Republic of the Philippines DEPARTMENT OF TRANSPORTATION ... 2013... · Republic of the Philippines DEPARTMENT OF TRANSPORTATION AND COMMUNICATIONS 56201 56202 Request for Amendment-Definition

Republic of the PhilippinesDEPARTMENT OF TRANSPORTATION AND COMMUNICATIONS

that is clearly written in the concession agreement.

56195 Definitions 32. CA 1.1· Existing System - What is the meaning of "withoutdouble counting"?· LRV - This limits the Project to onlyprovide trains with 2, 3 or 4-car sets. It should not belimited to these configurations to cater for future needs .•LRT Stimulus Contract - Should be "LRTA"· PrudentIndustry Practice - Please change the word "obligations" to ."experience"> Relevant Consent - There is a need to identifywhat are the relevant consents required from theConcessionaire and the Grantors for the purpose ofexecution, performance and completion of the project.

Taking each bullet in turn: (i) It is to cover the LRTA StimulusPackage Assets that will, when completed, become part of theExisting Track etc. (ii) the Bidder's comment is acknowledged andan appropriate amendment will be made to the CA. (iii) the Bidder'scomment is acknowledged and an appropriate amendment will bemade to the CA. (iv) no change will be made to the CA. (v) TheGrantors consider that the limited consents that they are responsiblefor obtaining will all be obtained prior to the Signing Date. Anupdate will be provided at the appropriate time.

56196 The comment is noted and an appropriate amendment will be madeto the CA.

Rules ofInterpretation(Missing article)

33. CA 1.2"Thus by way of example the value of theConstruction and Operation Performance Security in anymonth of year "n" of the Concession Period prior to 2024(Article 9.3.e) shall be ... " Please note that there is noArticle 9.3.e in the Concession Agreement.

56197 No change will be made to the CA, but see response to query#56163.

Request forDeletion-Definition ofCaviteExtension,Section 1.1,page 5

34. The term is generally used to refer to the items of work tobe done by the Concessionaire so the inclusion of theGrantors Procured Items in the term is inappropriate in mostcontexts. The bidder requests deletion of "the GrantorsProcured LRVs (when completed)" and "the GrantorsDepot Works (when completed)" in the definition andsuggest that these be included if required in the specificreferences.


56198 Request forAmendment-Defrnition ofChange in Law,Section 1.1,page 5

35. The Concessionaire is preparing its bid on the basis of theLegal Requirements and railway technology or operationalpractices applicable as at the Bid Proposals SubmissionDate. The Concessionaire is not in a position to predict whatchanges may arise and therefore cannot bear the risk of (i)any change in law which is reasonably foreseeable at theSigning Date; or (ii) improvements in railway technology oroperational practices. Similarly, the Concessionaire shouldnot bear the risk of (i) change in tax of general applicationsince the fmancial bid will take into consideration currenttax rates and interpretation thereof; or (ii) any suspension,delay in issuance or refusal to grant Relevant Consents asthis is beyond the control of the Concessionaire and is a riskbest managed by the Grantors. It would also be difficult forthe Concessionaire to assume the risk of a Change in Lawthat has not occurred as of Bid Proposals Submission Date.Please amend the defrnition such that "Change in Law" to: .Add "any termination, suspension, withdrawal, amendment,modification or replacement of or delay in issuance orrefusal to grant any Relevant Consent by any GovernmentAuthority" . Add "a change in a Legal Requirement thatimposes conditions that are more onerous or materiallyincreases the costs of obtaining such Legal Requirement" .Add "improved operational norms and practices which arebinding on the party in question and which must be appliedin relation the Railway Infrastructure Works, RailwaySystem Works, Services and System Upgrades" . Add" achange "Relevant Rules and Procedures" . Delete "changein national or local taxation of general application" . Delete"improvements in railway technology or operationalpractices" . Delete "in any case which was not reasonablyforeseeable at the Signing Date of this ConcessionAgreement" and replace with "in any case which takeseffect on or after the Bid Submission Date"

The split of tax risk reflects the Government's approach as appliedin previous PPP projects. A change in general tax rates in thePhilippines is a risk of doing business in the Philippines(particularly for a Concession not relying on a payment fromGovernment) and will not be the subject ofMAGA compensation.In particular, the imposition of any new national tax or change inmaximum rate of any national tax, in either instance except VAT isa MAGA event. However, change in local taxation is not a MAGAevent. Appropriate changes will be made in the CA.

The second exclusion is a point of clarification - the Concessionaireshould be obliged to comply with best practice (that will changeover a 32 year Concession). No change will be made to the CA.


56199

56200

Request forAmendment-Definition ofConcessionairePerformanceSecurity,Section 1.1.,age 7

36. Please provide for a separate Construction Security andOperation Security; and delete the Warranty Security.

See response to query #56181

The Grantors view the current defmition as reflecting PhilippinePPP precedent. No change will be made to the CA.

Request forClarification -Definition ofEquity, Section1.1., page 9

37. The definition should clarify that (i) retained earningsshould be positive, (ii) the certification should be made bythe corporate officer with knowledge regarding fmancialmatters; and (iii) Equity calculated between audited balancesheet dates includes retained earnings and interest and feeson Subordinated Debt. Please amend the defmition such that"Equity" means "the total audited book value of (1) allcommon and preferred shares of stock of the Concessionairewhich are issued and outstanding including current positiveretained earnings of the Concessionaire and (2) the faceamount of all subordinated debt (both principal and accruedinterest and all other amounts) owed by the Concessionaireto Affiliates. If Equity must be calculated between auditedbalance sheet dates, Equity shall include the book value ofcommon and preferred shares issued between auditedbalance sheet dates including current positive retainedearnings of the Concessionaire and subordinated debtborrowed between balance sheet dates (both principal andaccrued interest and all other amounts) each as attested toby the Concessionaire's treasurer, chief fmancial officer orequivalent officer."


