1. NAIA Expressway Project
The Philippine government launched in November 2010 an aggressive program for PPPs in order to develop much needed infrastructure that would support its objectives of sustained and inclusive economic growth. 
The NAIA Expressway is among the government’s priority PPP to be implemented under the Philippine Build-Operate-Transfer Law (the BOT Law) through the solicited mode.
The purpose of this Preliminary Information Memorandum is to provide information to potential investors on the Investment Opportunity linked to the NAIA Expressway Project sponsored by DPWH.
DPWH wishes to introduce the transaction to prospective investors, and is keen to hear investor’s thoughts and feedback on key issues, bid process and timing for the selection of the winning bidder.
INVESTORS’ BRIEFING
24 June 2011

2. The Investment Opportunity
The NAIA Expressway Project, sponsored by the Department of Public Works and Highways (DPWH), is one of the priority projects of the Government of the Republic of the Philippines (GOP) under its Public-Private Partnership (PPP) Program.
The Project is one of the components of the Metro Manila Urban Expressway System that is intended to provide a high-standard expressway.
The NAIA Expressway Project, sponsored by the Department of Public Works and Highways (DPWH), is one of the priority projects of the Government of the Republic of the Philippines (GOP) under its Public-Private Partnership (PPP) Program.
The Project is one of the components of the Metro Manila Urban Expressway System that is intended to provide a high-standard expressway.

3. Proposed HSH Network in MM and its 200km Sphere
EXISTING : 300KM
Project Name
Length
(km)
Subic-Clark-Tarlac Expressway
93.77
North Luzon Tollway
82.62
C-5 Expressway (Segment 8.1)
2.34
Metro Manila Skyway, Stage 1
9.30
SLEX (Magallanes-Alabang)
13.43
Manila Cavite Toll Expressway
6.75
South Luzon Tollway
36.03
Manila-Cavite Toll Expressway (R-1 Extension)
7.00
Metro Manila Skyway, Stage 2
6.86
Southern Tagalog Arterial Road (STAR)
42.00
This is the proposed high-standard highway network in Metro Manila and its surrounding areas.
At present, there is around 300km of existing highways with at least an additional 127km of additional expressways currently being constructed and scheduled for bidding/construction.
There are a few other planned highways not yet contained in this table such as the Daang Hari – SLEX Link of about 4km in length and the Cavite-to-Laguna or the CALA Expressway which is around 41.8km.
PLANNED/ON-GOING CONSTRUCTION : 127KM
Project Name
Length
(km)
Tarlac-Pangasinan-La Union Toll Expressway
88.58
C-5 Expressway (Segment 8.2, 9 & 10)
19.92
NlLEx-SLEx Connector
13.34
NAIA Expressway
5.2 6

4. The NAIA Expressway
Will facilitate the efficient flow of existing and future traffic to and from the country’s premier international and domestic airport, the NAIA Complex.
Will link two major expressways serving Metro Manila.
The NAIA Expressway will link two major expressways serving Metro Manila namely the South Luzon Expressway via the Skyway and the Manila-Cavite Toll Expressway. 7

5. The Investment Opportunity
The Republic of the Philippines (ROP), represented by DPWH, will be the direct counterparty in the Toll Concession Agreement (TCA).
The Project features a toll rate structure that is competitive and affordable.
The Republic of the Philippines (ROP), represented by DPWH, will be the direct counterparty in the Toll Concession Agreement (TCA).
The Project features a toll rate structure that is competitive and affordable.
The actual formula for toll rate adjustments will be presented later.

