NAIAX Information Memorandum 2012 - Final - July 31 2012

7/31/2019 NAIAX Information Memorandum 2012 - Final - July 31 2012

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Republic of the PhilippinesDEPARTMENT OF PUBLIC WORKS AND HIGHWAYS

NAIA EXPRESSWAY PROJECT

Information Memorandum

July 2012

Transaction Advisors With Assistance From


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DPWH NAIA Expressway Project: Information Memorandum July 2012

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DISCLAIMER

This Information Memorandum (IM) has been prepared by the Development Bank of thePhilippines (DBP) and the International Finance Corporation (IFC) on behalf of their client, theDepartment of Public Works and Highways (DPWH), in line with their mandate as Transaction

Advisors to the DPWH in the development, structuring and tendering of the NAIA ExpresswayProject as a Solicited Transaction under the Philippine Build-Operate-Transfer (BOT) Law (or RA6957 as amended by RA 7718).

This IM does not purport to be all-inclusive or to contain all of the information that a prospectiveparticipant may consider material or desirable in making its decision to participate in the tender.

No representation or warranty, express or implied, is made, or responsibility of any kind is or will beaccepted by the DBP, IFC, the DPWH, or the Republic of the Philippines (ROP) or any of itsagencies or advisors, with respect to the accuracy and completeness of this informationmemorandum.

The DPWH or the DBP/IFC may amend or replace any of the information contained in this bookletat any time, without giving any prior notice or providing any reason.

In furnishing this IM, the DBP, IFC, the DPWH, or the ROP or any of its agencies undertakes noobligation to provide recipients with access to any additional information, or to update, or to correctany inaccuracies which may become apparent in this IM or any other information made available inconnection with the Project. Additional information shall be provided at appropriate times during theformal tender process.

No person has been authorized to give any information or make any representation not contained inthis IM and, if given or made, any such information or representation may not be relied upon as having

been authorized by DBP, IFC, the DPWH, or the ROP or any of its agencies.

THIS MEMORANDUM DOES NOT CONSTITUTE A SOLICITATION OF BIDS FOR ANY ASPECTOF THE NAIA EXPRESSWAY PROJECT. SOLICITATIONS OF BIDS AND BIDDINGGUIDELINES WILL BE DISTRIBUTED SEPARATELY.


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ACRONYMS

BOT Build-Operate-Transfer

BTO Build-Transfer-Operate

CED Conceptual Engineering Design

DBP Development Bank of the Philippines

DED Detailed Engineering Design

DENR Department of Environment and Natural Resources

DOF Department of Finance

DPWH Department of Public Works and Highways

DTI Department of Trade and Industry

EO Executive Order

ICC Investment Coordination Committee

IFC International Finance Corporation

IRR Implementing Rules and Regulations

ITB Instructions to Bidders

JICA Japan International Cooperation Agency

NAIA Ninoy Aquino International Airport

NEDA National Economic and Development Authority

PAGCORPPP

Philippine Amusement and Gaming CorporationPublic-Private Partnership

RA Republic Act

RFP Request for Proposals

ROP Republic of the Philippines

ROW Right-of-Way

SBAC DPWH Special Pre-Qualification, Bids and Awards Committee

TCA Toll Concession Agreement

TOC Toll Operation Certificate

TRB Toll Regulatory Board

VOT Value-of-Time

UNITS

Km Kilometer

AADT Average annual daily traffic


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CONTENTS

I. Introduction ..................................................................................................................... 3II. Project Description .......................................................................................................... 4

A. Type of Toll System ............................................................................................. 8

B. Traffic Management ............................................................................................. 9C. Project Standards and Specifications................................................................. 10

Minimum Performance Standards and Specifications ........................................ 10Scope of Design ................................................................................................ 11Outputs of the Detailed Engineering Design by the Concessionaire .................. 11

D. Construction Cost .............................................................................................. 12III. Project Implementing Agency ........................................................................................ 13IV. Traffic Analysis .............................................................................................................. 15V. Right-of-Way and Resettlement .................................................................................... 20

A. Right-of-Way (ROW) Acquisition ........................................................................ 20B. Resettlement of Informal Settlers and the Resettlement Action Plan ................. 20

VI. Concession Structure .................................................................................................... 21A. Legal Framework for Concession ...................................................................... 21B. Project Structure ................................................................................................ 21

VII. Key Commercial Features of the Draft TCA .................................................................. 22VIII. Procurement Process .................................................................................................... 25

A. Legal Basis of Procurement ............................................................................... 25B. Outline of the Bidding Process ........................................................................... 25

Pre-Qualification ................................................................................................ 25Preparation of Bid Proposals ............................................................................. 25Pre-Bid Conference ........................................................................................... 26Submission of Bid Proposals ............................................................................. 26Bid Evaluation and Post Qualification ................................................................ 26

Awarding of Bidder and Issuance of Notice of Award ......................................... 27Signing of Concession Agreement ..................................................................... 27C. Information Available to Bidders ........................................................................ 27

IX. Investment Framework .................................................................................................. 28A. Taxation ............................................................................................................. 28

Corporate Tax .................................................................................................... 28Income Tax ........................................................................................................ 29Value-Added Tax (VAT) ..................................................................................... 29Tax Treaties ....................................................................................................... 30Tax Incentives ................................................................................................... 31Local Tax ........................................................................................................... 31

B. Foreign Exchange.............................................................................................. 32

C. Foreign Ownership and Management ................................................................ 33X. Regulatory Framework .................................................................................................. 34

A. National Economic and Development Authority ................................................. 34B. Toll Regulatory Board ........................................................................................ 34

XI. The Philippine Toll Road System................................................................................... 35XII. Ninoy Aquino International Airport ................................................................................. 39XIII. PAGCOR Entertainment City ........................................................................................ 42XIV. Indicative Timetable ...................................................................................................... 44


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LIST OF TABLES

Table 1: NAIA Expressway Project Description ............................................................................... 7

Table 2: Vehicle Class and Toll Rate Multiplier ............................................................................... 9

Table 3: Number of Traffic Lanes of At-Grade Roads ..................................................................... 9

Table 4: Risk Allocation Matrix ...................................................................................................... 24Table 5: Corporate Income Taxation ............................................................................................. 28

Table 6: Individual Taxation .......................................................................................................... 29

Table 7: Effective Philippine Tax Treaties ..................................................................................... 30

Table 8: Amount of Tax Per Annum .............................................................................................. 32

Table 9: Other Transport Costs in Manila...................................................................................... 35

Table 10: Philippine Toll Road System Toll Rate (2011 Pesos per Km) ........................................ 36

Table 11: High Standard Highway Master Plan 200km Sphere of Metro Manila ......................... 38

Table 12: Passenger Traffic at the Ninoy Aquino International Airport (1994-2010) ...................... 39

Table 13: Passengers at NAIA, DMIA and the Region (2002-2010) .............................................. 41

LIST OF FIGURES

Figure 1: NAIA Expressway Road Alignment .................................................................................. 5

Figure 2: At-Grade Entertainment City Works Road General Layout Plan....................................... 6

Figure 3: Traffic Volumes on Roads Surrounding NAIA ................................................................ 16

Figure 4: Hourly Variation of Traffic In NAIA Expressway Study Area (Weekdays) ....................... 17

Figure 5: Traffic Composition at the NAIA Terminal Main Gates ................................................... 18

Figure 6: Travel Speed from Roxas Blvd. to Skyway Expressway (From 5 to 6pm) ...................... 19

Figure 7: High Standard Highway Master Plan ............................................................................. 37Figure 8: Total A/D Passengers at NAIA (1994-2010) ................................................................... 40

Figure 9: Aerial Shot of Entertainment City ................................................................................... 43


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PART I. EXECUTIVE SUMMARY: INVESTOR HIGHLIGHTS

The implementation of the NAIA Expressway Project (the Project) under an openinternational competitive bidding process represents an excellent opportunity to invest in atoll road concession in the Philippines. The Project, sponsored by the Department of PublicWorks and Highways (DPWH), is one of the priority projects of the Republic of thePhilippines (ROP) under its Public-Private Partnership (PPP) Program launched byPresident Benigno Aquino III in November 2010. Under the 2011-2016 PhilippineDevelopment Plan, massive infrastructure investments are deemed urgently needed overthe medium-term in order for the Philippines to achieve its development targets ofsustained and inclusive growth; and PPP is identified as the centerpiece strategy formobilizing these investments.

The Project, one of the strategic component of the Metro Manila Urban Expressway Systemthat envisions the establishment of a network of high-standard expressways serving MetroManila, would facilitate the efficient flow of traffic to and from the countrys premier

international and domestic airport (the Ninoy Aquino International Airport (NAIA) Complex),link two major expressways serving as the north-south backbone of the eastern andwestern sections of Metro Manila, and support the development of the PAGCOREntertainment City located along the Manila Bay reclamation area.

