Metro Rail Transit Line 3

Project Background and Issues

MRT3 Project Description

Metro Manila Mass Transit System

Northrail

Operating Mass Transit Metro Manila LRT1: Yellow Line (Taft Corridor) LRT2: Purple Line (Aurora Corridor MRT3: Blue Line (EDSA Corridor) Orange Line North Rail to South Rail Linkage Project MMUTIS Report shows that EDSA Corridor is the heaviest Traffic Corridor of Metro Manila

LRT 1 NORTH EXT (Closing the Loop).

MRT7

MRT4

MRT2

LRT1

MRT3

M RT 8

LRT Ext Line I ens S ion outh

PNR Northrail-Southrail Linkage Phase 1 (Caloocan-Alabang, 34 km)

PNR Northrail-Southrail Linkage Phase 2 (Alabang-Calamba, 27 km)

MRT3 Background Information

Build, Lease and Transfer Agreement was signed between Department of Transportation and Communication (DOTC and Metro Rail Transit Corporation Ltd (HK) in August 1997 Approved Project Cost is US$ 679.0 million but Actual Project Expense is: US$ 675.0 million 16.6 kilometers with 13 stations and a depot in EDSA corner North Avenue 73 Light Rail Vehicles (Trains) Model RT8 D5M (Czech Made) 350,000 passengers a day capacity and having operating with peak capacity of 500,000 passengers a day Project Owner: Metro Rail Transit Corporation which invested US$ 190.0 million with a back-ended 25-year Equity Repayment Profile Project Lenders: Japan Bank for International Cooperation (JBIC), Czech ECA and FCDU who lent $485.5 million EPC Contractor: Sumitomo Corporation Maintenance Provider: Sumitomo Corporation Operator: DOTC

Comparison of Net Economic Benefit and Actual ERP Payment by DOTC

YEAR 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Annex A-1,Table-2 (Original Schedule) (96,144,684.00) (71,875,167.00) (21,980,149.00) 0.00 0.00 9,166,665.00 9,999,996.00 9,999,996.00 19,166,670.00 20,000,004.00 38,333,330.00 39,999,996.00 39,999,996.00 39,999,996.00 44,583,333.00 118,333,337.00 129,583,330.00 129,999,996.00 129,999,996.00 139,166,670.00 140,000,004.00 144,583,330.00 144,999,996.00 144,999,996.00 144,999,996.00 149,583,333.00 150,000,000.00 150,000,000.00 150,000,000.00 150,000,000.00 12,500,000.00 15.0000% Equity Rental Payments (Actual and
Projected)

Total ERP over 25 years: US$ 2,209,999,966.00

(96,144,684.00) (71,875,167.00) (21,980,149.00) 0.00 0.00 7,333,332.00 8,499,997.00 10,833,329.00 14,349,989.50 15,740,165.72 13,333,335.00 41,551,352.12 61,212,438.86 50,477,144.79 47,918,898.01 118,333,337.00 129,583,330.00 129,999,996.00 129,999,996.00 139,166,670.00 140,000,004.00 144,583,330.00 144,999,996.00 144,999,996.00 144,999,996.00 149,583,333.00 150,000,000.00 150,000,000.00 150,000,000.00 150,000,000.00 12,500,000.00 14.8457%

Total DOTC Payments Inclusive of Delayed Payment: 279,249,982

Additional DOTC Payment to Preserve Net Economic Return of 15%: US$ 26,581,101.99 (if settled by the end of 2009)

Additional DOTC Payment to Preserve Net Economic Return of 15%: US$ 30,466, 663.00 (if settled by the end of 2010)

Actual Ridership and Capacity Expansion Project Comparison (Phase 1 Only)

1,400,000.00

1,200,000.00

1,000,000.00 Unconstrained Demand 21 Brand New Trains by 2010 600,000.00 54 Brand New Trains by 2014 Actual Ridership

800,000.00

400,000.00

200,000.00

20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 20 10 20 11 20 12 20 13 20 14 20 15 20 16 20 17 20 18 20 19 20 20 20 21 20 22 20 23 20 24 20 25

MRT3 Phase has a potential ridership of 1.3 million passengers a day Today with 73 Light Rail Vehicles (Trains) capacity is 350,000 passengers a day With an additional 21 Light Rail Vehicles (Trains) by 2010 capacity will increase to 600,000 passengers a day when demand will be 633,000 passengers a day With and additional 54 Light Rail Vehicles (Trains) by 2015 capacity will increase to 980,000 a day when demand will be 780,000 passengers a day