6. Committed Government Support
Conduct of a fully transparent and competitive procurement process following the Philippine BOT Law and its Implementing Rules and Regulations.
Government grant contribution for CAPEX or the Government Financial Support (GFS)
By way of government support, DPWH will provide:
-Government contribution on the cost of the Civil Works payable to the Concessionaire under the pertinent milestones and specific conditions provided in Concession Agreement

7. Committed Government Support
ROW provided free and clear to Concessionaire by the pre-agreed timeline to be defined in the TCA
Guarantee on the issuance of the Toll Operations Certificate (TOC) from TRB
Guarantee on Toll Adjustment application.
By way of government support, DPWH will provide:
-Acquisition of necessary Right of Way and the peaceful use and occupation of the Project land during the Concession Period;
-Guarantee on the issuance of the Toll Operations Certificate (TOC) from the Toll Regulatory Board or TRB and on Toll Adjustment application

8. Advisors Transaction Advisors: Technical Advisor:
Development Bank of the Philippines (DBP)
International Finance Corporation (IFC)
Technical Advisor:
Japan International Cooperation Agency (JICA)
DPWH has engaged DBP, who along with IFC, which is a member of the World Bank Group, as Transaction Advisors for this Project.
As Transaction Advisors, DBP and IFC will assist the DPWH in developing, structuring and conducting the competitive tender for the project.
JICA, as Technical Advisor, did a review of the original Feasibility Study including traffic forecasts. Their output which is an update of the Feasibility Study shall be part of the bid documents to be provided to potential bidders.

9. Advisors
IFC in turn hired specialized consultants to complement the services offered by the Transaction and Technical Advisors of DPWH:
expressway technical specialists (LeighFisher),
international legal consultants (Hogan Lovells Singapore), and
local legal individual consultants
LeighFisher and Hogan Lovells, aside from supporting the Transaction Advisors, will also provide additional inputs on global best practices to ensure that this Project will be attractive to both local and foreign investors.

10. Project Description
Construction of an addition 4.6 km of 4-lane viaduct from NAIA Terminal 3 to Roxas Boulevard, over the existing roads of Sales Avenue, Andrews Avenue, Domestic Airport Road and NAIA Road.
Upgrading of Phase I (600m) to Phase II standards.
Provision of ramps to and from NAIA Road, Terminal 3 and other strategic locations.
The Project entails private sector participation in the financing, design, and construction of the adjustments to Phase I and extension (Phase II) of the NAIA Expressway, with the following features:
Total of 5.2 km of 4-lane viaduct from NAIA Terminal 3 to Roxas Boulevard, over the existing roads of Sales Avenue, Andrews Avenue, Domestic Airport Road and NAIA Road.
Ramps to and from NAIA Road, Terminal 3 and other strategic locations.

11. Project Description
Provision of toll plazas, plus additional toll operating equipment and safety facilities for the DPWH-constructed Phase I to standards compatible with those of Phase II.
Preparation of a Detailed Engineering Design.
The Operation and Maintenance of the entire NAIA Expressway (Phase I and Phase II) as an open-system tolled expressway.
Provision of toll plazas, plus additional toll operating equipment and safety facilities for the DPWH-constructed Phase I to standards compatible with those of Phase II.
Preparation of a Detailed Engineering Design.
The Operation and Maintenance of the entire NAIA Expressway (Phase I and Phase II) as an Open-system tolled expressway.

12. Project Description Minimum Expressway Configuration
Phase I in pink is an existing 600m elevated expressway connected to the Skyway system and ending on Andrews Avenue.
Phase II will connect Phase I and shall traverse over the existing roads of Sales Avenue, Andrews Avenue, Domestic Airport Road and NAIA Road providing access to Terminals 1, 2, and 3 of NAIA and Roxas Boulevard.
Ramps along Andrews Avenue and Roxas Boulevard will also provide access to on-going developments across Terminal 3 and will be a gateway to future developments along the reclamation area along Manila Bay including several master planned communities.

13. Project Description Toll Booth Configuration
The NAIA Expressway will be operated as an open-system. However, there will be two proposed toll rates:
For the main expressway
For ramps to-and-from NAIA Terminal 3 from to-and-from the Skyway which shall be a fraction of the main toll rate.
The actual toll rates to be used shall be disclosed during the formal tender process.

