered into and EPC contract with Sumitomo Corporation of Japan (“Sumitomo”) for the construction and commissioning of the Project on a turnkey basis. The EPC contract is a fixed-price, date-certain contract under which Sumitomo provides a single point of responsibility for the delivery of the entire rail system, inclusive of tracks and Rail Vehicles.
Sumitomo Corporation is one of the five largest Japanese trading conglomerates with extensive interests in commodities, machinery and equipment, project implementation and real estate development. Established in 1945, Sumitomo is today a global trading house with operations and offices in 95 cities around the world. Its overseas trading subsidiaries have offices in another 59 cities globally.
An asset base of more than US$ 45-billion and shareholders’ equity of more than US$ 6-billion indicate the size of its operations and the strength of its balance sheet. In 1995-1996, Sumitomo successfully contracted numerous projects in fields ranging from coaxial cable installation and power stations to steel plants and real estate development aggregating more than US$ 1-billion.
Profile of Mitsubishi Heavy Industries:
Sumitomo engaged Mitsubishi Heavy Industries, Japan (“MHI”), as the principal subcontractor for construction of civil works, track works and electro-mechanical works.
MHI is a Japanese engineering conglomerate with global operations. Originally established in 1870, it today has extensive interests in manufacture and installation of machinery and plants, shipbuilding, steel structures, transportation systems and aerospace systems, which together constitute nearly 96% of its revenues.
With an asset base of more than US$ 35-billion and shareholders’ equity of nearly US$ 11-billion, MHI has a strong balance sheet that supports the scale of its operations. Its Net Income of US$ 880-million in 1995-1996 constituted a healthy 2.9% profit margin on its Net Sales of US$ 25.6-billion.
MHI’s operations in the transportation sector are comprehensive and include the manufacture and installation of motor vehicles, aircraft, ships and rail transit systems. It has over 35 year’s experience in the construction of electrified light rail/monorail systems for high traffic urban transportation. Its rail systems have been operating successfully in 8 Japanese cities and is had 3 systems under implementation in Japan and Hong Kong just prior to the commencement of construction of the MRT-3 Phase-1 Project.
Profile of CKD Dopravni:
Under A Rail Vehicle contract, Rail vehicles for the Project were supplied by CKD Dopravni Systemy, a.s., (“CKD”) of the Czech Republic. In 1996, CKD belonged to the privatized CKD Praha group of the Czech Republic. The CKD Praha Group has business interests in trams and urban rail vehicle systems, electrical equipment and machinery, engines of various kinds, cooling and freezing equipment, grinding tools and refractory products and in turnkey project execution. The group’s trams and rail vehicle business is carried out by CKD, an affiliate company majority-owned by the CKD Praha Group.
CKD’s business includes the production, repair, modernization and servicing of trams, light underground railway systems and other urban transit systems. It exports rail vehicles and other kinds of railcars to several countries and has supplied one-third of all trams in service around the world. CKD also manufactures electrical motors and equipment for use in urban mass transport vehicles and in other motor locomotives.
The CKD Praha group of companies exports its products in more than 70 countries around the globe, indicating the wide acceptability and adaptability of its products.
[edit] The EPC Contract
General
The EPC Contract dated September 16, 1997 (and thereafter amended several times) between Metro Rail and Sumitomo (the “Contractor”) governed the terms of construction by the Contractor of, and payment by Metro Rail for, the rail transit system (the “System”). Under the terms of the EPC Contract, the Contractor could contract, with Metro Rail’s approval, any work to be carried out thereunder. Certain parts of the work that were carried out were contracted to MHI and CKD. The total contract price for work carried out and completed in accordance with the terms of the EPC Contract (the “Work”) was originally US$ 464,995,000.00 and was paid at times specified in a Payment Milestone Schedule.
The EPC Contract became effective (the “Effective Date”) when (i) the Contractor delivered a performance guarantee to Metro Rail or its nominee in an amount of US$ 69,387,000.00 and (ii) documentation evidencing the construction loan facility (which, when taken together with committed equity contributions or support from or on behalf of Metro Rail, provided for complete construction financing of the System) were executed and delivered and all conditions to first funding thereunder were satisfied or waived. If the Effective Date did not occur prior to November 30, 1997, either party could terminate the EPC Contract without any obligation or liability thereunder to the other party.