The key highlights of this investment opportunity are as follows:

Robust Legal and Regulatory Framework

The Philippine Constitution recognizes the critical role of the private sector as thegovernments main partner in development. This recognition was further reinforced with the

landmark passage of Republic Act No. 6957, otherwise known as the Philippine Build-Operate-Transfer (BOT) Law in 1990, which is the first of its kind in Asia, that declared theindispensable role of the private sector as the main engine for national growth anddevelopment and provided a stable framework for private sector involvement in thefinancing, construction, operation and maintenance of infrastructure and developmentprojects.

The BOT Law opened to private sector participation various infrastructure sectors anddefined contractual arrangements under which such participation may be undertaken. TheBOT Law was amended in 1994, further expanding the allowed contractual variants,strengthening the process for government approvals, allowing private sector initiativesthrough the unsolicited track and prescribing additional incentivizes for projects undertaken

through this legal framework. To date, over US$45 billion investments have been mobilizedunder the BOT Law covering some 70 infrastructure projects.

Government Support

The ROP, represented by DPWH, will be the direct counterparty in the Toll ConcessionAgreement (TCA) to be implemented under the Philippine BOT Law (Republic Act (RA)6957 as amended by RA 7718).


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The Government will provide the Right-of-Way (ROW) required for the Project by a pre-agreed timeline, which will be specified in the TCA.

The Government is facilitating the arrangement of debt financing on concessional termsfrom a reputable financing institution of up to Php6.5 billion. This debt facility theInfrastructure Support Facility (ISF) will be made available to the winning bidder. The

terms of this debt facility will be circulated to Pre-Qualified Bidders separately once theseare firmed up and finalized. The amount to be availed under the ISF shall be the criteria forthe financial proposal.

Competitive and transparent pre-qualification and bidding process

The Project will be procured strictly following the rules and procedures of the BOT Law andits Implementing Rules and Regulations, which adhere to the principles of competition,transparency, and a leveled playing field, and will therefore be fair and open to allinterested parties.

The bid process is expected to take approximately seven (7) months from the publication ofthe Invitation to Pre-Qualify to Bid to the signing of the Toll Concession Agreement.Prospective Bidders are given around three (3) months from the Notice of Pre-Qualificationto the Bid Submission Date to provide them sufficient time to conduct due diligence, reviewand comment on the transaction documents, and meet with DPWH representatives. A dataroom will be set up by DPWH to aid the conduct of such due diligence.

Pre-defined requirement and process for TOC issuance, and a toll rate structure thatpromotes bankability

The complete requirements and process for the issuance of the Toll Operation Certificate

(TOC) by the Toll Regulatory Board (TRB) will be provided to bidders and incorporated inthe TCA. Upon compliance with these requirements, DPWH will ensure the issuance by theTRB of the TOC to the Concessionaire or its duly appointed Facility Operator within aprescribed period to be stipulated in the TCA.

The Project will have a toll rate structure that is affordable and competitive, with levels setthat are comparable with those charged in existing toll roads serving Metro Manila. A tolladjustment formula will be prescribed in the TCA and its application over the concessionperiod will be guaranteed by the DPWH.

Environment and Social Considerations

The project will comply with environmental standards and safeguards required by local lawsas well as international standards required by multilateral and bilateral financing institutions.


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PART II.THE NAIA EXPRESSWAY PROJECT

I. INTRODUCTION

The Philippine government launched in November 2010 an aggressive program for PPPs inorder to develop much needed infrastructure that would support its objectives of sustainedand inclusive economic growth.

The NAIA Expressway is among the governments priority PPP to be implemented underthe BOT Law through the solicited mode (the Transaction).

The Project was approved by the NEDA Board on 30 May 2012.

In preparation for the competitive tender, the DPWH availed of the support of the JapanInternational Cooperation Agency (JICA) to review and update the feasibility study for theProject conducted by by Filipinas Dravo in association with Philipps Technical ConsultantsCorporation in 2008/2009.

Furthermore, DPWH engaged the services of the Development Bank of the Philippines(DBP) with the International Finance Corporation (IFC), an affiliate of the World Bank, to actas Lead Transaction Advisors in developing, structuring the PPP transaction, preparing thetender documents, and assisting DPWH in the conduct of the competitive tender processfor the Project. IFC in turn has hired specialized consultants for this project to support thework of the Advisors: expressway technical specialists (LeighFisher), international legalconsultants (Hogan Lovells Lee & Lee, Singapore), and local lawyers.

The Philippine Public-Private Partnership Center (PPP Center), under the NationalEconomic and Development Authority (NEDA), is also assisting the DPWH and its advisorsin the preparation and implementation of the tender for the Project. The PPP Center wasformerly known as the Build-Operate-Transfer Center (BOT Center) attached to theDepartment of Trade and Industry (DTI). Executive Order No. 8 series of 2010 signed inSeptember 9, 2010 renamed and reorganized the BOT Center into the PPP Center andtransferred it to NEDA to efficiently and effectively implement the Medium-Term PhilippineDevelopment Plan by facilitating the coordination and monitoring of the PPP programs andprojects of the Government.


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II. PROJECT DESCRIPTION

With the existing NAIA Terminals nearing capacity, the Republic of the Philippinessought to address this problem by constructing the NAIA Terminal 3 in the early 2000s topromote investments and tourism in the country. Furthermore, with the sale andcommercialization of a portion of the Villamor Airbase and the planned development ofthe reclamation area along Manila Bay, increased economic activity in these areas areexpected to drive up usage of the existing road network around the airport.

Thus, the NAIA Expressway was conceived to provide fast and reliable access to thethree NAIA Terminals and connect the South Luzon Expressway/Skyway with theManila-Cavite Toll Expressway/Roxas Boulevard, the gateway to the rising PAGCOREntertainment City complex (Entertainment City). Broadly, the objectives of the projectare as follows:

to provide quicker access between all three NAIA Terminals to Roxas Boulevard,Macapagal Boulevard, and the Entertainment City complex.

To reduce traffic congestion of roads in the vicinity of the NAIA Terminals;

To improve international/domestic investment environment for faster economicdevelopment; and

To support the development of Entertainment City as a prime tourism destination.

The NAIA Expressway is composed of two phases. Construction of Phase I of the NAIAExpressway and its related roads project started in 2003 and was completed in 2010.

The NAIA Expressway Phase I is a fully elevated expressway that runs from the MetroManila Skyway to Sales Road near NAIA Terminal 3 with on and down ramps beside theResorts World complex.

In order to ensure the safety and interest of the public, an Interim Operation Agreementcovering Phase I was entered into by the DPWH, the TRB and the Skyway O&MCorporation (SOMCO) last 28 October 2011. The Interim Operation Agreement shallexpire the day after the issuance by the TRB of the Toll Operation Certificate for thewhole NAIA Expressway (Phase I and II).


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FIGURE 1: NAIA Expressway Road Alignment

The Project is composed of the following components:

Phase I Adjustment Works:

Adjustments to the 0.6 km Phase I viaduct, starting from Skyway Stage 1 at km0+810 to km 1+398.27 including ramps, to achieve operations and maintenance

standards comparable with standards to be set for Phase II that would enableseamless operations.

Phase II Works:

Design and construction of approximately 4.83 km 4-lane viaduct extension fromthe existing Phase I near NAIA Terminal 3 to Roxas Boulevard and DiosdadoMacapagal Boulevard, over the existing roads of Sales Road, Andrews Avenue,Domestic Airport Road and NAIA Road.

Design and construction of Minimum of 6 on and 6 off ramps to Terminals 1, 2and 3 and other strategic locations.

Design and construction of two connection ramps to link Roxas Boulevard,Macapagal Boulevard and Entertainment City on-off ramps to and fromTerminals 1 and 2 on-off ramps.

Design, construction and provision of toll plazas, plus additional toll operatingequipment and safety facilities for the DPWH-constructed Phase I to standardscompatible with those of Phase II.


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Reconstruction and widening of affected at-grade public roads (Sales Road,Andrews Ave., Domestic Airport Road, and NAIA Road) due to Phase IIconstruction; these roads shall remain public and maintenance thereof shall bethe responsibility of Government.

At-Grade Entertainment City Works:

Construction of approximately 2.22 km 6 to 8-lane at-grade roads and a 300meter 2-lane service road within the Entertainment City, and a 4-lane accessroad connecting New Seaside Drive to Macapagal Boulevard, based on thedetailed design specifications to be provided; the maintenance and operations ofthis section shall be turned over to the Government upon completion.