14. Project Description Key Characteristics

15. Project Rationale
Vehicles travelling from the South Luzon Expressway or Skyway to Roxas Boulevard or the Manila-Cavite Expressway have to pass through the existing NAIA roads or EDSA.
Roads around NAIA are already congested.
There is a need to ensure efficient travel to and from the airport terminals  this will support both business travelers and tourism.

16. AVERAGE TRAVEL SPEED ALONG EXISTING NAIA ROADS
Road congestion can be observed on many of the existing roads in the area, and the volume of traffic has almost reached the roads theoretical capacity:
Sales Street at 84%.
Andrews Avenue at 91%.
Domestic Road at 86%.
NAIA Road at 82%.
Imelda Avenue at 81%.
Ninoy Aquino Road at 81%.
EDSA at 100%.
Roxas Boulevard at 100%.

17. Project Cost
The estimated civil works cost for NAIA Expressway is approximately Php9.3 billion.
The civil works cost was estimated based on similar Government and BOT projects implemented or tendered from 2010 up to the present.
The Php9.3 billion amount only refers to the estimated civil works cost.
This amount does not include any contingencies or consultancy costs nor does it include costs related to financing or insurance.
This, however, is inclusive of any Government Financial Support (GFS) that may be provided.

18. Bidding Framework for the Transaction Competitive and Transparent Process
The international competitive bidding for the Project will be conducted strictly in accordance with the rules and procedures of the BOT Law and its Revised IRR
Two Stage System:
Pre-qualification of Bidders based on technical, legal and financial criteria
The Bidding for the Project will be conducted in an open and transparent manner following the Two-Envelope/Two-Stage System for soliciting bids under the Revised IRR.
The selection process will be administered by the BOT Pre-Qualification, Bids and Awards Committee of the DPWH (“PBAC”).
The general procedure for the Bidding will be as follows:
(a)Bidders will be asked to submit their Pre-qualification Documents before the submission deadline. The envelope containing the Bidder’s Pre-qualification Documents will be opened immediately after the lapse of the deadline and will be checked for completeness. The PBAC will then separately determine whether the Bidder is prequalified or eligible to participate in the next stage. Only those Bidders who qualify shall be allowed to submit their Technical and Financial Proposals. The PBAC shall inform disqualified Bidders in writing of the reasons for their disqualification from the Bidding.
(b)The Technical and Financial Proposals of the Bidders who qualified will be submitted in two (2) separately sealed envelopes to the PBAC on the bid submission deadline. The date and time for the opening of the Technical Proposals will be provided in the Request for Proposals (“RFP”), which will consist of (i) the Instructions to Bidders, (ii) the Technical and Financial Bid Forms, and (iii) the Draft Concession Agreement. Only those Bidders whose Technical Proposals pass the technical evaluation criteria will have their Financial Proposals opened and evaluated. The Financial Proposals of Bidders who fail to pass the technical evaluation will be returned unopened together with a letter from the PBAC stating the reasons for their disqualification from the Bidding.
(c)The Financial Proposals of technically compliant Bidders will be opened and evaluated on a subsequent date to be set by the PBAC. The Bidder who offers the lowest the required Government Financial Support (GFS) to the Project will be selected as the winning project proponent and will be awarded the Concession Agreement.