The Contractor was also to provide two performance warranty bonds: (i) the first, in an amount of US$ 179,290,000 within 30 days of the mid-point of construction of the System and expiring on the first anniversary of the date (the “Test Completion Date”) that possession of the entire System was taken by Metro Rail or the date the System was put into revenue service by Metro Rail, whichever was the earlier; and (ii) the second (the “Final Bond”) in an amount of US$ 23,129,000.00, on the Test Completion Date and expiring on final completion of the System.
Contractual Obligations of the Contractor
The Contractor was required, among other things, to:
(1) complete the Work in a good and workmanlike manner in accordance wit, and in the times scheduled for completion in, the EPC Contract;
(2) be responsible for construction means, methods, techniques, sequences and procedures for coordinating all portions of the Work;
(3) supply and pay for all labor, tools, implements, equipment, machinery, utilities, materials, necessary supervision and any other facilities or services required for the proper and timely execution and completion of the Work in a good and workmanlike manner in accordance with the EPC Contract and within the time limits set forth therein;
(4) ensure that all materials incorporated in the Work would be new and of good quality, unless otherwise specified;
(5) prosecute the Work continuously and diligently and furnish sufficient forces, construction plant, and equipment to achieve completion of the Work within the time limits set forth in the EPC Contract using only qualified and competent personnel;
(6) provide all superintendence during the execution of the Work as may be necessary for the proper fulfillment of its obligations;
(7) timely deliver the rail vehicles and all other material, equipment, tools and goods to ensure completion of the Work in accordance withy the EPC Contract;
(8) supply all spare parts for the electrified rail transit system, including, without limitation, for the rail vehicles, necessary to successfully complete the tests required to be conducted under the EPC Contract; and,
(9) obtain, maintain and pay for certain permits to facilitate the Work.
Rail Vehicles and Assignment of the CKD Tatra Agreement
Pursuant to the terms of the EPC Contract, Metro Rail, the Contractor and CKD executed an assignment and assumption of the CKD Tatra Agreement, providing for the construction of the rail vehicles, whereupon CKD became a subcontractor of the Contractor for purposes of the EPC Contract. In connection therewith, and all amounts previously paid by Metro rail to CKD were treated as having been paid by Metro Rail to the Contractor pursuant to the terms of the EPC Contract.
The Contractor was not permitted to terminate the CKD Tatra Agreement or exercise any remedies thereunder in respect of a Seller Event of Default (as defined in the CKD Tatra Agreement) without prior consent of Metro Rail. In addition, the Contractor agreed, among other things, to:
a) manufacture, inspect and test and reassemble, test, set up, check out, commission and deliver the rail vehicles in accordance with the requirements of the CKD Tatra Agreement;
b) provide Metro Rail copies of all material written communications between the Contractor and CKD that relate to the Work;
c) not approve any variation order under the CKD Tatra Agreement without the prior consent of Metro Rail;
d) provide Metro Rail a detailed plan and manual for the training of operator personnel and maintenance personnel; and,
e) provide the operator and maintenance training services to be provided under the CKD Tatra Agreement.
Metro Rail Obligations
Metro Rail agreed, among other things, to:
1) provide the Contractor access to the project site;
2) ensure that certain work at intersection areas on EDSA to be performed by Philippine government authorities be completed on or before the scheduled dates for such completion;
3) indemnify the Contractor and its subcontractors against all damages and liabilities incurred by them arising out of any claim or any right of ownership or easement in any part of the depot portion of the System where any such claim may interfere with the Contractor’s access thereto;
4) obtain, maintain and pay for certain government permits;
5) provide certain operating and maintenance personnel for start up, check out, testing and operation of the System; and,
6) remove all hazardous substances or items of archeological interest from the Site.
Representations and Warranties
Each party has given usual and customary corporate representations and warranties including those relating to (i) its due organization, (ii) authorization of the EPC Contract, (iii) the due execution of, and its binding obligations under, the EPC Contract, (iv) the obtaining of certain government approvals, (v) the absence of material litigation and (vi) its financial condition.