FIGURE 2: At-Grade Entertainment City Works Road General Layout Plan

Source: Entertainment City Manila, Master Development Plan Updating, Edwin E. Aguiling+ Associates


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Operations and Maintenance:

Operation and Maintenance of the entire NAIA Expressway (Phase I and PhaseII, but not including the At-Grade Entertainment City Works) as a tolledexpressway.

The Project description is summarized the following Table.

TABLE 1: NAIA Expressway Project Description

Elements Approximate Characteristics

Phase I (existing, for adjustments) 0.6 km

Phase II- Main Expressway, four-lane- 12 Ramps, 6.34 km single-lane

equivalent to four-lane

4.83 kms

2.32 kms

Total Length (Phase I & II) 7.75 kms

No. of Lanes (Phase 1 & II) 4 lanes (2-lane x 2-direction); 1 lane for ramps

Ramps 6 on-ramps, 6 off-ramps, 2 connection ramps

At-Grade Entertainment City Works- New Seaside Drive- Bay Boulevard- access road- service road

0.72 kms1.0km0.5km0.3km

Total Length (At-Grade Works) 2.52 kms

No. of Lanes (At-Grade Works)- New Seaside Drive

- Bay Boulevard- access road- service road

6 lanes (3-lane x 2-direction)

8 lanes (4-lane x 2-direction)4 lanes (2-lane x 2-direction)2 lanes (1-lane x 2-direction)

Concession period 30 years

Construction period Approximately 2 years

Preparation of the Detailed EngineeringDesign

Approximately 10 months; partial delivery andapproval allowed

Operation start year

At-Grade Entertainment City Works turn-over by Dec.2013;

Partial operations by April 2015 (Terminals

1 and 2 to/from Roxas Blvd. / MacapagalBlvd. / Entertainment City);

Full operations by 2016

The six new on-ramps, six new off-ramps and one existing off-ramp shall be provided asfollows: One on-ramp for NAIA Terminal 3 exit traffic and one existing off-ramp from Skyway

for access to NAIA Terminal 3; One off-ramp for traffic from Paranaque bound for Terminal 3;


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One on-ramp along Andrews Ave. to collect traffic from NAIA Terminal 3 andAndrews Ave;

One off-ramp access to NAIA Terminal 1; One off-ramp access to NAIA Terminal 2; One on-ramp to collect traffic from NAIA Terminal 1 and Terminal 2; One on-ramp and one off-ramp from/to Roxas Boulevard towards the Manila-Cavite

Coastal Expressway; One on-ramp and one off-ramp at Macapagal Boulevard towards Manila; and One on-ramp and one off-ramp at Entertainment City.

Two connection ramps will also be constructed to link Roxas Boulevard, MacapagalBoulevard and Entertainment City on-off ramps to and from Terminals 1 and 2 on-offramps.

Furthermore, one existing on-ramp (entry to the Skyway) of Phase I should be removed.

Should the Concessionaire propose to provide any additional on and off ramps, aside forthe minimum of twelve ramps in the abovementioned locations, the Concessionaire shall

bear the costs of construction, operation and maintenance thereof, as well as the cost ofthe additional right-of-way needed.

The number of traffic lanes of the main expressway shall be four (4) lanes (2-lane x 2-directions) meanwhile the number of traffic lanes of all ramps shall be one (1).

Upon issuance of the Toll Operation Certificate for the NAIA Expressway, the TRB maythen require the Concessionaire to enter into interconnection agreements with theSkyway operator for connection with the Skyway and with the Cavite Expresswayoperator for connection with the Cavite Expressway. These agreements are necessaryfor the seamless integration of these expressway systems.

A. TYPE OF TOLL SYSTEM

The "open toll system" shall be used in which motorists pay the following flat toll rate:

a) Short-segment Rate - a fixed toll rate for the appropriate vehicle class, for motoriststravelling on the NAIA Expressway between:

i. the Skyway and NAIA Terminal 3; andii. NAIA Terminals 1 and 2 and Roxas Boulevard/Macapagal Boulevard/Entertainment

City.

b) Full-route Rate - a fixed toll rate for the appropriate vehicle class, for motorists travellingon the NAIA Expressway, other than those covered above.

The proposed toll rate is tentatively set at: Full-route Rate: Php45.00 (inclusive of VAT) Short-segment Rate: Php35.00 (inclusive of VAT)

The following table shows the toll rate multiplier to be applied per vehicle class on the fixedtoll rate described above.


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TABLE 2: Vehicle Class and Toll Rate Multiplier

Vehicle Class Toll Rate Multiplier

Class I: Light Vehicles - Car, Jeep, Passenger Van/Pickup, Taxi, Mega-Taxi, Jeepney, Mini-Bus

1.0x

Class II: Medium Weight Vehicles - Aircon& Non AirconBus, Goods Van/Pickup, 2-Axle Truck, DumpTruck, Tanker, Mixer

2.0x

Class III: Heavy Vehicles Rigid Truck with 3 or moreAxles, Trailer (Articulated)

3.0x

Currently, to ensure the proper upkeep of NAIA Expressway Phase I, TRB has granted an Interim

Operations Agreement to SOMCO to operate and maintain the facility, including the collection of

tolls (Php20/vehicle) until the issuance of the Toll Operation Certificate for the NAIA Expressway

by the TRB to the Concessionare.

B. TRAFFIC MANAGEMENT

To ensure the continuous use of the existing roads and to minimize the impact of trafficduring the construction of NAIA Expressway on traffic, during construction, at-grade roadswill be required to be opened at all time with the following number of operable lanes:

TABLE 3: Number of Traffic Lanes of At-Grade Roads

At-grade RoadExisting No. ofTraffic Lanes

No. of TrafficLanes During

Construction

No. of TrafficLanes After

Construction

Sales Road

East Bound3 (Before on-ramp)2 (After on-ramp)

2 3

West Bound3 (Under off-ramp)2 (Under off-ramp)

2 3

Andrews Avenue(Sales AveRoundabout)

East Bound 3-4 3 3-4

West Bound 3 3 3

Andrews Avenue(Roundabout

Domestic Rd)

East Bound 3 3 3

West Bound 3 3 3

Domestic RoadNorth Bound 3 2 3

South Bound 3 2 3

NAIA (MIA) Road(Domestic RdQuirino Ave)

East Bound 4 2 4

West Bound 4 2 4

NAIA (MIA) Road(Quirino AveRoxas Blvd)

East Bound 4 2 4

West Bound 3 2 3


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DiosdadoMacapagal Blvd.

North Bound 4 2 4

South Bound 4 2 4

A detailed traffic management plan will be required as part of the Technical Proposal to besubmitted by the Bidders for the evaluation and approval of DPWH.

C. PROJECT STANDARDS AND SPECIFICATIONS

MINIMUM PERFORMANCESTANDARDS AND SPECIFICATIONS

Ramp Layout

Six on-ramps and six off-ramps shall be provided. The one existing on-ramp of Phase I is tobe removed. An emergency exit for overloaded trucks shall be provided for Skyway-boundtraffic after the weighbridge. The existing toll plaza (A) under Phase I near the Skywayshould be maintained.

Number of Lanes

For the main expressway, the number of traffic lanes shall be four (4). The number of trafficlanes of each ramp shall be at least one (1).

For the At-Grade Entertainment City Works, the following shall be the number of trafficlanes: six-lane New Seaside Drive

eight-lane Bay Boulevard four-lane access road two-lane service road

Vertical Clearance

The desirable vertical clearance for the expressway and at-grade roads shall be 5.00 m.The absolute minimum vertical clearance is 4.88 m applicable to the section controlled bythe NAIA Navigational Height Limitations.

NAIA Navigational Height Limitations

The NAIA Expressway Project shall comply with the Maximum Allowable Top Elevation(MATE) or Height Limitation at critical points of the Project stated in the letter dated May 30,2011 of the Civil Aviation Authority of the Philippines (CAAP).

Basic Right-of-Way


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The Maps of the Basic Right of Way, to be delivered by the DPWH, corresponding to theMinimum Configuration described above are given in the MPSS. The Concessionaire maylocate the Expressway center line within the Basic Right of Way.

Environmental Compliance Certificate (ECC) Requirements

The requirements of the ECC/s for the Project shall be complied with.

The Environmental Management Bureau (EMB), DENR, in a letter dated 17 June 2011,informed the DPWH that the ECC, which covers both Phases I and II, is still valid.

The ECC for the at-grade roads within Entertainment City was issued on [*] which alsocovers other developments within Entertainment City.

Indicative Minimum Requirements for Phase I Adjustments Works

These consist of the replacement of longitudinal expansion joints between the Skyway andPhase I, replacement of expansion joints between spans of Phase I, repair of 10% of thepavement, and miscellaneous repairs.