19. Selection of bidder with the lowest required GFS as winning bidder
Bidding Framework for the Transaction Competitive and Transparent Process
Two Envelope System:
Only those Bidders who pre-qualify will be eligible to formally submit their technical and financial proposals
Technical Proposal
Financial Proposal
Selection of bidder with the lowest required GFS as winning bidder
The Bidding for the Project will be conducted in an open and transparent manner following the Two-Envelope/Two-Stage System for soliciting bids under the Revised IRR.
The selection process will be administered by the BOT Pre-Qualification, Bids and Awards Committee of the DPWH (“PBAC”).
The general procedure for the Bidding will be as follows:
(a)Bidders will be asked to submit their Pre-qualification Documents before the submission deadline. The envelope containing the Bidder’s Pre-qualification Documents will be opened immediately after the lapse of the deadline and will be checked for completeness. The PBAC will then separately determine whether the Bidder is prequalified or eligible to participate in the next stage. Only those Bidders who qualify shall be allowed to submit their Technical and Financial Proposals. The PBAC shall inform disqualified Bidders in writing of the reasons for their disqualification from the Bidding.
(b)The Technical and Financial Proposals of the Bidders who qualified will be submitted in two (2) separately sealed envelopes to the PBAC on the bid submission deadline. The date and time for the opening of the Technical Proposals will be provided in the Request for Proposals (“RFP”), which will consist of (i) the Instructions to Bidders, (ii) the Technical and Financial Bid Forms, and (iii) the Draft Concession Agreement. Only those Bidders whose Technical Proposals pass the technical evaluation criteria will have their Financial Proposals opened and evaluated. The Financial Proposals of Bidders who fail to pass the technical evaluation will be returned unopened together with a letter from the PBAC stating the reasons for their disqualification from the Bidding.
(c)The Financial Proposals of technically compliant Bidders will be opened and evaluated on a subsequent date to be set by the PBAC. The Bidder who offers the lowest the required Government Financial Support (GFS) to the Project will be selected as the winning project proponent and will be awarded the Concession Agreement.

20. Concession Structure
Build-Transfer-Operate (“BTO”) variant under the BOT Law
Toll Concession Agreement Scheme:
Concessionaire will Finance, Build, and Operate and Maintain the adjusted Phase 1 and completed Phase 2 as one open system.
35 year concession period, inclusive of construction period.
Legal transfer of ownership of NAIA Expressway to DPWH will be automatic upon issuance of Certificate of Final Construction
Toll Structure Competitive and Affordable: Opening tolls set by DPWH and approved by TRB. Periodic toll adjustments shall be made bi-annually and based only on a domestic inflationary index
DPWH to procure and deliver in a timely manner the required ROW and GFS to partially cover the capital cost of implementing the Project
The Project will be implemented as a variant of the Build-Transfer-Operate (BTO) contractual arrangement, which is one of the PPP variants specifically authorized under the BOT Law
The principal terms and conditions governing the transaction are set out in the TCA, which provides for the obligations of the DPWH and the Concessionaire . Key aspects of the TCA are:
Concessionaire will Finance, Build, and Operate and Maintain the adjusted Phase 1 and completed Phase 2 as one open system.
Thirty-five (35) year concession period, inclusive of construction period.
Legal transfer of ownership of NAIA Expressway to DPWH will be automatic upon issuance of Certificate of Final Construction
Toll Structure Competitive and Affordable: Opening tolls set by DPWH and approved by Toll Regulatory Board. Periodic toll adjustments shall be made bi-annually and based only on a domestic inflationary index
DPWH to procure and deliver in a timely manner the required Right of Way and Government Financial Support (GFS) to partially cover the capital cost of implementing the Project

21. Key Commercial Terms
Concessionaire Obligations for the 35 year concession period:
raise financing for the balance of the Project cost (not covered by the GFS) and achieve financial close within 1 year from the signing of the TCA;
design the Phase I adjustments and Phase II works;
construct the Phase I adjustments and Phase II works within 2 years from approval of the Detailed Engineering Design;

22. Key Commercial Terms
operate and maintain Phase I and Phase II to defined levels of performance standards;
collect the authorized toll from users of the NAIA Expressway which shall be operated as an open system;
assume the commercial risks; and
turn-over the NAIA Expressway in good condition to DPWH at the end of the concession period.