56201

56202

Request forAmendment-Definition ofMaterialAdverseGovernmentAction, Section1.1., page 15

38. The definition should not be limited to actions of a nationalgovernmental agency as the Concessionaire may beadversely affected by actions of the government belownational agency level. As between the Concessionaire andthe Grantors, the Grantors are in a much better position tomanage this risk. Similarly, the definition should beexpanded to include (i) government inaction; (ii) theConcessionaire's ability to enjoy and/or exercise rights andprivileges under the Transaction Documents or FinanceDocuments (as opposed to only the rights under the CA);(iii) the Concessionaire's ability to comply with itsobligations under law as well as contractual obligations; and(iv) other parties, e.g. Subcontractors, Shareholders,Finance Parties etc. We propose the following definition ofMAGA: ""Material Adverse Government Action" meansany action or inaction of any Governmental Authoritywhich has a material adverse effect on any of the rights andprivileges of, or on the enjoyment and/or exercise thereofby, the Concessionaire, Shareholders, Subcontractors,Facility Operator or Finance Parties under the TransactionDocuments or the Finance Documents, or which has amaterial adverse effect on a Milestone or the ability of theConcessionaire, Shareholders, Subcontractors, FacilityOperator or the Finance Parties to comply with its financialand/or other contractual obligations in connection with theProject or their respective ability to perform theirobligations required by a Legal Requirement, including aChange in Law."

39. Kindly provide the legal basis for the authority oftheDOTC to issue the Operating Franchise. Also, the authorityofthe DOTC (and not other Governmental Authority) toissue such Operating Franchise should be included in theGrantors representations and warranties. Kindly confirmthat the DOTC has already romulgated rules and

Practice in Philippine PPP projects is for the National Governmentto only take responsibility for the acts of the branches and agenciesof the National Government given that local governments areconstitutionally autonomous.

Request forClarification -Definition ofOperatingFranchise,Section 1.1.,

No change will be made to the CA.

The Charter of the DOTC - Executive Order No. 125-A-authorizes the DOTC to issue certificates of public convenience forthe operation of public land and rail transportation utilities andservices.

The Concession Agreement and its schedules will rovide for all of


page 16, Section26.2 page 91

regulations concerning the issuance ofthe OperatingFranchise and provide a copy of such rules and regulationsin the data room.

the requirements and procedures necessary for the issuance of theOperating Franchise; there will be no other rules and regulations onthe matter.

56203 Request forDeletion-Definition ofWarrantyAmount/W arranty Period,Section 1.1.,page 21

40. Consistent with the Bidder's request for removal oftheWarranty Security, please delete defmition of "WarrantyAmount" and "Warranty Period".

See response to query #56181.

56204 Request forAmendment-Section 1.2k,page 23

41. Only the DOTC is responsible for financial obligationsunder the Concession Agreement. In this regard, DOTC andLRTA should be jointly and severally liable for allobligations of the Grantors under the ConcessionAgreement. Please provide for the joint and several liabilityof the Grantors for the financial and non-financialobligations of the Grantors.

We believe this adequately addressed. No change will be made tothe CA.

56205 Request forAmendment-Section 5.1.a,Operation of theExisting System,

age 29

42. The Grantors' obligation to operate the Existing Systemshould be subject to acceptable standards. Please insert "inaccordance with the Operation and MaintenanceRequirements, the Relevant Rules and Procedures andPrudent Industry Practice" after "maintain the ExistingS stem" in the first sentence.

The Bidder's comment is acknowledged and an appropriateamendment will be made to the CA.

56206 Request forAmendment-Section 5.2.d(1),ConcessionaireRelevantConsents, page30

43. It is not clear which Relevant Consents must be obtained bythe respective parties. For instance, the Concessionaire isrequired to provide all Relevant Consents required for thetransfer of possession, custody and risk of loss in anddeterioration of the Existing System. However, Schedule 4,Part 1 also provides that the Grantors are required toprovide those Relevant Consents required for the transfer ofpossession, custody and risk of loss in the Existing System.

The Grantors consider that the limited consents that they areresponsible for obtaining will all be obtained prior to the SigningDate. An update will be provided at the appropriate time.


56207

56208

Request forAmendment-Section 5.3,Grantors'Obligations,page 30

Request forClarification -Section 5.3.b,Grantors'Obligations,page 30

The bidder propose that the Concession Agreement includesa schedule of Grantor Relevant Consents (which theGrantors are obliged to procure) and ConcessionaireRelevant Consents (which the Concessionaire is obliged toprocure). The bidder requests that the Grantor RelevantConsents include all Relevant Consents to be issued, or aremore easily obtained, by the Grantors.

44. It should be part of the conditions precedent for theEffective Date that certain major Relevant Consents havebeen obtained by the Grantors. These should include,among others, the: . approval of the Project by the Presidentof the Philippines, the NEDA Board-ICC and relevant localgovernment units; . congressional franchise for theConcessionaire or the opinion of each of the Secretary ofJustice and the legal counsels of the Grantors that suchcongressional franchise is not needed for the operation ofthe System· opinion of the Secretary of Justice and legalcounsel of the Grantors regarding the power of the DOTC to(i) issue the Operating Franchise; (ii) to fix the fares; and(iii) grant to the Concessionaire the right to charge andcollect fees from the public; and . evidence that sufficientfunding is available to support Grantors obligations underthe Concession Agreement

45. In general, the Grantors must provide complete and accurateinformation in relation to the Existing System and providerepresentation and warranty as regards the usefulness,accuracy, completeness, validity or propriety of suchinformation. The parameters constituting Existing SystemRequirements are too limited and disproportionate to thelevel of KPls that the Concessionaire must comply withimmediately upon taking over of the Existing System. Amore reasonable set of performance indicators must beado ted as art of the Existin S stem Re uirements to


The Bidder's point is noted. Please provide specific suggestions.