MRT3 Revenue and Expenses based on Present and Expanded Capacity

Present and Capacity Expansion Revenue (PhP 12.50 average fare) and MRT Project Expenses Comparison (excludes Debt Payment) Present and Capacity Expansion Fare Box (PhP 25.00 average fare) and MRT Project Expenses Comparison (excludes Debt Payment)
250,000,000.00 MRT Operating and Maintenance Expenses

250,000,000.00

200,000,000.00

200,000,000.00 Farebox Revenue based on PhP 12.50 Fare with 54 additional brand new trains

150,000,000.00

150,000,000.00 Farebox Revenue based on PhP 12.50 Fare and Actual Ridership (US$ per annum)

100,000,000.00

100,000,000.00

Farebox Revenue based on PhP 12.50 Fare and Unconstrained Ridership (US$ per annum)

50,000,000.00

50,000,000.00

Farebox Revenuebased on PhP 12.50 Fare with 21 additional brand new trains

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

BLT Agreement Provisions Relevant to MRTCL, MRTC, MRTDC and MoRTC (as of 14 April 2009)

MRT3 as a Solicited Project

In 1991 the DOTC bidded out the MRT 3 Project. As a result the project is classified as a SOLICITED project for a complete rail-based mass transport system from Baclaran to Monumento along EDSA. February 1991 to April 1991 - DOTC issued the Terms of Reference (TOR) for the MRT Line 3 Project. Section I of the TOR expressly declared that the Project involves the development of complete rail-based mass transport system from Baclaran (Taft Avenue, Pasay City) to Monumento in Caloocan City.

MRT3 Project as a Solicited Project and 1st BLT Agreement dated November 7, 1991 was upheld by Supreme Court
On November 7, 1991, the Republic of the Philippines, acting through DOTC, and EDSA LRT Corporation, LTD. (previously EDSA LRT Consortium), entered into the AGREEMENT TO BUILD, LEASE AND TRANSFER A LIGHT RAIL TRANSIT SYSTEM FOR EDSA (Original BLT Agreement). On April 6, 1995, the Supreme Court en banc promulgated its landmark ruling in the case of TATAD vs. GARCIA. The ruling recognized and affirmed the validity of the nature and technicalities of the project procurement process for the LRTS Line No. 3, as well as the rights of the parties under the BLT Agreement.

Signing of revised and restated dated August 8, 1997 BLT Agreement between MRTCL and DOTC
On 08 August 1997, the Republic of the Philippines, acting through DOTC, and MRTCL executed the Revised and Restated BLT Agreement. The BLT Agreement also recognized that MRTCL made equity investment of in the total amount US$ 190.0 million as indicated in the definition of Net economic return (page 10 BLT Agreement)

Contractual relationships as of August 8, 1998

Recognition of the MRTCs Role as Lessor and DOTCs Role as Lessee in a Real Estate Taxes Case Hearing between Makati City and the Republic of the Philippines

Triggering Provision in BLT Agreement for the payment of Rental Fees

MRTC and the DOTC entered into a Completion Agreement on 15 July 2000, which confirmed that the entire LRTS Phase I has been duly handed over to DOTC.

For all purposes of the BLT Agreement, Completion Date occurred on 15 July 2000 and equity rental fees has become due and demandable.

Rental Fees include:

Debt Rental Payments paid by DOF to Lenders through the Intercreditor agents Equity Rental Payments paid by DOTC to MRTC Administrative and Staffing Cost paid by DOTC to MRTC Subject to Escalation Maintenance Fees paid by DOTC to MRTC Subject to Escalation Adjustments during the first 10 years of the revenue period MRTC shall pay liquidated damages if there are less than 54 LRVs. DOTC shall pay bonuses if there are more than 60 LRVs. Reimbursements for all payments made by MRTC other than Administrative and Staffing Cost and share in the payment of the cost of the Expert.

MRTC Covenants Under Omnibus Agreement

On 17 October 1997, MRTC signed a Common Agreement (Omnibus Loan Agreement) with the MRT3 Phase1 Lenders which required MRTC to be a Single Purpose Vehicle to complete Phase1. A relevant feature of the Common Agreement is that MRTC shall not permit the Core Shareholders (Fil-Estate, Ayala, Anglo, Ramcar, Greenfield) to own in the aggregate, either directly or indirectly, less than 51% of the voting stock of the Borrower. (Section 6.11)

Assignment of Rights under the BLT Agreement and its Attached Documents

Assignment Of LRTS Phase 1 Rights under Assignment and Assumption Agreement (MRTCL and MRTC)
On August 8, 1997, DOTC gave its consent to the assignment between MRTCL and MRTC of the formers rights and obligations under the BLT Agreement relating to Phase1 (Annex H-2 of the BLT Agreement). DOTC also gave its consent to the Assignment and Assumption Agreement