In addition, the Contractor has represented and warranted that (i) the Site, the means of access and lay-down areas thereof required to be provided to the Contractor are in all respects sufficient for the Contractor to carry out and complete the Work in a good and workmanlike manner in accordance with, and within the time limits set forth in, the EPC Contract, (ii) the Work under the EPC Contract is all that is reasonably required or necessary to construct and complete, on a turnkey basis, a fully operational System and (iii) the Contractor has the required authority, ability, skills and capacity to perform, and shall diligently perform, the Work in a timely and professional manner consistent with the requirements of the EPC Contract utilizing sound engineering principles, project management procedures and supervisory procedures.
Liquidated Damages
If the Test Completion Date did not occur on or before January 20, 1999 (the “Test Completion Deadline”, as extended pursuant to the terms of the EPC Contract) the Contractor must pay to Metro Rail (up to a maximum of US$ 50,000,000.00) as liquidated damages the sum of US$ 250,000.00 per day for each day by which the Test Completion Date is delayed beyond the Test Completion Deadline.
Taking-Over Deadline Extensions
The Test Completion Deadline may be extended if the Effective Date has not occurred on or prior to November 30, 1997 and neither party has terminated the EPC Contract. Unless and until such termination occurs, the Test Completion Deadline will be extended on a daily basis for each day the Effective Date is delayed beyond November 30, 1997.
The Test Completion Deadline could be extended where delay in the Test Completion Date beyond the Test Completion Deadline occurs specifically or proximately by reason of, among other things:
1. a variation order agreed to by Metro Rail that specifically orders and delay the Test Completion Deadline;
2. suspension of the Work by either Metro Rail or the Contractor pursuant to the terms of the EPC Contract, or a suspension by CKD Tatra of its performance of the work thereunder;
3. an Event of Force Majeure (as defined) occurs in circumstances such that permits a delay;
4. failure by Metro Rail to perform any of its obligations under the EPC Contract in accordance with the terms thereof;
5. certain notified changes in law;
6. certain failures by Metro Rail of its obligations under the EPC Contract;
7. where additional tests are required to be performed by the Contractor at the request of Metro Rail;
8. searches for the cause of certain defects;
9. the negligent act or intentional or willful misconduct of Metro Rail or any of its representatives, the DOTC or any of its representatives, or certain other specified affiliates;
10. Metro Rail’s directive regarding items of archeological interest or hazardous substances encountered at the Site.
11. the failure by Metro Rail to provide the Contractor with necessary access to the Site;
12. any material misrepresentation or material breach of warranty of Metro Rail;
13. the commercial development of the Site (including, without limitation, construction activities relating thereto);
14. the exercise or assertion by CKD Tatra of its rights under the Lien (as such term is defined in the CKD Tara Agreement) as a result of non payment by Metro Rail of amounts payable by it to CKD Tatra under the CKD Tatra Agreement;
15. the occurrence of partial Taking-Over; or
16. any item designated as a variation in the Work.
Upon the occurrence of any such Event above, the Test Completion Deadline shall be extended by a reasonable period of time commensurate with the effect of such delay.
Variations and Changes in Contract Price
If the cost to the Contractor of performing its obligations under the EPC Contract is increased because of certain of the specified matters referred to above then the Contract Price shall be increased by such amount (together with an amount for the Contractor’s overhead).
Metro Rail may instruct the Contractor, or the Contractor may propose to Metro Rail, at any time before the Test Completion Date to alter, amend, omit, add to or otherwise vary the Work. Any proposal by the Contractor must be approved by Metro Rail. If any variation results in an increase or a decrease in the Contractor’s cost, such increase or decrease will be passed on to Metro Rail. In addition, the Contractor may make changes that enhance the reliability or performance of the rail transit system. However, Metro Rail is under no obligation to agree to any change that might increase the Contract Price, extend the Taking-Over Deadline or modify any warranties by the Contractor under the EPC Contract.