Regarding verification ofKPls see response to query #56153

Regarding incremental costs see response to query #56376


ensure that the Existing System is capable of performing atthe KPI levels required by the Grantors. Also, the remedy ofcompensation for "incremental costs" to bring the ExistingSystem up to the Existing System Requirements (if it doesnot achieve 90%) does not seem adequate, especially sincethere may be a lag in actual payment from the Grantors. It isalso unclear whether the "incremental costs" will be such asto bring the Existing up to the Existing SystemRequirements or onl 90% thereof. Kindly clarify.

56209 Request forAmendment-Section SA.a,Right toTerminate, page32

46. There is a need to clarify Section SA(a) to add a conditionthat a party is entitled to terminate only if such party hascompleted all conditions pertaining to it (including thosethat may be required for the other Party to meet itsrespective conditions precedent, if any), and therefore, hasnot contributed to the failure to meet the Effective Dateand/or the Construction Start Date by the RequiredEffective Date. Kindly revise.

The Concessionaire is protected in that if the Grantors terminatewhere both parties have failed to perform their responsibilities, thetermination payment will be as if the CA had been terminated forForce Majeure (Section 5.5).

No amendment will be made to the CA.

56210 Request forAmendment-Section 5.5,Consequencesof Termination,page 33

47. The fmancial consequences of terminating prior to EffectiveDate/ Construction Start Date are unclear. Please provideSchedule 10 as soon as possible. Also, the consequences oftermination where termination is due to Grantor's failure tosatisfy its CPs, which is currently not covered by Section5.5, should be clarified. Kindly confirm that, at the veryleast, the Grantors shall be obliged to reimburse all of theConcessionaire's costs and expenses and promptly return allperformance securities where termination is due toGrantor's failure to satis its CPs.

The comment is noted and an appropriate amendment will be madeto the CA.

Schedule 10 will be released shortly.

56211 Request forDeletion -Section 5.5.b,Consequencesof Termination,page 33

48. Given that (i) the Concessionaire has already lost all of itscosts as well as the opportunity; (ii) the Grantors can re-bidthe Project; and (iii) the Grantors' advisory costs havealready been paid, there are effectively no "losses" for thefor the Grantors and, therefore, the penalties provided arepunitive. Also, it is not clear from the provision whether by

The penalty and the security are not cumulative and the amount ofthe penalty will be reduced to PhP 75 million. The Bidder's pointconcerning joint responsibility is noted and an appropriateamendment will be made to the CA.


enforcement, the intention is to seek payment of thePhP300m by drawing on the security or the Concessionaireis obliged to pay the Php300m penalty plus the Grantorsmay draw on whole amount of the security. Please removethe penalty. Please clarify that the Grantors will be entitledto remedies for failure to achieve Effective Date by theRequired Effective Date (e.g., the penalty payment) only ifthe Grantors have completed all conditions pertaining to it,including those that may be required for Concessionaire tomeet its respective conditions precedent, if any.

56212 Request forAmendment-Section 6.2,Asset Register,page 34

49. While the Concessionaire is made responsible for the AssetsRegister from the Effective Date, the Grantors make nowarranty as to the accuracy of the Asset Register. There islikewise no obligation on the part of the Grantors to provideinformation even for Grantor Procured Items. Please reviseto: . obligate the Independent Engineer to issue acertification regarding the properties in the Asset Register(quantity, condition, etc.); and, insert a new provision thatrequires that Grantors to provide all reasonable assistance tothe Concessionaire in obtaining information relating to theGrantor Procured Items.


It is an important element of this Concession that the Concessionaireunderstands that it is taking over an existing, operating system onwhich it has had opportunity to do due diligence, on an "as is whereis" basis and that no representations or warranties as to its conditionwill be given by the Grantors.

56213 Request forClarification -Sections6.1.b/6.3,aTransferringEmployees,page 34

50. The provisions should make it clear that (i) the Grantorsshall be responsible for all salary, bonus, pension or otherbenefit (including severance payments) payable to anyemployee for periods prior to the Effective Date as well asany liability for breaches of employment terms by theGrantors; (ii) the Grantors shall not make changes to theemployment conditions of the Transferring Employees froma specified date - which is prior to the Bid SubmissionDate; and (iii) the Grantors shall indemnify theConcessionaire in respect thereof. Kindly include languageto such effect. Further, kindly confirm that theConcessionaire will be taking these Transferring Employees

Please see responses to queries #56151 and last part of #56185.


as new hires and, therefore, is not obligated to credit lengthof service and is free to set the compensation package. Also,consistent with such principle, the Concessionaire should beentitled to determine which and how many TransferringEmployees are required and to accept only suchTransferring Employees. The Grantors then bear theresponsibility for terminating employment of the non-Transferring Employees. Further, the offers of employmentshould include, as required under Philippine labor laws, thereasonable standards to be used for evaluating theperformance of the employees and the probationary periodshould use "180 days" as opposed to "6 months" as monthsin the CA are calendar months and may exceed 180 days.Please delete "6 months" and replace it with "180 days" andadding "(which offers shall include the reasonable standardsto be used for evaluating performance during theprobationary period) after "Transferring Employees" in thefirst sentence of Section 6.3.a.

56214 No change will be made to the CA.Request forClarification -Section 6.3,cTransferringEmployees,page 34

51. Other authorized causes under Philippine labor laws are notincluded in the term "Economic Causes". Please insert"cessation of an undertaking" before "or retrenchment."Also, kindly confirm that the Concessionaire's obligation ismerely to follow Legal Requirements and, therefore, theadditional requirements under Section 6.3.c (e.g.development and implementation of mitigating plans,negotiations with labour unions etc.) should be deleted. TheGrantors should not unduly interfere with the managementprerogatives of the Concessionaire post-transfer of theTransferring Em loyees.

Yes, Concessionaire must only comply with the LegalRequirements.