SCOPE OFDESIGN

The Concessionaire shall prepare the Detailed Engineering Design (DED) covering theconstruction of the Phase II Works, and the Phase I Adjustment Works, and submit it forreview and certification by the Independent Consultant. The Concessionaire shall prepare the

DED (a) based on its Conceptual Engineering Design (CED) submitted in the TechnicalProposal, and (b) in accordance with the MPSS.

The certified DED, together with the MPSS for Construction, shall govern the Phase IConstruction and the Phase I Adjustment Works.

OUTPUTS OF THEDETAILED ENGINEERING DESIGN BY THECONCESSIONAIRE

a) Changes to the At-Grade Entertainment City Works DED, if any.

b) Phase II Works DED:

1. Detailed design of expressway, on and off ramps, Phase I-II interconnection, at-grade roads, and appurtenant structures, including plans, profiles and cross-sections;

2. Detailed design of viaduct structures, including substructure and superstructure;3. Detailed design of toll facilities, including toll plazas and tolling

systems/equipment; and4. Detailed design of expressway traffic safety devices, including signage.

c) Phase I Adjustment Works DED.


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d) Plans, elevations, and typical cross-sections.

e) Supporting data for a), b), and c) above, including topographic, geotechnical, andhydrologic, geometric and pavement design reports, structural analysis andcalculations, detailed specifications of materials, safety audit, and value engineering.

f) Updated/detailed Construction Plan, including Schedule, including milestones, and S-curve, and Traffic Management Plan.

D. CONSTRUCTION COST

The construction cost was estimated based on several factors, as follows:a) Unit price was used for similar ROP and BOT projects implemented or tendered from

2010-2011; andb) Procedures and composition for the derivation of base construction cost, used in similar

projects.

The civil works cost was divided into four components:a) General requirement such as facilities for the engineer, construction health & safety

requirements, activities relating to mobilisation and demobilization, implementation ofenvironmental monitoring and traffic management plans during construction

b) Expressway Ramp and Viaduct;c) Construction of At-Grade Entertainment City Works; andd) Toll Plaza.

The estimated civil works cost for NAIA Expressway is approximately Php11 billion. Thisdoes not include any contingencies or consultancy costs nor does it include costs related tofinancing or insurance.


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III. PROJECT IMPLEMENTING AGENCY

The Project is being implemented by DPWH, a department of the executive branch of Government.It is the engineering and construction arm of the Government. DPWH is primarily responsible forthe planning, classification, design, construction, operation, maintenance, and supervision of all

public works and infrastructure facilities, particularly national roads and highways.

Its specific legal mandate in relation to national roads and highways is set out in its charter,Executive Order (EO) No. 124 as amended under Book IV, Title V, Chapter 1, Section 3 of EO 292or the Administrative Code of 1987 as follows:

a) Provide technical services for the planning, design, construction, maintenance, or operation ofinfrastructure facilities;

b) Develop and implement effective codes, standards, and reasonable guidelines to ensure thesafety of all public and private structures in the country and assure efficiency and proper qualityin the construction of public works;

c) Ascertain that all public works plans and project implementation designs are consistent withcurrent standards and guidelines;

d) Identify, plan, secure funding for, program, design, construct or undertake prequalification,bidding, and award of contracts of public works projects with the exception only of specializedprojects undertaken by Government corporate entities with established technical capability andas directed by the President of the Philippines or as provided by law;

e) Provide the works supervision function for all public works constructions and ensure that actualconstruction is done in accordance with approved government plans and specifications;

f) Assist other agencies, including the local governments, in determining the most suitable entityto undertake the actual construction of public works projects;

g) Maintain or cause to be maintained all highways, flood control, and other public worksthroughout the country except those that are the responsibility of other agencies as directed bythe President of the Philippines or as provided by law;

h) Provide an integrated planning for highways, flood control and water resource developmentsystems, and other public works;

i) Classify road and highways into national, regional, provincial, city, municipal, and barangay

roads and highways, based on objective criteria it shall adopt; provide or authorize theconversion of roads and highways from one category to another;

j) Delegate, to any agency it determines to have the adequate technical capability, any of theforegoing powers and functions; and,

k) Perform such other functions as may be provided by law.


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In addition to its charter, EO 686, which was issued in 2007, provides that the DPWH also hasthe powers to:

a. Determine the kind, type and nature of roads and highways;

b. Enter into construction, operation and maintenance contracts for roads andhighways; and,c. Condemn private property for roads and highways.


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IV. TRAFFIC ANALYSIS

A JICA study team was commissioned by DPWH to conduct a traffic study for NAIAExpressway. The traffic estimation was based on a network traffic model developed usingthe JICA STRADA software, including all steps of the travel model calibration and demandforecasting. The results of this traffic study will be provided to bidders.

Base year for the model is 2010 and Annual Average Daily Traffic (AADT) values werederived from observed data extrapolated from the following two documents:

Feasibility study completed in February 2010 by Filipinas Dravo Corporation inassociation with Philipps Technical Consultants Corporation on behalf of the Ministry ofEconomy & Trade, Government of Japan and the Economic Research Institute forASEAN and East Asia; and

JICA Study on Airport Strategy for Greater Capital Region (January 2011).

Traffic volumes (expressed as AADT) on roads surrounding NAIA are discussed below:

As seen in the Figure below, there is a high number of vehicles in the corridor where thefuture expressway will run 48,373 on Sales Road, 65,229 on Andrews Avenue,78,405 on NAIA Road (Seaside Drive);

Recorded traffic at NAIA Expressway (Phase I) in 2010 is 18,332 vehicles in bothdirections. This number increases to 36,391 at beginning of 2011 with 60% of trafficmoving in the direction of the Skyway;

Most of these vehicles entering Skyway are exiting at the Makati exits of Skyway(Magallanes exit and Osmena exit). At present, use of the entire stretch of NAIA

Expressway Phase I is free of charge as well as use of the portion of the Skyway fromNAIA Expressway to the Skyway Makati exits;

The number of vehicles recorded at the main entrance of terminals of the airport is alsosignificant at 16,578 a day at Terminal 1, 16,839 at Terminal 2 and 11,375 at Terminal3. Traffic recorded at the gate of the Cargo Terminal is 1,149 vehicles a day; and

Observed traffic volume at the major corridors in vicinity of the airport is also high at95,669 in Roxas Boulevard and 95,675 in EDSA.


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FIGURE 3: Traffic Volumes on Roads Surrounding NAIA

Source: Review and Update of Feasibility Study of NAIAX Phase II Final Report 2011_06 Chapter 4

Observations of hourly variation of traffic are as follows:

Traffic accessing the terminals of the NAIA has peak period at noon time(11:00AM to 3:00PM) and dramatically decreases around midnight (1:00AM to3:00AM). The highest number of vehicles recorded in one hour is 1,283 atTerminal 2. There is no observed difference of traffic characteristics betweenweekday and weekend day.

The peak hours of traffic on Sales Road are between 8:00AM and 11:00AMduring the weekday. On weekend days however there is also a high volume ofvehicles from 5:00PM onwards moving in the direction of Andrews Avenue.

At Andrews Avenue (near Aurora Road), both on weekday and weekend day,there is a constant high volume of vehicles from 6:00AM to 7:00PM, with each

direction having more than 1000 vehicles per hour. The highest recorded numberof vehicles in an hour is 2,119 on a weekday and 2,862 on the weekend.

Traffic volume at Andrews Avenue near Domestic Road is also very high and thenumber of vehicles recorded constantly exceeded 1,000 vehicles an hour from6:00AM to 9:00PM on weekdays. On weekend days however, the trafficcharacteristics change and there is a very high peak of traffic at noon time in thedirection of Roxas Boulevard, and then again at 9:00PM to 10:00PM in the samedirection. This peak hour may be correlated with airline flight schedules.

85,890 7,50431,609

64,698

61,069

1,44590,485

12,98596,883

44,476

61,652

51,284

44,476

69,174

16,856

82,705

41,899

95,669 11,071 33,895

49,664

65,229

78,405

13,071

61,579

65,876

44,958

48,373

18,332

95,675

L E G E N D

Feb. 2010 (ERIA) Intersection Count

Feb. 2010 (ERIA)

16,578

4,542

Jan. 2011 (JICA)

1,149

16,8393,668

2,049

8792,187

11,375

(1)(2)

(3)

(4)

April 2011 (JICA Study Team)

36,391

NAIA Expressway (Phase - 1)

Traffic DataDirection 2010 2011

From Skyway 9,407 14,866

To Skyway 8,925 21,525


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The highest traffic volume is observed on the NAIA Road (Seaside Drive) whereboth weekday and weekend day have the same traffic characteristics. The flowin the direction of coastal road is higher than the opposite direction and trafficvolumes substantially decrease from 6:00PM onwards. Peak hours of traffichowever are different, with peak hours on weekday from 11:00AM to 5:00PM andon the weekend from 9:00AM to 5:00PM.