23. Key Commercial Terms
DPWH Obligations for the 35 year concession period:
procure and deliver in a timely manner the required ROW;
subject to Concessionaire compliance with pre-defined obligations, ensure the grant of the TOC from the TRB

24. Key Commercial Terms
assist the Concessionaire in securing necessary national government consents for the Project;
provide to the Concessionaire the agreed GFS based on pre-agreed milestones, which will be defined in the TCA; and
ensure the application of the toll adjustment formula prescribed in the TCA and provide compensation in the event of disallowances of authorized computed tolls.

25. Key Commercial Terms
The bid parameter will be the lowest required GFS.
The selection of the Independent Consultant (IC) will be done by DPWH from a shortlist of firms to be approved by the Concessionaire. The cost of the IC shall be borne equally by DPWH and the Concessionaire.
There will be two (2) sets of tolls for the Expressway, one applied on the main expressway and the other for the segment to and from Terminal 3.

26. Key Commercial Terms
Opening tolls will be set by DPWH and approved by TRB. The approved toll rates will be disclosed during the tender process.
A performance regime related to efficient flow of traffic, ride quality, safety, security and cleanliness will be defined in the TCA and payment obligations will be imposed on failure to meet Key Performance Indicators.
Force majeure shall be a risk that will be shared by both the Concessionaire and DPWH.

27. Toll Rate Adjustment
Periodic toll adjustments shall be made bi-annually and based only on a domestic inflationary index based on the following formula:
TRn= TRo [(CPIn/CPIo)]
where:
TRn = new Toll Rate as adjusted
TRo = old Toll Rate as of the last adjustment
CPIn = CPI for month of the new review date issued by the NSO
CPIo = CPI for the month of the last review date issued by the NSO

28. Key Risk Allocation Matrix
Risk/Responsibility
Allocation
Remarks
Traffic
Concessionaire
No minimum traffic guarantee
Toll & Adjustment Implementation
DPWH
Compensation provided for disallowance of adjustment based on agreed formula
Project Financing
Concessionaire and DPWH
Private financing and GFS, respectively
Inflation & Foreign Exchange
Relief provided for domestic inflation through Toll Adjust formula
Basic ROW Acquisition & Delivery
Free and clear, delivered by pre-agreed timeline
Design/Construction
Performance Security for Construction posted in favor of DPWH
Operation/ Maintenance
KPIs set with corresponding penalties for non-compliance, Performance Security for Operations posted in favor of DPWH
Political Risks
Limited events
Force Majeure
Relief provided to Concessionaire on O&M performance of obligations, procedure and mechanism for addressing impact of FM events to be provided in the TCA
Turn-over at the end of Concession
At pre-agreed conditions, testing & acceptance regime included in TCA

29. Foreign Ownership and Management
The Philippine Constitution, provides that no franchise, certificate or any other form of authorization for the operation of a public utility shall be granted except to citizens of the Philippines or to 60/40 companies.
Foreign ownership and management is NOT PROHIBITED on the level of the Concessionaire.
However, the Facility Operator MUST BE at least 60% Filipino owned and controlled.
Participation of foreign investors in the governing body of any public utility enterprise is limited to their proportionate share in its capital and all executive and managing officers of such corporation or association must be citizens of the Philippines.

30. Indicative Timetable
2011
July - Publication of Invitation to Participate and Bid
August - Pre-qualification Conference
September - Submission of Qualification Documents
Notice of Pre-qualification
Release of Draft Concession Agreement to Pre-qualified Bidders
October - Pre-bid Conference
December - Release of Final Concession Agreement to Pre-qualified Bidders
2012
January - Submission of Bid and Issuance of Notice of Award
March - Signing of the TCA
2013
March - Approval of the Detailed Engineering Design and Delivery of ROW
April - Start of Construction
2015
April - Start of Operations
2048
March - Turn-over of the NAIA Expressway to DPWH
The international competitive bidding for the Project will be conducted in accordance with the procurement rules and timelines set forth in the BOT Law