56215 Request forAmendment-Section 7.3,Grantors CPs to

52. The bidder requests delivery of all Basic ROW Packages asa condition precedent to the Construction Start Date. Thebidder does not consider a staggered delivery of land rightsto be workable.

It is a fundamental requirement of the Grantors (and one that hasbeen accepted by developers and lenders on Philippine PPPtransport projects) that construction be commenced as soon asossible and not wait for full ROW delivery. The Grantor, however,


shall exert its best effort to deliver the ROW as soon as possible. Itis also contemplated that existing ROW already acquired by theGrantor shall be delivered to the Concessionaire ahead of time evenbefore the scheduled delivery per package.

56216

ConstructionStart Date, page36

53. Given that the Equity Interests are required to be held inescrow during the Lock-Up Period, the same shares cannotbe delivered to the lenders' security agent and, therefore, apledge over said shares (which would be typically requiredin project financing) cannot be validly constituted. Thebidder requests that the requirement for the share escrowarrangement be removed. The bidder does not consider thisarrangement to be market practice and considers that theinterests of the Grantors are sufficiently protected by thetransfer prohibitions and related termination rights of theGrantors for breach thereof. The bidder also notes that thesponsors' ability to transfer its shares will be furtherrestricted by the share pledge given in favor of the lendersand transfer restrictions under the financing documents,which also serves the Grantors' interest. The share escrowre uirement should be deleted.

The Share escrow provisions simply reinforce the restrictions onshareholding. A transfer to or as required by Lenders on anenforcement of security is a permitted transfer under Section 8.2 andSection 8.5 and the Share Escrow Agent will thus be automaticallyobliged to release shares from escrow as directed by Lenders onenforcement.

Request forDeletion-Section 8.5,Share Escrow,page 38

56218 Request forDeletion-Section 9.3WarrantySecurity, page41

54. The obligation to provide the Warranty Security should beremoved since (i) the liability under the Warranty Securitysubsists for 3 years during which the Concessionaire nolonger has any control over the operation and maintenanceof the System, has no technical oversight regarding theactivities of the Grantors or any other concessionaire andreceives no revenues or benefits from the Grantors; and (ii)it is duplicative and imposes a disproportionate liability onthe Concessionaire (particularly given the lack of warrantiesgiven by the Grantors in the handover of the ExistingS stem at the Effective Date).

See response to query #56181

56219


Request forDeletion-Section 10.3,Leverage Ratio,page 43

55. Please delete the leverage cap. At any rate, theConcessionaire would be constrained by LegalRequirements (either the BOI or the BSP) or by its lendersto comply with acceptable debt-to-equity ratios. Suchrequirements unduly limit the Concessionaire's ability toa ly innovation to rovide im roved value for money.

This is a usual provision on Philippine PPP projects. No change willbe made to the CA.

56220 Request for .Amendment-Section ll.1.a,Basic Right ofWay, page 43

56. Delivery of land rights is a risk that the Grantors are bestplaced to manage and, therefore, should not be borne by theConcessionaire. Lenders will not allow draw down withoutall necessary land rights being in place and sponsors cannotfund project costs pending resolution of any land relatedissues. Thus, there should be no staggered delivery since astaggered delivery presents multiple points of possible delayin the design and construction of the Cavite Extension,which may materially increase the costs and constructionperiod of the Cavite Extension and require expenditure ofsignificant funds without certainty that the remaining BasicROW will be delivered. Grantors must ensure that all theBasic ROW Packages are delivered to the Concessionaire asa condition to Construction Start Date. The Grantors mustalso ensure that any ROW needed for the Existing System isdelivered as a condition to Effective Date.


The Concessionaire is protected through the provisions of Sections17 (any delay in delivering any ROW is a Grantor Delay Evententitling the Concessionaire to relief and compensation) and 31 (a90 day delay is a Grantors Event of Default entitling theConcessionaire to terminate).

The Grantors are not prepared to provide any legal certifications asto ROW - in that all ROW is delivered to the Grantors. TheGrantors recognize the Bidder's concern however and will clarifythe CA to ensure that any defect in title to the ROW that interfereswith the Project will be treated as a MAGA under Section 29. Anappropriate amendment will be made to the CA.

56221 Request forAmendment-Section 11.1.d,Basic Right ofWa ,pa e44

57. Any "deemed delivery" on the basis of an IE certification isnot appropriate as delivery of land rights involves legal aswell as technical considerations.


~~••_c--.-J'~;. ~.,.(J~~899 •


56222 Request forAmendment-Section11.1I11.3.a,Basic Right ofWay/Obligations in relation toROW, page 43and 46

58. Grantors must ensure that Basic ROW Packages cover all See response to query #56220.the land rights necessary for the completion of the CaviteExtension and delivery of the Basic ROW Packages shouldonly be considered satisfied when the Grantors havedelivered such rights (i) free from liens, encumbrances,similar charges and other third party rights; (ii) free fromany utility pipes, cables or other media; and (iii) with properdocumentation (by way of lease, easement agreements,titles in the name ofthe Grantors, etc.) and duly annotatedon the relevant titles or registered in the book ofunregistered land of the relevant Register of Deeds at theGrantors' cost. Any "deemed delivery" on the basis of an IEcertification is not appropriate as delivery of land rightsinvolves legal as well as technical considerations. Inrelation to the foregoing obligations and similar to otherconcessions that have been granted under the PPPframework, the Grantors must ensure that sufficient fundingis available to cover the costs of clearing the Basic ROWPackages and the annotation/registration of the land rightscovering these ROW.

56223 Request forAmendment-Section 11.3.f,Obligations inrelation toROW,page47

59. Please confirm if the parcels ofland where the Basic ROW See response to query #56220.are located are titled and in whose name/s are the lands aretitled. Further, the obligation to annotate should be borne bythe Grantors since the Grantors ultimately benefit from theannotation of its rights over the Project Lands. Suggestaddition of "or, in case of unregistered lands, the taxdeclarations or book of unregistered lands" after "title" inthe rovision.