The following figures show observed traffic condition at NAIA Expressway study area.

FIGURE 4: Hourly Variation of Traffic In NAIA Expressway Study Area (Weekdays)

AIRPORT TERMINALS SALES ROAD

ANDREWS AVENUE (NEAR AURORA ROAD) ANDREWS AVENUE (NEAR DOMESTIC ROAD)

NAIA ROAD (SEASIDE DRIVE) Source: "Review and Update of Feasibility Study ofNAIAX Phase II Final Report 2011_06 Chapter 4

0

200

400

600

800

1000

1200

1400

6-7AM

7-8AM

8-9AM

9-10AM

10-11AM

11-12AM

12-1PM

1-2PM

2-3PM

3-4PM

4-5PM

5-6PM

6-7PM

7-8PM

8-9PM

9-10PM

10-11PM

11-12PM

12-1AM

1-2AM

2-3AM

3-4AM

4-5AM

5-6AM

Terminal 1

Cargo Terminal

Terminal 2

Domestic

Terminal 3

-

200

400

600

800

1,000

1,200

1,400

1,600

1,800

6-7AM

7-8AM

8-9AM

9-10AM

10-11AM

11-12AM

12-1PM

1-2PM

2-3PM

3-4PM

4-5PM

5-6PM

6-7PM

7-8PM

8-9PM

9-10PM

To ANDREWS AVE.

From ANDREWS AVE.

-

500

1,000

1,500

2,000

2,500

6-7AM

7-8AM

8-9AM

9-10AM

10-11AM

11-12AM

12-1PM

1-2PM

2-3PM

3-4PM

4-5PM

5-6PM

6-7PM

7-8PM

8-9PM

9-10PM

10-11PM

11-12PM

12-1AM

1-2AM

2-3AM

3-4AM

4-5AM

5-6AM

From SLEX

To SLEX

-

500

1,000

1,500

2,000

2,500

6-7AM

7-8AM

8-9AM

9-10AM

10-11AM

11-12AM

12-1PM

1-2PM

2-3PM

3-4PM

4-5PM

5-6PM

6-7PM

7-8PM

8-9PM

9-10PM

To ROXAS BLVD.

From ROXAS BLVD.

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

6-7AM

7-8AM

8-9AM

9-10AM

10-11AM

11-12AM

12-1PM

1-2PM

2-3PM

3-4PM

4-5PM

5-6PM

6-7PM

7-8PM

8-9PM

9-10PM

10-11PM

11-12PM

12-1AM

1-2AM

2-3AM

3-4AM

4-5AM

5-6AM

From Coasta l Rd

To Coasta l Road


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Regarding vehicle composition, most of the vehicles recorded at the main gates of airportterminals are private cars. For example:

At Terminal 1, 99% are cars and the remaining 1% are buses.

At Terminal 2, share of cars is 86%; jeepneys, 7%; buses at 4%; and trucks, 3%.

At Domestic Airport, 99% of the traffic is cars.

At Terminal 3, share of cars is about 98% and the remaining 2% is shared by buses and

trucks.

At Cargo Terminal, cars share is 70% and trucks share is 30%.

FIGURE 5: Traffic Composition at the NAIA Terminal Main Gates


The main users of the corridor where the future NAIA Expressway will run are cars. Theshare of cars at Sales Road is 69%, at Andrews Avenue near Aurora Street 67%, atAndrews Avenue near Domestic Road 58%, and at NAIA Road (Seaside Drive) 66%.

A travel time survey was conducted by JICA on 15 April 2011 (Friday) from 7:00AM to9:00PM where a single run every hour was carried out to determine the most congestedperiod. The survey shows that:

The longest travel time spent in the section is around 40 minutes (5:00 PM) and thedirection is from Skyway to Roxas Boulevard. This means travel speed is below 10km/hr for the entire 5.8 km stretch.

The shortest travel time is 11 minutes (12:00AM) in the direction of Roxas Boulevard toSkyway. Average travel speed is around 30 km/hr.

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

Terminal1

Cargo

Terminal2

Domestic

Terminal3

Truck

Bus

Jeepney

Car


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If NAIA Expressway Phase II is built the expected travel time is around 8 minutes(excluding any stop time at a toll plaza) from Roxas Boulevard to Skyway. The travelspeed is about 45 km/hr for the entire 5.6 km expressway stretch.

The Figure below shows speeds in the most congested hour (5 to 6PM).

FIGURE 6: Travel Speed from Roxas Blvd. to Skyway Expressway (From 5 to 6pm)


Road congestion can be observed on many of the existing roads in the area, and thevolume 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%.

Less t han 10km/hr

10km ~ 20km/hr

20km ~ 30km/hr

Over 30km/hr

L E G E N D

RoxasBoulevard

Skyway/SLEX

Terminal 1

Terminal 2

Terminal 3

Manila-Cavite

CoatalRoad

EDSA


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V.RIGHT-OF-WAY AND RESETTLEMENT

A. RIGHT-OF-WAY (ROW)ACQUISITION

ROW acquisition area for the Project is about 33,000 square meters wherein majority of thelots are owned by Government through Government-Owned and Controlled Corporations(GOCCs) such as the Manila International Airport Authority, the Light Rail Transit Authority,PAGCOR, Philippine Reclamation Authority and the Philippine Air Force.

The DPWH expects to be able to turn over all the ROW within approximately one (1) yearfrom the signing of the TCA to ensure that the Concessionaire is able to perform itsobligations under the TCA. The DPWH may also turn-over ROW in sections to theConcessionaire to accelerate construction.

The DPWH will coordinate with the Concessionaire on the relocation of public utility

facilities and structures in accordance with the Concessionaire's construction schedule toavoid delay the construction of the Project. The Concession Agreement shall set out thedetails of the arrangement for relocating public utility facilities and structures. Presently, theDPWH is already coordinating with the affected utility agencies on this matter since underDPWH Department Order No. 26 series of 2011 on Policy on Diggings/Excavations byPrivate and Public Utilities on National Roads signed 3 May 2011, a utility agency is obligedto remove or relocate its existing utility facilities or structures located on a national roadshould this be required by the DPWH for expansion or improvement. Maps of undergroundutilities will be provided to Pre-Qualified Bidders and will be included in the Data Room.

DPWH has already completed the parcellary survey for the Project. Negotiations withaffected parties are on-going for direct acquisition. Formal expropriation proceedings will be

conducted after six months if agreement is not reached with affected parties.

B. RESETTLEMENT OF INFORMAL SETTLERS AND THE RESETTLEMENT ACTION

PLAN

The implementation of the NAIA Expressway is expected to yield a number of involuntaryresettlement impacts as a result of land acquisition for ROW.

More than sixty (60) households of informal settlers have been identified as affected by theProject. Other affected areas are commercial establishments with expired leases (with

MIAA) that have partially affected offices and facilities along the road alignment.

DPWH is currently coordinating with MIAA and the Pasay City Local Government for thepossible relocation site for the affected households. Resettlement will be done inaccordance with the rules and regulations of the Philippine Government, and guidelines ofthe World Bank, Asian Development Bank, and JICA.


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VI. CONCESSION STRUCTURE

A. LEGAL FRAMEWORK FOR CONCESSION

The BOT Law provides the legal framework for government agencies to enter into PPPcontracts with qualified private sector proponents for the prosecution of governmentinfrastructure or development projects. In particular, the BOT Law and its Revised IRRdescribe the requirements and procedures for the preparation, approval, tendering andimplementation of PPP/BOT projects.

The Project will be a public utility. The Project provides flexibility for the Concessionaire toboth own the income stream and operate the Project, provided it satisfies the Filipinonationality requirement under Art. XII, Section 11 of the Philippine Constitution, or to ownthe income stream from the Project and appoint a Facility Operator to operate the Project.

Under the second option, only the Facility Operator needs to satisfy the Filipino nationalityrequirement.

B. PROJECT STRUCTURE

The Project was approved to be implemented as a variant of the Build-Transfer-Operate(BTO) contractual arrangement, which is one of the PPP variants specifically authorizedunder the BOT Law. In a BTO scheme, the private sector party or concessionaire will berequired to construct the infrastructure facility and assume construction-related risks arisingfrom cost overruns, delays and other performance risks connected to construction. Oncethe facility is commissioned satisfactorily, title over the facility is transferred to the

implementing agency, but the private sector party operates the facility on behalf of theimplementing agency pursuant to the terms of the TCA. As a form of repayment forfinancing, constructing, operating and maintaining the facility, the private sector party isauthorized to charge and collect tolls, fees and charges from the end users. The approvedBTO variation entails the turnover and retrofitting of the existing NAIA Expressway Phase Ito allow seamless operation with Phase II; and, the immediate transfer, after completion, ofthe ownership, operation and maintenance of the At-Grade Entertainment City Works toGovernment.