In addition, if the Philippine Peso cost of labor and materials increases at an annual rate of 20% or more from the corresponding months of the preceding year for more than six consecutive months and such increase has a material adverse impact on the Contractor’s cost of performing the Work, Metro Rail and the Contractor will meet to discuss an equitable adjustment to the Contract Price. Any such adjustment will not, however exceed any corresponding increase in rental fees payable to Metro Rail under the BLT Agreement.
Inspection and Tests
Individuals representing Metro Rail, the Lenders, DOTC and the Program Manager shall, at all times (subject to safety requirements) have full access to all areas where the Work is being performed. Where testing is required pursuant to the terms of the EPC Contract, the Contractor must give notice of its intention to carry out such testing. Results of all tests conducted must be sent to the Program Manager and, if any defects are discovered as a result of testing, the Contractor must carry out all necessary Works, including, where necessary, redesign to remedy such defect. All costs relating to such tests will be borne by the Contractor. If Metro Rail requires additional testing to be carried out, such cost will be borne by Metro Rail unless the results of such test indicate that workmanship or materials used by the Contractor were not in compliance with the EPC Contract.
Upon the expiration of the 21-month period commencing on the Taking-Over Date (the “System Warranty Period”) Metro Rail will review the Contractor’s obligations under the EPC Contract and, if completed satisfactorily, will issue a certificate of final completion and cause the release of the Final Bond 30 days thereafter.
Taking-Over
When the Contractor deems the System is ready for taking over and (a) the System has been tested and otherwise completed in accordance with the EPC Contract (other than things of a minor nature covered by a list (the “Punch List”) delivered to the Project Manager) and the Contractor and Metro Rail have agreed upon a schedule for the items on the Punch List; (b) operations and maintenance manuals and other documentation have been provided to Metro rail; (c) a training program with respect to operations has been satisfactorily completed and (d) all test certificates required to have been issued pursuant to the terms of the EPC Contract have been so issued, then the Program Manager shall issue a Test Completion Certificate and the Test Completion Date shall be deemed to have occurred. Upon the additional completion of training with respect to maintenance, then the Final Completion Date shall be deemed to have occurred. The Test Completion Date may occur notwithstanding that up to three rail vehicles remain undelivered provided such rail vehicles shall be delivered within 15 days of such date.
Risk of Loss; Passing Title
The Contractor is required (a) to retain full care and custody and all risk of loss for all portions of the Work in progress, including without limitation, supplies, material, equipment and rail vehicles, until the Test Completion Date, and (b) to bear the responsibility of preserving, safeguarding, and maintaining the Work during such period. Any Work lost, damaged, stolen or impaired before the Test Completion Date must be repaired or replaced promptly by the Contractor at its expense except that the Contractor shall not bear the expense of repair or replacement to the extent any such loss, damage, theft or impairment of Work resulted from (1) the negligent acts or intentional misconduct of Metro Rail, any of its representatives, the DOTC or any of its representatives, or Metro Rail or any of its affiliates’s other contractors or any of their representative, or (2) expropriation or political violence.
Title to equipment and materials to be imported from outside the Philippines for purposes of incorporation into the Work (“Imported Equipment”) passes to Metro Rail upon the date such equipment or materials are loaded on board a vessel for export to the Philippines. Title to the remainder of the Work passes to Metro Rail on the earlier of incorporation into the System and payment therefore by Metro Rail. In all cases, title passes to Metro Rail free and clear of all liens and encumbrance created by or through Metro Rail. Risk of loss to all portions of the Work including the Imported Equipment passes to Metro Rail on the Taking-Over Date.
Contractor’s Warranties of Design, Materials and Workmanship
The Contractor has warranted to Metro Rail that the Work (including repairs and replacements of parts, equipment or any portion thereof required to correct Work) will comply in all respects with the requirements of the EPC Contract, that the Work shall be free from defects in design, materials, and workmanship, and that all equipment, parts and materials incorporated in the Work shall be new and of good quality.
During the Warranty Period, all Work that does not comply in all respects with the requirements of the EPC Contract or Work carried out to correct defects in design, materials or workmanship, will be carried out by the Contractor within a reasonable time after notice thereof from Metro Rail and at the Contractor’s own expense.