56224 Request forAmendment-Section 12.4,Cost of theWorks, page 50

60. The Concessionaire's entitlement to Grantors' No change will be made to the CA.Compensation for cost overrun should not be limited tocauses attributable to the Grantors. Please expand to covercost overruns not attributable to or otherwise not within thecontrol of the Concessionaire, such as uninsurable Force


Majeure events, MAGA and the circumstances in 30.l.c.

56225 Proposal-Section 12.6,AFCS, page 51

61. There is clearly potential conflict in the CA regarding See response to query #56155critical AFCS operation and commercial issues, especiallyhow it relates to the ongoing tender for the concession ofthe AFCS by the DOTC. These issues include, amongothers: (i) full operational control and responsibility of theLRT 1; (ii) responsibility for maintenance of AFCSequipment; (iii) allocation of integration risk; (iv) liability incase of delay or default in payment or any other act oromission by the AFCS Concessionaire or in case of revenueloss due to any breakdown or service suspension of theAFCS; and (v) the lack of clarity relating to collection andpayment of Farebox Revenue, and the operations of theproposed AFCS Clearing House, which are critical to theConcessionaire's project financing. Since the operation ofthe AFCS is key to the operation of the System and therevenues of the Concessionaire, it is critical that theConcessionaire has control over the operation andmaintenance of the AFCS in respect of the System,especially where there are no sufficient safeguards in placeto ensure that the Concessionaire has adequate recourseagainst, or will receive sufficient compensation from, theAFCS Concessionaire or the Grantors. The bidder proposesthat, as part ofthe LRTl concession, the Concessionaire bethe operator of the AFCS (Levels 0-3) ("LRTl AFCS") inrespect of the System with a commitment to upgrade theexisting fare collection system based on specificationsformulated to ensure compatibility with the LRTl Projectand compatibility for integration with the broader AFCSConcession. When the Grantors award the APCSConcession for Level 4 to the AFCS Concessionaire, theLRTl Concessionaire shall undertake to make an chan es


56226 Request forAmendment-Section 13.2,DesignCoordination,page 50

to the LRTl AFCS necessary to interface with theintegrated AFCS awarded by the Grantors. However, allcosts and expenses for such changes made shall be for theaccount of the Grantors and shall entitle the Concessionaireto compensation.

62. The provision should include a deadline for approveddesign to be furnished to the Concessionaire. For approval.Designs approval of the Grantors Procured Items mustoccur before the Construction Start Date and anyadjustments on such design/specifications shall not bepermissible after six (6) months following the ConstructionStart Date. Any delay resulting from any change of thedesign/specifications of Grantors Procured Items shall betreated as Grantors Delay Event. Please amend: . to read" .... and that all design approved shall be furnished to theIndependent Engineer and the Concessionaire for approvalno later than the Construction Start Date;" and . the lastsentence to read: "The Grantors may, subject to the priorwritten agreement of the Concessionaire, request changes tobe made to such approved specifications. However, norequests for changes may be made following the expirationof six (6) months from the Construction Start Date. Anydelay arising from changes requested by the Grantors shallbe considered as a Grantors Dela Event."

The Concessionaire will not be given approval rights for Grantor'sProcured Items. There is a requirement for close liaison betweenthe Grantor and Concessionaire during the design stages of thedepot expansion and the satellite depot to ensure integration.


Request forAmendment-Section l4.6.a,Full Acceptance,page 56

63. The provision should be clarified to reflect that thecompletion test should be objective and clear. Also, thecertificate should be automatically given upon satisfactoryperformance rather than procured by the Grantors.

No change will be made to the CA. The CA Schedule 7parameters for completion testing

Regarding the certificate, the comment is noted and appropriateamendment will be made to the CA.

56228 Request forAmendment-Section 14.6.a(3)/Section14.7.a(3), FullAcceptance/SubstantialAcceptance,pages 56 and 57

64. The issuance of the Full Acceptance/Substantial Acceptancerequires that the Tested Works have been certified as beingsafe for commercial operation by the Independent Engineer.This is not sufficient as as it does not sufficiently coverperformance. Please revise the provisions to read: " ... theTested Works have been certified as being safe forcommercial operation by the Independent Engineer basedon the following criteria: (i) works (manufacturing,construction, and installation) shall be based on designapproved by the Independent Engineer; (ii) allmanufacturing tests, and construction and installation alongwith the evidence of controls shall be approved by theIndependent Engineer; (iii) system and sub-systems' RAMand performances shall be demonstrated by Suppliers /Contractors and approved by the Independent Engineer; (iv)safety as per safety case based on the existing concept shallbe successively proven from definition through design,factory tests, installation and integration to test andcommissioning by suppliers / contractors under the controlof the Concessionaire; and (v) punch lists of successivesteps to authorize test and commissioning, trial run andsystem acceptance and to enter into operation withassen ers shall be cleared b the Inde endent En ineer."

The Bidders comments are noted and accepted. An appropriateamendment will be made to the CA.


56229

56230

Request forClarification -Section14.6.b/Section14.14,Consequence ofIssuance ofFinalAcceptance/SupplementtoOperatingFranchise, pages56 and 61

Please see response to query no #56191

Part 2 of Schedule 9 is to be completed by the Bidders and reflecttheir proposals for amount and timing of their Bid Amounts.

Up-front Lump-sum Payment ofBid Amount,No. 6

65. Even after Extension Completion Date,amended/supplemented Operating Franchise is requiredfrom DOTC to begin operations. This exposes theConcessionaire to the risk of delay or denial. The Grantorsshould be obliged to issue an Operating Franchise as a CPto the Effective Date covering the Existing System and theCavite Extension with the condition in relation to the CaviteExtension that it shall be effective only upon issuance of theFinal Acceptance Certificate. Also, please clarify: . HasSchedule 15 been subject of public hearings, etc. to bevalidly promulgated as a binding administrative order?Finally, kindly include a draft of the Operating Franchise asan attachment to the Concession Agreement. SuchOperating Franchise should include authority to collect fees,including train fares. Given the importance of the OperatingFranchise, the Concessionaire and its lenders will needcertainty as to the requirements or conditions (if any) to beincluded in the 0 eratin Franchise.