The principal terms and conditions governing the transaction are set out in the TCA, whichprovides for the obligations of the DPWH and the Concessionaire in respect of thedevelopment and operation of the facility, and other mutual undertakings, covenants andconditions to be performed or fulfilled by each of the parties.


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VII. KEY COMMERCIAL FEATURES OF THE DRAFT TCA

The following are some of the indicative key commercial features and terms that are contemplatedunder the draft TCA being prepared for the Project:

Grant of a 30-year concession (inclusive of construction period), reckoned from the deliveryof the government of the ROW1, to the Project Proponent to exclusively undertake thefollowing:

o raise financing for the total Project cost (not covered by the Infrastructure SupportFacility) and achieve financial close within one year from the signing of the TCA;

o design the Phase I Adjustment Works, Phase II Works, and Entertainment CityWorks (if needed);

o construct the Phase I Adjustment Works and Phase II Works within two years fromapproval of the Detailed Engineering Design;

o construct and turn-over the At-Grade Entertainment City Works by December 2013;

o operate and maintain the adjusted Phase I and completed Phase II, or if theConcessionaire is foreign-owned or controlled, through its qualified Facility Operatorto undertake the operation of the Project to defined levels of performancestandards;

o collect the authorized toll from users of the NAIA Expressway which shall beoperated as an open system;

o assume the commercial risks for the profit or loss in the Project as a going business

concern; and

o turn-over the NAIA Expressway in good condition to DPWH at the end of theconcession period.

DPWH obligations:

o procure and deliver in a timely manner the required ROW;

o subject to Concessionaire compliance with pre-defined obligations, ensure the grantof the TOC from the TRB

o assist the Concessionaire in securing necessary national government consents forthe Project;

o ensure the application of the toll adjustment formula prescribed in the TCA andprovide compensation in the event of disallowances of authorized computed tolls.

1 Refers to the land or land rights required for the Project based on the conceptual designed prepared by DPWH.


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Other major commercial points include:

o The bid parameter will be the lowest amount required for the Infrastructure Support

Facility.

o The selection of the Independent Consultant (IC) will be done by DPWH from ashortlist of firms to be approved by the Concessionaire. The cost of the IC shall beborne equally by DPWH and the Concessionaire.

o There will be two (2) sets of tolls for the Expressway, one applied on the mainexpressway (the Full-route rate) and the other for the shorter segments betweenTerminal 3 and the Skyway and Terminals 1 and 2 and Roxas Boulevard/MacapagalBoulevard/Entertainment City (the Short-segment rate)

o Opening tolls will be set by DPWH and approved by TRB. The approved toll rate will

be disclosed after Pre-Qualification.

o Periodic toll adjustments shall be made bi-annually and based only on a domesticinflationary index based on the following formula:

TRn= TRo [(CPIn/CPIo)]

where:

TRn = new Toll Rate as adjustedTRo = old Toll Rate as of the last adjustmentCPIn = Consumer Price Index for month of the new review date

issued by the National Statistics OfficeCPIo = Consumer Price Index for the month of the last review date

issued by the National Statistics Office

o A performance regime related to efficient flow of traffic, ride quality, safety, securityand cleanliness will be defined in the TCA and payment obligations will be imposedon failure to meet Key Performance Indicators.

o Force majeure shall be a risk that will be shared by both the Concessionaire andDPWH.


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Below is the risk allocation matrix for the Project.

TABLE 3: Risk Allocation Matrix

Risk/Responsibility Allocation Remarks

Traffic Concessionaire No minimum traffic guarantee

Toll & Adjustment Implementation DPWHCompensation provided fordisallowance of adjustment based onagreed formula

Project Financing Concessionaire

Private financing; Infrastructure SupportFacility: Terms and Conditions for thesubordinated financing facility shall bedisclosed during the Bid Process; theISF shall be managed by a reputableFinancial Institution

Inflation & Foreign Exchange Concessionaire

Relief provided for domestic inflation

through Toll Adjust formula

Basic ROW Acquisition & Delivery DPWHFree and clear, delivered by pre-agreedtimeline

Design/Construction ConcessionairePerformance Security for Constructionposted in favor of DPWH

Operation/ Maintenance Concessionaire

KPIs set with corresponding penaltiesfor non-compliance, PerformanceSecurity for Operations posted in favorof DPWH

Political Risks DPWH Limited events

Force MajeureConcessionaire and

DPWH

Relief provided to Concessionaire onO&M performance of obligations,procedure and mechanism foraddressing impact of FM events to beprovided in the TCA

Turn-over at the end of Concession ConcessionaireAt pre-agreed conditions, testing &acceptance regime included in TCA


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VIII. PROCUREMENT PROCESS

A. LEGAL BASIS OF PROCUREMENT

The international competitive bidding for the Project (the Bidding) will be conducted inaccordance with the procurement rules and procedures set forth in the BOT Law (RepublicAct No. 6957, as amended by Republic Act No. 7718) and its Revised Implementing Rulesand Regulations (April 2006) (the Revised IRR).

The Special Bids and Awards Committee for Public Private Partnership Projects of theDPWH (SBAC) created for this purposeshall administer the process of pre-qualification andbidding for the project.

B. OUTLINE OF THE BIDDING PROCESS

The Bidding for the Project will be conducted in an open and transparent manner followingthe two-envelope/two-stage system for soliciting bids under the Revised IRR.

The general procedure for the Bidding will be as follows:

PRE-QUALIFICATION

1. The first stage is the pre-qualification Process, which will be governed by theInstructions to Prospective Bidders. Prospective Bidders may be partnerships,corporations or unincorporated consortiums of two or more partnerships and/or

corporations. During the Pre-Qualification stage, Prospective Bidders will have tosubmit documents that establish that they meet the legal, technical, and financialrequirements set by the DPWH to bid for the Project.

2. Prospective Bidders will be asked to apply to pre-qualify to bid by submitting theirQualification Documents on the Qualification Documents Submission Date. Afterreviewing the documents, the SBAC will determine which Prospective Bidders fulfill therequirements to pre-qualify, and inform all Prospective Bidders who are pre-qualifiedwithin ten (10) days of the Qualification Documents Submission Date. Only Pre-Qualified Bidders will be invited and allowed to submit a Bid for the Project.

PREPARATION OFBID PROPOSALS

3. After all Pre-Qualified Bidders are informed that they have pre-qualified, they maypurchase the Instructions to Bidders and other Bidding Documents

4. The Instructions to Bidders will contain the detailed rules and procedures forpreparation, submission, and evaluation of Bid Proposals, the date, time, and location ofthe Pre-Bid Conference, and the Bid Proposal Submission Date, which will be no lessthan 90 days after completion of pre-qualification. It will also describe the procedures tobe followed from the Bid Proposal Submission Date until the signing of the Concession


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Agreement between the DPWH and the Winning Bidder or the corporation to be formedby the Winning Bidder.

5. Pre-Qualified Bidders will be allowed to send any comments and inquiries on any of theBidding Documents, including the Draft Concession Agreement and the MinimumPerformance Standards and Specifications.

PRE-BID CONFERENCE

6. During the Pre-Bid Conference, Pre-Qualified Bidders will be invited to raise anyquestions and issues regarding the Project, the Bidding Process, and the BiddingDocuments. In addition, DPWH will make arrangements for Pre-Qualified Bidders whichwish to have one-on-one discussions with it on any topic relating to the Bid

7. No later than 30 days before the Bid Proposal Submission Date, the DPWH will releaseto Pre-Qualified Bidders the final drafts of the Concession Agreement, and if there areany changes to them, the Minimum Performance Standards and Specifications.

SUBMISSION OFBID PROPOSALS

8. The Bid Proposals to be submitted by Bidders on the Bid Proposal Submission Dateshall contain:

A Bid Letter in a prescribed form, corporate authorizations to bid, a Bid Security,and other supporting documents

A Technical Proposal which will include:o Traffic Study;o Conceptual Engineering Design for Phase II of the Project;o Construction Plan;o

Cost estimates for the Phase I Adjustment Works, Phase II Works, andAt-Grade Entertainment City Works;o Cost estimate for other works included in the Entertainment City Road

Network Masterplan2

;o Operation and Maintenance Plan; ando Other documents as may be required by DPWH.

A Financial Proposal which will include:o Bid Amount stating the financing to be required from the Infrastructure

Support Facility (ISF); ando Supporting financial model.

9. Pre-Qualified Bidders will be asked to bid for the Project by submitting their Bid

Proposals on the Bid Proposal Submission Date.