The Contractor’s liability does not extend to defects or damage resulting from ordinary wear and tear, the effects of normal degradation on performance, abuse, Events of Force Majeure, major modifications executed without the prior consent of the Contractor or improper or insufficient maintenance.
The System Warranty Period for all equipment and Work (other than the rail vehicles and the spare parts and special tools therefore provided by CKD Tatra under the CKD Tatra Agreement (the “Rail Vehicle Supplied Portion”) will begin on the Taking-Over Date and expire 21 months thereafter. The warranty period for the Rail Vehicle Supplied Portion shall begin on the Taking-Over Date and expire 9 months thereafter.
Limitation of Liability
The total aggregate liability (including by way payment of liquidated damages, the forfeiture of performance guarantees the breach of any warranty or non-performance of any obligation under the EPC Contract) of the Contractor to Metro Rail, and the total aggregate liability of Metro Rail to the Contractor in excess of the Contract Price, shall not exceed US$ 231,290,000.00
Each party has indemnified the other and its representatives from and against all claims and liabilities incurred as a result of the negligence, failure to comply with applicable laws or failure to pay taxes of such party. Additionally, the Contractor has indemnified Metro Rail and its representatives from and against all claims and liabilities incurred as a result of non-payment of subcontractors.
Force Majeure
No failure of omission, as a result of a Force Majeure Event (as defined), to carry out or observe any of the terms, Provisions or conditions of the EPC Contract (other than payment obligations) shall be deemed to be a breach of contract.
Suspension of Work
Metro Rail may direct the Contractor to suspend the Work for such times and in such manner as Metro rail may direct. Additionally, the Contractor may suspend the Work upon ten (10) working days’ notice to Metro Rail if Metro Rail has failed to pay, within ten (10) working days of becoming due, any amounts to the Contractor relating to the Contract Price or any variation thereto provided such amounts owing exceed US$ 1,000,000.00
Termination
Metro Rail may terminate the EPC Contract and the execution of the Work by the Contractor and expel the Contractor from the Site at any time without cause by giving the Contractor not less than fifteen (15) working days’ notice. Unless such notice directs otherwise, the Contractor is required immediately to discontinue the execution of the Work, leave the Site, make every reasonable effort to procure cancellation of all existing commitments, use commercially reasonable efforts to mitigate the damages resulting therefrom, and in general take all commercially reasonable steps to minimize the cost arising from such termination.
If the EPC Contract and the execution of the Work is terminated, Metro Rail is required immediately to release the performance guarantee and the warranty bonds and, upon demand of the Contractor, to pay to the Contractor the portion of the Contract Price represented by the Work completed at the date of termination and certain other specified amounts.
Events of Default (Contractor)
Certain customary insolvency and bankruptcy events with respect to the Contractor will constitute a “Contractor Event of Default”. Additionally, a Contractor Event of Default will occur if the Contractor (a) is in breach of a material obligation under the EPC Contract and fails to remedy such breach within 30 days; (b) fails to correct any material defect in the Work or any Work that fails materially to conform to the Scope of Work within a reasonable period of being required to do so, and the Contractor fails to remedy the same within 30 days; (c) assigns any of its rights or delegates any of its duties under the EPC Contract, other than as expressly permitted thereunder; (d) abandons the Work or permanently withdraws from the Site; or (e) a Provider Event of Default (as defined in the Maintenance Agreement) has occurred and is continuing.
Upon the occurrence of a Contractor Event of Default, Metro Rail may suspend payment of any amounts to the Contractor under the EPC Contract, terminate the EPC Contract or finish the Work itself.
If Metro Rail finishes the Work itself it must determine the total cost of completing the Work and notify the Contractor of such total cost completion. If the sum of (1) Metro Rail’s total cost of completing the Work and (2) the portion of the Contract Price (excluding the CKD Tatra Portion of the Contract Price) already paid to the Contractor exceeds the Contract Price (excluding the CKD Portion of the Contract Price), then the Contractor must pay such excess to Metro Rail plus interest to the date of payment of such excess by the Contractor.