66. CA 1.1, CA 20.5; ITB 7.3., i.ITB ANNEX FP-l ,Under theInstruction to Bidders, Section 7.3.i, the SBAC willdetermine the winner Bidder based on the highestcomplying Bid Amount. However, the draft ConcessionAgreement, Section 20.5 states that "Upon the achievementof the Effective Date, a Concession Payment shall be paidby the Concessionaire to the Grantors (a "ConcessionPayment")." Please clarify if payment of the Bid Amountwill be replaced by the Concession Payment. It will not beacceptable for the winning Bidder to pay the Bid Amountupfront and lump-sum even though there may be aConcession Payment paid quarterly. The concept of aConcession Payment is also not clear due to the omission ofinformation on Financial Matters. In addtion, under theInstruction to Bidders, "the Bid Amount shall be paid ...within thirty (30) days from the Notice of Award." This


means that the payment will obviously be made prior toFinancing Closing. This will be disadvantageous to theWinning Bidder and the Project as a whole because oftheimpact to be caused by a huge negative cash flow at theonset. Besides, it is not clear how the Bid Amount would bepaid back to the Winning Bidder in case, for example, aGrantors Event of Default occurs (e.g., failure to deliver theBasic ROW) or if the Winning Bidder fails to reachFinancial Closing after the upfront, lump-sum payment ismade before the Effective Date. We kindly requestDOTC/SBAC to remove the requirement for an upfront,lumpsum payment in favor of the Concession Payment,which shall be paid quaterly during the Concession Periodand after Financing Closing. We believe It would help allthe Bidders come up with more competitive bids and wouldhel make this Project more bankable.

56231 The Bidder's comment is acknowledged and an appropriateamendment will be made to the CA.

Request forClarification -Definition ofApproved Fare,Section 1.1,page 4

67. The definition should clarify that the Approved Fare mustbe such maximum Fare that the Concessionaire is legallyable to charge. Please amend the definition such that"Approved Fare" means "the maximum Fare that theConcessionaire is authorized and is able to charge pursuantto Section 20.3.b."


Request forDeletion-Definition ofAffiliate,Section 1.1,age 4

68. The definition should exclude "common ownership" as thisunduly broadens the scope of term. As drafted, ownershipof one share in the Concessionaire and another entity wouldbe captured. The bidder considers that the Grantors'interests are covered by the definition of "control". Requestdeletion of "ownershi or" before the word "control".

56233 No change will be made to the CA.Request forAmendment-Definition ofConcessionPeriod, Section

69. The definition should acknowledge the right of theConcessionaire to extend the Concession Period on thesame terms, subject to the cap of 50 years. The reckoning _point should likewise be the Construction Start Date or theEffective Date, whichever is later. Please amend the


1.1, page definition such that "Concession Period" means a periodcommencing from the Effective Date and expiring on thedate that is the thirty-second (32nd) anniversary of theConstruction Start Date or the Effective Date, whichever islater, as may be extended pursuant to the terms of thisConcession A eement."

56234 The comment is noted and an appropriate amendment will be madeto the CA

Request forDeletion-Definition ofDebt, Section1.1.,pa e8

70. The definition is too broad. Please delete "and otherliabilities of any nature of the Concessionaire" from thedefinition as it would capture liabilities which are not in thenature of debt/indebtedness.

56235 No change will be made to the CARequest forAmendment-Definition ofDefault Rate,Section 1.1.,age 8

71. The PDST -F is lower than the Concessionaire cost ofcapital. Please add a margin of 5% and adding the phrase"plus five percent (5%)" before "per annum".

56236 No change will be made to the CARequest forClarification -Definition ofE&S ImpactAssessment,Section 1.1.,a e 9

72. As this is a local Project, the Concessionaire should only bemade to comply with local E&S requirements, which mayprovide better value for money to the users. Please delete"the Equator Principles" and "and the EHS Guidelines forRailways, whichever is more stringent."

56237 The comment is noted and an appropriate amendment will be madeto the CA

\

Request forClarification -Definition ofLegalRequirements,Section 1.1.,a e 14

73. Please include "standards" as standards applied by aGovernment Authority may be binding on the relevantparty, its assets etc.


56238 74. The definition is too broad, particularly as the consequencefor breach is termination of the Concession Agreement.Please delete "or any agents, suppliers or vendors of any ofthese entities" in the definition.

This is a usual provision on Philippine PPP projects. No change willbe made to the CA.

J

Request forDeletion-Definition ofProhibited Act,Section 1.1.,age 16


Request forClarification -Definition ofRelevantConsents,Section 1.1.,age 17

75. To avoid vagueness as regards the Concessionaire'sobligations, please: . delete "including advice that there isno objection to a particular proposal or that a particularproposal is not inconsistent with policy or guidelines"; and,clarify obligation of the Concessionaire where there is notime limit for the prohibition to be issued

56240 Request forAmendment-Definition ofRequiredEffective Date,Section 1.1.,a e 19

76. The bidder suggests that a separate long stop date apply forthe Construction Start Date of 18 months.

Whilst the Grantors do not accept this proposed change they areprepared to extend the "Required Effective Date" to 12 months afterthe Signing Date.

56241 No change will be made to the CA.Request forAmendment-Definition ofRequiredExtensionCompletionDate, Section1.1., page 19

77. The definition should be reckoned from the ConstructionStart Date or the Required Effective Date, whichever isearlier since it is after such date that the Concessionaire cancommence or is required to commence the construction ofthe Cavite Extension. Please replace "Signing Date" with"Construction Start Date or the Required Effective Date,whichever is earlier".