BID EVALUATION AND POSTQUALIFICATION

10. The SBAC will first review the Bidders Bid Letter and supporting documents. OnlyBidders whose Bid Letters and supporting documents are complete will have theirTechnical Proposals opened. The SBAC will then review the Bidders Technical

2 See XIII. PAGCOR Entertainment City section on description of the Entertainment City Road Network Masterplan


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Proposals and evaluate them on a pass/fail basis. Bidders will be informed as towhether their Technical Proposals were passed. The SBAC will return the FinancialProposals of Prospective Bidders whose Technical Proposals did not pass.

11. Financial proposals of Bidders whose Technical Proposals were passed will be openedand evaluated. The Pre-Qualified Bidder whose Technical Proposal is passed and who

submits a Bid with the highest amount of Government Payment will be subject to a post-qualification process to verify the accuracy of the statements it made in its QualificationDocuments and Bid Proposal.

12. Post-qualification will be done to verify and validate whether the Pre-Qualified Bidderwhose Technical Proposal is passed and who submits a Bid with the highest amount ofGovernment Payment passed all the requirements and conditions as specified in theBidding Documents. Should the Bidder fails to meet any of the requirements orconditions, he will be post-disqualified and the SBAC will conduct the post-qualificationon the Bidder with the next highest amount of Government Payment.

AWARDING OFBIDDER AND ISSUANCE OFNOTICE OFAWARD

13. If the Winning Bidder with the highest amount of Government Payment passes the post-qualification process, it will be designated the Winning Bidder and receive a Notice ofAward.

SIGNING OFCONCESSIONAGREEMENT

14. The Winning Bidder will have to provide proof of incorporation, capitalization, andavailability of debt financing and post a Construction Performance Security within thirty(30) days of receipt of the Notice of Award, and will have to enter into a ConcessionAgreement immediately after providing these required documents.

C. INFORMATION AVAILABLE TO BIDDERS

Immediately after notifying Pre-Qualified Bidders that they have been pre-qualified, DPWHwill allow Pre-Qualified Bidders access to a physical data room located at the DPWH MainOffice that will contain documents and relevant background information relating to theProject, including but not limited to the following documents:

1. Review and Update of Feasibility Study of NAIAX Phase II Final Report prepared bythe JICA Study Team;

2. Feasibility Study on the NAIA Expressway Project Phase II by Filipinas Dravo in

association with Philipps Technical Consultants Corporation;3. As-Built Drawings of Phase I;4. Asset Register of Phase I;5. Original Plans and Specifications of Phase I;6. Geotechnical Investigation Data for Phase I;7. Design for the At-Grade Entertainment City Works;8. Other information related to the Entertainment City Road Masterplan;9. Maps of underground utilities;10. Environmental Compliance Certificates; and11. Environmental Impact Assessment.


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PART III.OTHER INFORMATION

IX. INVESTMENT FRAMEWORK

A. TAXATION

Laws governing the Philippine taxation are provided in the National Internal Revenue Code,as revised by the Tax Reform Act of 1997, effective January 1, 1998. Taxation isadministered by the Bureau of Internal Revenue (BIR) under the Department of Finance.

CORPORATETAX

Corporate tax is a tax to be paid by a corporation based on the amount of profit generated.Below is a table showing the various tax rates applicable:

TABLE 4: CORPORATE INCOME TAXATION

SourcesDomestic/Resident

Foreign CorporationNon-resident Foreign

Corporation

Taxable income not subject to

special tax rates 30% 30%

Interest on foreign loans 20% 35%

Interest income derived by adomestic corporation from adepository bank under theexpanded foreign currency depositsystem

N/A 20%

Dividends from domesticcorporations

7.5% N/A

Gains on sales of shares of stock

not traded in the Stock Exchange

Not over PhP100,000.00 5% 5%

On any amount in excess ofPhP100,000.00

10% 10%

Source: Board of Investments

A Minimum Corporate Income Tax (MCIT) was also established under the Tax ReformAct. A minimum of 2% MCIT on gross income on an annual basis is imposed oncorporations whose regular corporate income tax liability is less than the MCIT beginning


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the fourth taxable year following the year they commenced business operation. Any excessof the MCIT over the normal tax will be carried forward and credited against the normal taxfor the succeeding three (3) taxable years.

Aside from that, there is Improperly Accumulated Earnings Tax, which is a 10% taximposed on the improperly accumulated earnings of a corporation, except in the case of

publicly held corporations, banks, and other non-bank financial intermediaries andinsurance companies. When a corporation allows its earnings or profit to accumulatebeyond its reasonable needs, it is assumed that the purpose is to avoid tax onstockholders, unless proven to the contrary.

INCOMETAX

Income Tax is a tax on a person's income, emoluments, profits arising from property,practice of profession, conduct of trade or business or on the pertinent items of grossincome specified in the Tax Code of 1997 less the deductions and/or personal andadditional exemptions, if any, authorized for such types of income, by the Tax Code or

other special laws.

TABLE 5: INDIVIDUAL TAXATION

Sources Rates

Non-resident aliens not engage in trade andbusiness flat income tax rate

25%

Resident citizens/aliens (gainfully employed)Graduated income tax rates

0-35%

Source: Bureau of Internal Revenue

VALUE-ADDED TAX(VAT)

VAT is a form of sales tax. It is equivalent to 12% of the gross selling price or gross value inmoney of goods or properties sold, bartered or exchanged. It is a tax on consumption leviedon the sale of goods and services and on the imports of goods into the Philippines. Thoserequired to file VAT returns are as follows:

Every person or entity who in the course of their trade or business, sells or leasesgoods, properties and services subject to VAT, if the aggregate amount of actualgross sales or receipts exceed One Million Five Hundred Thousand Pesos (P1,500,000.00) for any twelve month period.

A person required to register as VAT taxpayer but failed to register. A person who imports goods.

VAT registered entities are required to issue an invoice or receipt for every sale and, inaddition to regularly required accounting records, they must maintain subsidiary sales andpurchase journals exclusively for VAT purposes. VAT reports must be submitted on aquarterly basis, twenty-five days after the end of the quarter. VAT payments must be madeon a monthly basis.


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TAXTREATIES

The Philippines has tax treaties with various countries like the United States, UK, Canadaand Singapore, which provide for tax relief on income derived by foreign or local residents

of the Philippines and the foreign country from sources within their respective territories.The tax relief includes tax exemption or entitlement to preferential tax rates on certain typesof income such as interest, royalties and dividends.

The business profits of a resident of another country with whom the Philippines has a taxtreaty are taxable in the Philippines only if the resident has a permanent establishment inthe Philippines to which the profits are attributable.

As of June 2010, the Philippines have a total of 37 effective tax treaties. Following is the listof countries and their dates of effectivity:

TABLE 6: EFFECTIVE PHILIPPINE TAX TREATIES

CountryDate of

EffectivityDate and Venue of Signature

1. Australia January 1, 1980 May 11, 1979, Manila, Philippines

2. Austria January 1, 1983 April 4, 1981, Vienna, Austria

3. Bahrain January 1, 2004 November 7, 2001, Manila, Philippines

4. Bangladesh January 1, 2004 September 8, 1997, Manila, Philippines

5. Belgium January 1, 1981 October 2, 1976, Manila, Philippines

6. Brazil January 1, 1992 Sept. 29, 1983, Brasilia, Brazil

7. Canada January 1, 1977 March 11, 1976, Manila, Philippines

8. China January 1, 2002 November 18, 1999, Beijing, China

9. Czech January 1, 2004 November 13, 2000, Manila, Philippines

10. Denmark (Renegotiated) January 1, 1998 June 30, 1995, Copenhagen, Denmark11. Finland January 1, 1982 October 13, 1978, Manila, Philippines

12. France January 1, 1978 January 9, 1976, Kingston, Jamaica

13. Germany January 1, 1985 July 22, 1983, Manila, Philippines

14. Hungary January 1, 1998 June 13, 1997, Budapest, Hungary

15. India January 1, 1995 February 12, 1990, Manila, Philippines

16. Indonesia January 1, 1983 June 18, 1981, Manila, Philippines

17. Israel January 1, 1997 June 9, 1992, Manila, Philippines

18. Italy January 1, 1990 December 5, 1980, Rome, Italy

19. Japan January 1, 1981 February 13, 1980, Tokyo, Japan

20. Korea January 1, 1987 February 21, 1984, Seoul, Korea

21. Malaysia January 1, 1985 April 27, 1982, Manila, Philippines22. Netherlands January 1, 1992 March 9, 1989, Manila, Philippines

23. New Zealand January 1, 1981 April 29, 1980, Manila, Philippines

24. Norway January 1, 1998 July 9, 1987, Manila, Philippines

25. Pakistan January 1, 1979 February 22, 1980, Manila, Philippines

26. Poland January 1, 1998 September 9, 1992, Manila, Philippines

27. Romania January 1, 1998 May 18, 1994, Bucharest, Romania

28. Russia January 1, 1998 April 26, 1995, Manila, Philippines

29. Singapore January 1, 1977 August 1, 1977, Manila, Philippines

30. Spain January 1, 1994 March 14, 1989, Manila, Philippines


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31. Sweden (Renegotiated) January 1, 2004 June 24, 1998, Manila, Philippines

32. Switzerland January 1, 2002 June 24, 1998, Manila, Philippines

33. Thailand January 1, 1983 July 14, 1982, Manila, Philippines

34. United Arab Emirates January 1, 2009 September 21, 2003, Dubai, UAE

35. United Kingdom of GreatBritain and Northern Ireland

January 1, 1979 June 10, 1976, London, United Kingdom

36. United States of America January 1, 1983 October 1, 1976, Manila, Philippines37. Vietnam January 1, 2004 November 14, 2001, Manila, Philippines

Source: Bureau of Internal Revenue

TAXINCENTIVES

The Omnibus Investments Code grants tax holidays of either four or six years to Board ofInvestments-registered enterprises, provided qualifies under the annual InvestmentsPriority Plan entitlements.