Events of Default (Metro Rail)
Certain customary insolvency and bankruptcy events with respect to Metro Rail will constitute a “Metro Rail Event of Default”. Additionally, a Metro Rail Event of Default will occur if Metro Rail (a) fails to make any payment to the Contractor provided for under the EPC Contract where the amount due is a minimum of US$ 1,000,000.00 in the aggregate, within twenty (20) working days after such payment becomes due and payable (b) is in material breach of any of its other obligations under the EPC Contract and fails to remedy such breach within ninety (90) days, (c) assigns any of its rights or delegates any of its duties under the EPC Contract, except as expressly permitted thereunder, (d) if an Owner Event of Default (as defined in the Maintenance Agreement) has occurred and is continuing, or (e) a Buyer Event of Default (as such term is defined in the CKD Tatra Agreement) has occurred and is continuing as a result of a failure by Metro Rail to perform its obligations under the CKD Tatra Agreement or has occurred and is continuing under certain specified sections of the CKD Tatra Agreement with respect to Metro Rail.
Upon the occurrence of a Metro Rail Event of Defaults the Contractor may suspend the execution of the Work or any part thereof or terminate the EPC Contract by delivery of a notice of termination to Metro Rail. Additionally, the Contractor may terminate the EPC Contract (1) if the Work is suspended for more than 12 continuous months or (2) if an Event of Force Majeure, change in law, or discovery of hazardous substances or items of archeological interest occurs that interrupts the execution of the Work for more than 12 continuous months.
Further the Contractor may terminate the EPC Contract in the event that any binding, nonappealable decision or action of any Philippine government authority voids or otherwise prevents the operation of the BLT Agreement or if CKD Tatra terminates the CKD Tatra Agreement.
[edit] The Rail Vehicle Supply Agreement
The Rail Vehicle Supply Agreement or “Vehicle Contract” was executed between Metro rail and CKD Tatra on October 14, 1996 and has since been the subject of five amendments. It covers the purchase and commissioning by Metro Rail and the production and shipment by Tatra of 73 Rail Vehicles to be used in the EDSA MRT-3 Phase-1 rail system. Simultaneous with the execution of the Vehicle Contract, Metro Rail and Sumitomo entered into an Assignment and Assumption pursuant to which Metro Rail assigned and Sumitomo assumed most but not all of Metro Rail’s rights and responsibilities under the contract. The Assignment is part of the single point of responsibility structure under which Tatra becomes a subcontractor of Sumitomo, who then becomes responsible to Metro Rail for Tatra’s performance.
[edit] Maintenance Agreement
The Maintenance Agreement that was entered into between Metro rail and Sumitomo Corporation (the “Provider”) sets forth the terms on which the Provider will provide maintenance and repair services (the “Services”), for a period of ten (10) years, for the System. As compensation for Services, Metro rail agreed to pay a base fee (the “Base Fee”) adjusted in accordance with a price escalation formula (the ”Annual Maintenance Fee”), for each year such Services are provided. The Base Fee in the first year is approximately US$ 15.3-million stepping up to approximately US$ 18-million on the 6th year. In addition to the Annual Maintenance Fee, Metro Rail also agreed to reimburse the Provider for the cost of carrying out any special repairs to the System. The Provider subcontracted, with Metro Rail’s consent, all services with respect to the remainder of the System to be carried out by Mitsubishi Heavy Industries, Limited.
[edit] Insurance
NVH Insurance Brokers Philippines, Inc. was the insurance adviser for the Project for its insurance requirements for both the construction and operation phases.