56242 See response to query #56155Request forClarification -Definition ofStation Services,Section 1.1.,

78. The definition does not take into account the APCSConcessionaire and it is not clear whether theConcessionaire is obligated to sell tickets and man theticketing booths. Kindly clarify.


56243 See response to query#56181Request forAmendment-Section 5.2.a,Concessionaire's Obligations,page 29

79. The Concessionaire has no obligations relating to theoperation or construction of the Project until the EffectiveDate and Construction Start Date, respectively, but isrequired to submit the Construction and Operation Securityon Signing Date. Please de-couple the Operation Securityand the Construction Security to be given at the EffectiveDate and the Construction Start Date, respectively.

56244 See response to query #56185Request forDeletion-Section 6.1.d,HandoverofExisting System,page 33

80. The Concessionaire should not be required to reimburse theGrantors for all moneys properly payable by and actuallypaid by the Grantors under the LRT Stimulus Contractsbetween the Bid Proposals Submission Date and theEffective Date since the Grantors should have hadbudgetary appropriations for the LRT Stimulus Contracts.The reimbursement obligation is also inconsistent with theprinciple set out in 5.3.b which provides that the Grantorsshall be responsible between the Bid Proposals SubmissionDate and the Effective Date for any capital expenditurereplacement costs required to ensure that the ExistingSystem Requirements are met. Please remove.

56245 Specific changes can be made to the CA to reflect a Bidder's projectexecution strategy.

Request forAmendment-Section 7.2.b,ConcessionaireCPs toConstructionStart Date, page35

81. It appears that the Concession Agreement contemplatesseparate contracts for the Railway Systems and RailwayInfrastructure. This may not always be the case and,therefore, the Concession Agreement should not specify thenumber of contracts through which the Concessionaireshould undertake the design and construction works. Theapproval requirement in respect of the contracts for theWorks should be deleted. The Concessionaire will beanswerable to the Grantors under the ConcessionAgreement if it fails to meet and comply with itsconstruction related obligations under the Concession


Agreement. Section 7.2.b should also clarify that therequirement is that all conditions precedent other thanissuance of notice to proceed have been satisfied "orwaived".

56246 See response to query #56181Request forClarification -Section 9.2,Construction &OperationSecurity

82. The face value of the Construction Bond is moreappropriately set at Php500 Million, which is 2% of theestimated project costs of the Concessionaire (php25Billion) as required under the BOT IRR. The face value ofthe Operation Bond is more appropriately set at Php50Million, which is a reasonable amount of security for theConcessionaire's operational obligations and is more in linewith Operational Security required in other railway projects.Please: . revise so that the required face value of theConstruction Security is Php500 Million and the requiredface value of the Operation Security is Php50 Million; and .add "with [x] days prior written notice being given to theConcessionaire" before "in accordance with this CA" in9.2(g).

56247 Request forClarification -Section 10.2.a,Terms ofFinance, page42

83. The bidder considers that a period of9 months for financialclose is too short. Please amend to 18 months, consistentwith other concessions in railways. Please also revise theproviso to read: "(provided that the Concessionaire shall notbe in breach of this obligation if, and to the extent that, thereason for failure to fulfil these conditions was attributableto (i) the breach by the Grantors of their obligations underthis Concession Agreement, including failure to satisfy theconditions precedent to Effective Date or Construction StartDate; (ii) the occurrence of Force Majeure or MAGA; oriii) any material adverse chan e in financin markets)."


56248 No change will be made to the CA. This concession is beingtendered as a variant of the BTO modality under the BOT Law.

Request forClarification -Section lO.2.d,

84. The bidder propose that consistent with other railwayprojects in the Philippines, title to all assets acquired or builtb the Concessionaire e.. additional LRVs as art of a


• •

Terms ofFinance, page42

System Upgrade or the Cavite Extension) remain with theConcessionaire until the Transfer Date.

56249 Request forAmendment-Section lOA,GrantorsProcured Items,

age 43

85. To ensure continued possession by the Concessionaire,please add "and shall ensure that these Grantor ProcuredItems are delivered to the Concessionaire free from liens,encumbrances and other similar charges or securityinterests. "

The Bidder's comment is acknowledged and an appropriateamendment will be made to the CA.

56250 Request forAmendment-Section 11.1 ,c,Basic Right ofWay, page 43

86. Given the importance of the ROW, a certificate issued bythe Independent Engineer should not be binding on theParties. Please delete the last sentence of Section 11.1.c.


56251 Request forAmendment-Section 11.3 .c,Obligations inrelation toROW, a e47

87. Grantors should procure the Relevant Consents fromGovernment Authorities for the use of roads, tracks. or otherroutes, ways or means of access.


56252 Request forAmendment-Section 11.3.e,Obligations inrelation toROW, age47

88. Any Additional Land, not required by Concessionaire,should belong to Concessionaire.


56253 Request forAmendment-Section 11.4.a,Proj ect Landand CommercialDevelopment,

age 47

89. Please delete "Equator Principles, the EHS Guidelines andthe EHS Guidelines for Railways".


56254


Request forClarification -Section 12.2.f,Construction,page 48

90. Concessionaire obligations in respect ofthe NAIAExpressway project are not clear. Please clarify and providespecific responsibilitieslliabilities of the Concessionaire tominimize risks to the NAIA Expressway Project.

The Bidder's comment is noted. With regards to the NAIAExpressway project's impact on the Existing Depot, the land to beaffected will be part of the ROW of the NAIA Expresswayconcessionaire. The design, layout and initial construction of therequired depot extension is the responsibility of the Grantor. TheConcessionaire shall be responsible for any interface after turnoverof the depot expansion to the Concessionaire. The CA will beamended to reflect this.

With regards to the NAIA Expressway project's impact on the MIAStation, interface layouts will be uploaded to the data room.