Tax credits are also granted for purchase of Philippine-made capital equipment and rawmaterials.

Under the BOT Law and its IRR, projects costing more than Php1 billion are entitled toincentives, upon registration with the Board of Investments (BOI), as provided under theOmnibus Investment Code. Other incentives may be provided through P.D. 535 (1974),otherwise known as the Tourism Incentives Program of 1974.

LGUs may also provide additional tax incentives, exemptions or reliefs, subject to theprovisions of the Local Government Code (LGC) of 1991.

LOCAL TAX

The LGC of 1991 provides for the fiscal autonomy of cities or local governments from thenational government, and allows them to impose local and real property taxes.

The local governments of Pasay City and Paraaque City, where the Project will beoperated, are allowed to impose business taxes, based on their respective revenueordinances or enacted resolutions/ordinances.

Local contractors tax under which the Concessionaire could be subject is a graduated taxwith a maximum of between 0.5% to 0.75% of gross receipts under the Local GovernmentCode.

Below is a table showing the schedule of taxes that municipalities may levy on contractors,per gross receipts for the preceding calendar year. However, the rates of taxes that citiesmay levy may exceed the maximum rates allowed for the province or municipality by notmore than 50%.


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TABLE 7: AMOUNT OF TAX PER ANNUM

Gross Receipts(in PhP)

Amount of Tax Per Annum(in PhP)

Less than 5,000.00 27.50

5,000.00 or more but less than Php 10,000.00 61.60

10,000.00 or more but less than 15,000.00 104.50






75,000.00 or more but less than 100,000.00 1,320.00100,000.00 or more but less than 150,000.00 1,980.00

150,000.00 or more but less than 200,000.00 2,640.00






750,000.00 or more but less than 1,000,000.00 10,250.001,000,000.00 or more but less than 2,000,000.00 11,500.00

2,000,000.00 or moreat a rate not exceeding fifty percent

(50%) of one percent (1%)Source: Local Government Code of 1991, Book II Local Taxation and Fiscal Matters

B. FOREIGN EXCHANGE

Foreign exchange may be bought and sold freely by foreign corporations operating in thePhilippines and may be brought into or sent out of the country with few restrictions.

Foreign investments and profits can also be repatriated in foreign exchange with minimalcontrol from the Bangko Sentral ng Pilipinas (BSP or Central Bank of the Philippines).Registration of foreign investments with the BSP requires proof of inward remittance of theforeign exchange used to fund the investment and has now become essentially anautomatic process after the necessary corporate registration has been completed by thePhilippine Securities and Exchange Commission. Should the banking system be also usedfor the payment of royalties, the related royalty contract should be registered with theTechnology Transfer Registry of the Bureau of Patents, Trademarks, and TechnologyTransfer.


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C. FOREIGN OWNERSHIP AND MANAGEMENT

The Philippine Constitution and a number of Philippine laws operate to limit the extent towhich non-Philippine nationals may participate in the ownership and management of public

utilities. No franchise, certificate or any other form of authorization for the operation of apublic utility shall be granted except to citizens of the Philippines or to 60% Foreign 40%Filipino companies.

Only forty percent (40%) ownership of common shares, and not of the total outstandingcapital stocks (common and non-voting preferred shares), of corporations operating publicutilities is allowed to non-Philippine nationals. All executive and managing officers of suchcorporation are then restricted to Filipino citizens.

To ensure compliance with these nationality requirements, Commonwealth Act No. 108,also known as the Anti-Dummy Law, provides that any person, corporation or associationwith a right, franchise or privilege, the exercise or enjoyment of which is expressly reserved

by the Constitution or the laws to the citizens of the Philippines or to 60/40 companies, isprohibited from permitting or allowing the use, exploitation or enjoyment of such right,franchise or privilege by a non-qualified person or entity or in any manner permitting orallowing any non-qualified person to intervene in the management, operation,administration, or control thereof, whether as an officer, employee or laborer therein, with orwithout remuneration, except technical personnel whose employment may be specificallyauthorized by the Secretary of Justice. The Anti-Dummy Law, however, allows the electionof aliens as members of the board of directors or governing body of corporations inproportion to their allowable participation in the capital of such entities and the employmentof foreigners in the capacity of technical consultants.


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X.REGULATORY FRAMEWORK

A. NATIONAL ECONOMIC AND DEVELOPMENT AUTHORITY

The National Economic and Development Authority (NEDA) is the countrys independenteconomic development and planning agency. The NEDA is primarily responsible forformulating the countrys social and economic policies, plans and programs, including theformulation of annual and medium-term public investment programs.

National projects implemented through the BOT Law and costing more than PhP300 millionmust be submitted to the NEDA Board for approval upon the recommendation of theInvestment Coordination Committee (ICC).

The NEDA Board is headed by the President, with the Secretary of Socio-EconomicPlanning, concurrently NEDA Director-General, as vice-chairman. The other members of

the NEDA Board are the Executive Secretary and the (a) Secretary of Finance, (b)Secretary of Trade and Industry, (c) Secretary of Agriculture, (d) Secretary of Environmentand Natural Resources, (e) Secretary of Budget and Management, (f) Secretary of Laborand Employment, and (g) Secretary of Local Government.

B. TOLL REGULATORY BOARD

The TRB is a government agency created on 31 March 1977 by virtue of PresidentialDecree No. 1112 (PD 1112), otherwise known as the Toll Operation Decree. It is anattached agency of the Department of Transportation and Communications.

The TRB Board is composed of the Secretary of Transportation and Communications asChairman, and its members are the Secretaries of DPWH, the Department of Finance, andNEDA, or their duly authorized representatives with ranks not lower than Undersecretary.A representative from the public sector, preferably a lawyer or an economist with adequateexperience in public utilities regulation, also serves on the Board.

The TRB has the powers to:a) grant authority to operate a toll facility and to issue the necessary Toll Operation

Certificate;b) issue, modify and promulgate the rates of toll that will be charged the direct

users of toll facilities; andc) approve or disapprove petitions for toll increases.


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XI. THE PHILIPPINE TOLL ROAD SYSTEM

The Philippine High Standard Highway Master Plan is shown in the Figure below. Itprovides the long list of proposed Expressways as identified in the Master Plan forimplementation in the Medium Term Plan, 2011-2016 and beyond.

The DPWH completed on July 2010 the Study of Master Plan on High Standard Highway(HSH) Development in the Republic of the Philippines through technical assistance of theJapan International Cooperation Agency (JICA). It focused on Metro Manila and itssurrounding areas extending 200 KM radius including Metro Cebu and Tagum, Davao andGeneral Santos Corridor.

The toll rate proposed for the NAIA Expressway will be comparable with the current Skywaytoll per km and is therefore considered to be an acceptable rate, particularly taking intoaccount the higher willingness to pay of people accessing the Airport.

The following tables show other transport costs that can be used as benchmarks for

understanding the willingness to pay the new toll on the NAIA Expressway.

TABLE 8: Other Transport Costs in Manila

Good Cost

1 liter of gas (unleaded) Php52.60-57.67

1 liter of diesel Php42.80-54.35

Airport Taxi Php70 boarding and Php4.00 per 300m

Taxi Php40 boarding and Php3.50 per 300m

Jeepney Php8.00 for first 4kms then Php1.40/km

Local bus (air con) Php12 for first 5kms then Php2.20/km

Shared Taxi / Shuttle Php12 minimum; Php2.00/km

LRT fare (current) Between Php12 to Php20

Makati on street parking 35 for 2 hours

Day flat rate airport parking fee (for cars and jeeps) 35

Overnight airport parking 50 per night

Park N Fly 300 per full day (including overnight)

Source: Dept. of Energy, Oil Price Monitor as of April 2012; TRB as of October 2011 October


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