Coverage of Risks During The Construction Phase:
○ Marine Cargo Insurance
○ All Risks During Construction/Erection
○ Third Party Liability
○ Terrorism/Sabotage
○ Injury to Workmen/Automobile Liability
○ Delay in Star-up/Advance Loss of Profits
Coverage of Risks During The Operational Phase:
○ All Risks (including terrorism and sabotage)
○ Business Interruption Following Events Under All Risks
○ Machinery Breakdown
○ Business Interruption following Machinery Breakdown
○ Third Party Liability
○ Automobile Insurance
[edit] Transportation in the Philippines
The Philippines has more than 160,000 kilometers of roads including nearly 27,000 kilometers of national roads and 29,000 of provincial roads, More than half of the country’s road network consists of barangay or rural roads. The total number of vehicles in the Philippines exceeds 2 million with around 80% being private vehicles. Public jeepneys, constituting 5.5% of the total vehicles and public buses, constituting 0.95%, make up only a small portion of the total number of vehicles. Road transport across the country is provided along 4,612 inter-regional routes, 254 inter-provincial routes, 796 intra-provincial routes, 262 inter-provincial jeepney routes, 2,754- intra-provincial routes, 219 intra urban jeepney routes, 21 intra-urban bus routes, 249 inter-regional routes (Metro-based) and 57 inter-regional routes (not Metro-based). While buses generally service the longer routes, the shorter routes are serviced by mini-buses and jeepneys.
Rail transport is available only on the island of Luzon and is provided by Philippine National Railways (“PNR”). The rail system consists of two lines:
1. the South Main Line, a 478 kilometer line from Manila to Legaspi City with a 5 kilometer branch line from San Pedro (Laguna) to Carmona (Cavite); and
2. the North Main Line, a 266 kilometer line from Manila to San Fernando (La Union) with a 55 kilometer branch line from Tarlac (Tarlac) to San Jose (Nueva Ejica).
However, parts of the South Main Line and the whole of the North Main Line are temporarily non-operational due to the dilapidated state of the tracks. Also, the operations of the PNR have been sharply reduced since the 1960s and 1970s, in terms of both number of trains run and the number of passengers carried, leading to a higher burden on the road transport system.
[edit] Transportation in Metro Manila
Road Transport
By 1996, Metro Manila had more than 3,000 kilometers of roads of which nearly 2,200 kilometers are urban National Roads or City Roads. The mainstay of the road network is an arterial grid of ten radial roads which radiate outwards from the City of Manila and five semi-circumferential roads which intersect the radial roads.
The ten radial roads are:
• Roxas Boulevard (Manila South Coastal Road);
• Taft Avenue, Quirino Avenue;
• South Super-highway;
• Imelda Avenue, Mercedes Street;
• Shaw Boulevard;
• Ramon Magsaysay Boulevard, Aurora Boulevard;
• España, Quezon Avenue, Don Marcos Avenue;
• Andalucia, Dimasalang;
• Jose Abad Santos, Rizal Avenue Extension, McArthur Highway; and
• Manila North Coastal Road.
The five circumferential roads are:
• Claro M. Recto Avenue;
• President Quirino Avenue, A. Mendoza, Tayuman;
• 5th Avenue, Sgt. Rivera St., G. Araneta Avenue, Buendia Avenue;
• Epifanio de los Santos Avenue (“EDSA”), Samson Road; and
• Pasig Boulevard, E. Rodriguez Jr., Avenue, Katipunan Avenue.
Most of the roads constituting the arterial network described above have six lanes in each direction while the rest have four lanes each. The roads are characterized by high vehicular movement comprising public buses, public jeepneys, taxis and private cars. Total vehicular population (indicated by the number of vehicle registrations) in Metro Manila is estimated at over one million which is nearly 43% of the total vehicular population of the entire country and growing rapidly as economic growth of the Philippines accelerates.
Public transportation caters to over three-fourths of Metro Manila’s total passenger demand. The backbone of the public transportation system is buses and jeepneys. Although buses and jeepneys constitute only 7% of the total vehicle population of Metro Manila, they cater to almost 55% of the city’s total passenger demand. They run services on 143 public bus routes, 32 mini-bus routes, and 543 public jeepney routes. Most bus routes are overcrowded, operating at load factors ranging from 65% to more than 100%.