56255 Request forAmendment-Section 12.5.a,E&SRequirements,page 50

91. As the Project is in Philippines, it is more appropriate to No change will be made to the CA.apply relevant local provisions as they are customised forthe local market and conditions. Thus, the Concessionaireshould only be made to comply with local E&Srequirements. Please revise the second sentence to read"The E&S Impact Assessment shall be carried out inaccordance with all Relevant Rules and Procedures." Inaddition, the provision also states that the Concessionaireshall be solely responsible for the integrity of the DetailedDesign and the design ofthe Works. However, this has totake into account the fact that there could be instanceswhere there is a change in the Detailed Design at theGrantors' request and approved by the IndependentEngineer, but without the consent of the Concessionaire.The clause should be revised accordingly.

56256 Request forClarification -Section 15.1,General(Subcontracting), age 61

92. For clarity, the right of the Concessionaire to designate a This is contemplated in Sections 15 and 18.Facility Operator and/or a Maintenance Provider to operateand maintain the project should be recognized. In such case,the Consortium Members with the technical capacity shouldalready be recognized as pre-qualified.

56257


Request forClarification -Definition ofAffectedCommunities,Section 1.1,page 4

93. The defmition is broad and it is unclear what is intended by. "Concessionaire's geographical proximity". The termshould refer people or communities located within thegeographical proximity of the Project's site. Please amendthe defmition such that "Affected Communities" means"any people or communities located in the Project Land'sgeographical proximity, who are subject to actual orpotential direct risks and/or adverse impacts related to theo eration of the Proi ect."


Request forDeletion-Definition ofBidDocumentation,Section 1.1,age 4

94. The definition should exclude "Qualification Documents"since the Concession Agreement should prevail. Requestdeletion of "Qualification Documents," before the phrase"Bid Letter" in the defmition.


56259 Milestones, No.7

95. CA 4.2CA 5.4 Per the Milestones in the draft ConcessionAgreement, the Concessionaire shall start the constructionof the Extension and the Operation of the Existing Systemon the Effective Date which shall be no later than nine (9)months after the Signing Date, and if either the EffectiveDate or the Construction Start Date has not occurred by theRequired Effective Date either Party may give writtennotice to the other Party of its intention to terminate thisConcession Agreement. The nine months are insufficient forthe Concessionaire to prepare for and carry out the Design,Construction of the Extension and the Operation of theExisting System. In terms of Design, the Concessionaireneeds to start by conducting full due diligence processes,geotechnical investigations, technical surveys, etc., and thenfollowed by the detailed design. The design shall go throughreview and monitoring by the Independent Engineer andwill need the relevant government permits and licenses.

An extension of the Required Extension Completion Date to 54months after the Signing Date will be made.

The CA will be amended to reflect these changes.


56260 Request forAmendment-Definition ofConcessionaireConstitutionalDocument,

Based upon the detailed design, the Concessionaire willestimate the Construction cost for the EPC contract as acondition precedent to Financing Closing. In terms ofOperation and Maintenance, the Concessionaire also needsto conduct a full due diligence review, hire staff, contractwith suppliers and service providers, before it can take overthe operation of the Existing System. Nine (9) months is tooshort for that process. It is a very aggressive timetablewhich makes it unrealistic and too risky at the possibleexpense of the safety and convenience of the riding public.Finally, the Concession Agreement states that the RequiredExtension Completion Date is fifty one (51) months fromthe Signing Date; however, the commencement date ofConstruction may be impacted by unanticipated delayevents during the period between the Signing Date and theEffective Date, and the commissing and testing period aswell as the construction period. All these should beconsidered in the setting of the Required ExtensionCompletion Date. We request to adjust the deadline for theachievement of the Construction Start Date and theOperation of the Existing System to a realistic level, whichis eighteen (18) months. We also request to add languageand provisions for a "Curing Period" and "Penalty andCompensation" for the party whose action results in a delay.Finally, we request to adjust the Required ExtensionCompletion Date from "fifty one (51) months from theSigning Date" to "fifty one (51) months from the EffectiveDate."

The Concessionaire Constitutional Documents must only beapproved and certified by the Philippines Securities and ExchangeCommission.

96. The certification by the Corporate Secretary and the SEC isredundant. Also, the term "Corporate Secretary" should notbe capitalized. Please delete "and approved and certifiedby" after "corporate secretary" and use "or" before "thePhilippine SEC".


Section 1.1,page 7

97. The bidder requests that the definition correspond to acalendar year rather than a 12 month period calculated byreference to the Effective Date. It is difficult to comply withthe financial reporting obligations for instance based onContract Year as currently drafted, Please amend thedefinition such that "Contract Year" means each twelve (12)month period commencing from January 1 until December31 of each year of the Concession Period, provided that (i)in relation to the first Contract Year, it shall be the periodcommencing from the Effective Date and ending onDecember 31 of the same year; and (ii) in relation to the lastContract Year, it shall be the period commencing fromJanuary 1 and ending on the Transfer Date, or if earlier, theTermination Date."

98. For clarity, please: . delete "Section 5.4" in the definition asthe definition refers to satisfaction of conditions set out inSection 5.4 but there is no condition under Section 5.4; and. insert "by the relevant Party" after "satisfied or waived".

99. As this is a local Project, the Concessionaire should only bemade to comply with local E&S requirements. Please deletethe definitions of "EHS Guidelines", "Equator Principles"and "EHS Guidelines for Railways."

56261 The comment is noted and Section 25 will be amended to refer tofinancial years.

Request forAmendment-Defmition ofContract Year,Section 1.1.,page 7


Request forAmendment-Defmition ofEffective Date,Section 1.1.,page 9

56263 No change will be made to the CA.Request forDeletion-Definition ofEHS Guidelines,EHS Guidelinesfor Railwaysand EquatorPrinciples,Section 1.1.,