Accession Undertaking of LRTS Phase 1 Rights under BLT Agreement (MRTCL, MRTC & DOTC)

Assignment Of LRTS Phase 1 Rights under BLT Agreement (MRTCL and MRTC)

Assignment Of Rights (Development, Makati Loop & Monumento Rights) under Tri-partite Agreement (DOTC, MRTCL and MRTDC)
On the same day August 8, 1997, DOTC, MRTCL and MRTDC (then known known as EDSA LRT Development Corp.) entered into a a tripartite agreement where DOTC recognized that MRTDC has the sole obligation to pay the Development Rights Payment and exercise development rights (e.g. develop commercial premises and airspace, lease or sublease interests or assign such interests, and obtain advertising income from depot and airspace).

Original Ownership and Holding Structure and Restructuring of MRTCL

MRTCL Dissolution and Assignment

a. MRTC letter to DOTC December 6, 2000 regarding: (1) the dissolution of MRTCL, (2) assignment to Monumento Rail Transit Corporation a wholly-owned subsidiary of MRTCL of all the rights and obligations under the BLT Agreement relating to Phase 2 and the Makati Loop, and (3) assignment of residual rights and obligations under Phase 1 to MRTC. Paragraph 21.3 (b) of the BLT Agreement states that MRTCL may assign any of its rights to any other subsidiaries of MRTCL without DOTC consent. b. DOTC letter December 20, 2000 to MRTCL regarding DOTCs consent to the dissolution of MRTCL and its assignment of residual rights and obligations under Phase 1 to MRTC

Before Dissolution as of December 20, 2000

After Dissolution October 15, 2001

MRT3 Bond Structure

MRTC Shareholders entered into a Cooperation Agreement in 07 August 2002.

Parties: (1) Sellers Fil-Estate Corporation, Fil-Estate Properties, Inc., Railco Investments, Inc., Anglo Philippine Holdings Corporation, Sheridan LRT Holdings Inc., DBH Incorporated, (2) Metro Rail Transit Holdings, Inc., (3) Metro Rail Transit Holdings II, Inc., and (4) Metro Rail Transit Corporation. Highlights of the Cooperation Agreement: MRTC agreed not to allow any transfers of its shares. MRTC agreed to not engage in any business activity apart from the building, leasing, operating and maintaining of LRTS Phase I. MRTC agreed that it shall promptly collect from DOTC that amounts representing payments to the Lenders (Debt Service Rental payments) and the Equity Rental Payments, and any other amounts due under the BLT Agreement. MRTC agreed not to voluntarily sell, convey, assign or otherwise transfer the Project or any part thereof other than as a result of exercise of an Equity Value Buyout or Residual Value Buyout under the BLT Agreement or as a result of an asset transfer agreement with the DOTC, provided that the purchase price shall not be lower than an amount equivalent to 130% of the accreted value of the Notes outstanding at the time of the transfer, which in any event shall not be lower than the Equity Value Buyout Price, plus MRTCs outstanding obligations to the Lenders.

ERP Flowchart

Additional Payment Required to Preserve the 15% Net Economic Benefit of MRTC due to non-Payment of ERP
YEAR 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Annex A-1,Table-2 (Original Schedule) (96,144,684.00) (71,875,167.00) (21,980,149.00) 0.00 0.00 9,166,665.00 9,999,996.00 9,999,996.00 19,166,670.00 20,000,004.00 38,333,330.00 39,999,996.00 39,999,996.00 39,999,996.00 44,583,333.00 118,333,337.00 129,583,330.00 129,999,996.00 129,999,996.00 139,166,670.00 140,000,004.00 144,583,330.00 144,999,996.00 144,999,996.00 144,999,996.00 149,583,333.00 150,000,000.00 150,000,000.00 150,000,000.00 150,000,000.00 12,500,000.00 15.0000% Equity Rental Payments (Actual
and Projected)

(96,144,684.00) (71,875,167.00) (1) (21,980,149.00) 0.00 0.00 7,333,332.00 8,499,997.00 10,833,329.00 14,349,989.50 15,740,165.72 13,333,335.00 41,551,352.12 61,212,438.86 50,477,144.79 47,918,898.01 (2) 118,333,337.00 129,583,330.00 129,999,996.00 129,999,996.00 139,166,670.00 140,000,004.00 144,583,330.00 144,999,996.00 144,999,996.00 144,999,996.00 149,583,333.00 150,000,000.00 150,000,000.00 150,000,000.00 150,000,000.00 12,500,000.00 14.8457%

Additional Payment from DOTC in Order to Preserve 15% Net Economic Benefit of MRTC is US$ 26,741,101.99 by year end 2009.

Thank you

Ownership Structure

Ownership Structure

Ownership Structure