Rail Transport
Before completion of the MRT-3 Phase-1 Project, Metro Manila’s rail transport consisted of two railway lines – the Light Rail Transit system (“LRT Line-1”) and the Philippine National Railway (Commuter) System (“PNR Commuter Line”). LRT Line-1 is a fully elevated guideway system from Monumento in the north to Baclaran in the south along Rizal Avenue and Taft Avenue. The line is 15 kilometers long and 7 meters above ground level and consists of 3 terminals and 15 stations. Operational since 1984, this line has a capacity of 8,000 passengers per hour in each direction and carries approximately 150 million passengers per year. THE PNR Commuter Line from Manila to San Fernando Pampanga runs a total distance of nearly 60 kilometers and carries nearly 4.6 million commuters per year. Additionally, the PNR also operates a railway line from Manila to Carmona, Cavite, a total distance of 40 kilometers.
[edit] Transportation Along EDSA
EDSA runs for a distance of about 22 kilometers from Monumento in the north to Taft Avenue in the south, connecting high-activity residential and commercial communities as highlighted below:
► It connects several existing residential communities along its entire length. Substantial housing development for middle and upper income classes in northern, eastern and southern Manila also depend heavily on EDSA for transportation.
► Widespread commercial development including construction of shopping complexes and office buildings along EDSA depend on EDSA as the backbone of their transportation needs.
► Major Industrial activity along the banks of the Pasig River and Marikina River and in suburbs such as Caloocan, Quezon City, Malabon and Valenzuela to the north of EDSA, Marikina Valley to the east of EDSA and Pasay City, Taguig, Sucat and Paranaque to the south of EDSA also depend heavily on EDSA for their industrial and commuter transportation requirements.
As the main arterial road connecting high volume commercial, industrial and residential communities, EDSA is the highest volume road in Metro Manila. Although a broad road with six lanes in each direction, the magnitude of vehicular traffic on EDSA makes it congested along most of its entire length, handling more than 42,000 vehicles per day in each direction with a stretch of EDSA from Katipunan Avenue to Buendia Avenue handling traffic of more than 120,000 vehicles per day in each direction.
The MRT-3 Phase-1 Project was designed to run along almost the entire length of EDSA from North Avenue to Taft Avenue to ensure effective mitigation of traffic congestion. The presence of 18 major intersections along EDSA leads to further traffic congestion. The queue of vehicles at these intersections is sometimes as long as 120 vehicles, sharply increasing transit times. (To be continued…)
[edit] The Project’s Strategic Interface
As the busiest arterial road in Metro Manila, EDSA interconnects with several other modes of transport, primarily buses and jeepneys, which run along the radial roads. The Project has interfaced with these modes at several places, the major areas being:
● Balintawak;
● Munoz/Roosevelt Avenue;
● North Avenue/West Avenue;
● Quezon Avenue;
● Timog Avenue/Kamuning;
● Cubao;
● Ortigas Avenue;
● Shaw Boulevard;
● Boni Avenue;
● Ayala/Buendia Avenue;
● Magallanes;
● Taft Avenue; and
● Roxas Boulevard
MRT-3 Phase-1 will also interface in the future with several new light rail transit lines proposed by the Philippine Government. These are:
► LRT-2, a 13-kilometer, double-track elevated guideway from Old Bilibid, Claro M. Recto Avenue to Cubao/Katipunan Avenue via Magsaysay Boulevard and Aurora Boulevard; this line will cross Aurora Boulevard at EDSA;
► LRT-4, a 22.6 kilometer, double-track partly elevated guideway From Claro M. Recto Avenue to Quirino (Novaliches) via Espana, Quezon Avenue and Commonwealth Avenue; this line will cross Quezon Avenue at EDSA;
► NorthRail, a 100 kilometer, double-track rapid rail system from Ninoy Aquino International Airport (NAIA) to Clark (Pampanga) via Fort Bonifacio, Shaw Boulevard, Araneta Avenue, EDSA/Balintawak, Samson Road (Caloocan) and through PNR right-of-way towards Meycauyan; this line will cross Shaw Boulevard at EDSA;
► LRT-6, a 11 kilometer, double-track fully elevated guideway from LRT-1 south terminal in Baclaran to Zapote (Bacoor) via Quirino Avenue; this line could be a feeder to EDSA;
► Marilaque railway line, a 96 kilometer railway from the City of Manila (old CBD) to Real, Quezon Province (east of Metro Manila); this line will cross EDSA at Pasig Boulevard.
