- Metro Rail Transit Corporation
The Metro Rail Transit Corporation is a private consortium responsible for the maintenance of the Manila Metro Rail Transit System. It is also the original contractor for the MRT project. It runs the MRT in coordination with the Department of Transportation and Communications.
Formation and Purpose of Metro Rail Transit Corporation
The contract for building and leasing for the EDSA Rail Transit III, Phase I Project was first awarded in 1992 to a consortium of international sponsors headed by Mr Eli Levin, who was involved in installing the first light rail transit system in Manila in the mid-1980s. Mr. Levin incorporated EDSA LRT Corporation Ltd. ("ELCL") in Hong Kong as the initial contractual counterparty to the DOTC. Legal and other problems beset the project through the first quarter of 1995, which were all subsequently resolved with a Supreme Court decision that asserted the validity of the Project.
In June 1995, a newly formed consortium of reputable Philippine companies purchased a majority stake in ELCL through EDSA LRT Holdings, Inc. ("ELHI"), a Philippine-registered company. It was also approximately at this same period that the consortium engaged JP Morgan to help organize the financial structure of the Project and its highly complex financing plan.
The Philippine owners obtained control of roughly 85% of ELCL's voting stock. ELHI also formed and owns in its entirety a development company ("MRT DevCo") that acquired the development and commercial rights to develop the 16-hectare depot site and in the 13 stations, as well as the right to develop the air space above the 13 stations. In December 1995, ELCL's name was changed to Metro Rail Transit Corporation Ltd. ("Metro Rail") and ELHI was correspondingly renamed MRT Holdings, Inc.
A Philippines subsidiary of Metro Rail, Metro Rail Transit Corporation ("MRTC"), was later formed for the purpose of designing, constructing, testing, commissioning, and maintaining the EDSA Rail Transit III, Phase-1 system. An Accession Undertaking and an Assignment and Assumption Agreement was executed which gave MRTC all rights and obligations to the Project agreements during the debt repayment period and establish MRTC as the Project borrowing entity.
The BLT Agreement
The BLT Agreement was signed by DOTC and Metro Rail on August 8, 1997 and amended on October 16, 1997. It constitutes a restatement of similar agreements dating back to the first such contract, which was signed on November 7, 1991. That agreement was restated on April 22, 1992, and the restated agreement was supplemented on May 6, 1993, and amended on July 28, 1994 and May 1996. Another restatement was signed on October 3, 1996. All the terms in those prior agreements were superseded by the provisions of the BLT Agreement.
The BLT Agreement governs the relationship between Metro Rail and DOTC during the Project’s two major phases, construction and revenue service. During the construction phase, Metro Rail was obliged to construct the Project (Phase 1) and to complete that construction by a certain date (the “Date Certain”). The construction was to be accomplished in accordance with the specifications and drawings approved by the DOTC and the completed system capable of achieving certain capacity requirements. Metro Rail was also obligated to provide all equipment that was to be used in the system, including the rail vehicles.
The DOTC’s obligations during the construction phase included granting Metro Rail access to the Project site (including relocating squatters and other persons from the Depot area) and ensuring that certain work to be performed by the Department of Public Works and Highways (“DPWH”) was completed properly and on time. In addition, the DOTC accepted the responsibility for certain events that could delay completion of the system. Should such events occur, DOTC would be responsible for paying the costs of the event and the delay it causes, and the date by which Metro Rail is obliged to complete construction would be adjusted.
After completion, Metro Rail was obligated to lease the system to DOTC, who would operate the system, with Metro Rail providing the maintenance. DOTC was required to make payments of Rental Fees to Metro Rail, and these were broken down into several different portions. One significant part was intended to repay the loans taken out to finance the Project (“Debt Rental Fees”).
Project Funding Components
A breakdown of the key funders and tranche funding components of the MRT-3 Phase-1 Project were as follows:
The Key Management Team Members: Construction, Operations and Financial Management
From September 1995 to March 2002, Metro Rail oversaw the construction, financing and operational management of the Project. On December 15, 1999 Metro Rail commenced operations (soft opening) of the MRT-3 Phase-1 System operating 10-stations from Buendia to North Avenue. The Project was formally inaugurated on July 15, 2000 (all 13 stations) as scheduled and within the DOTC-approved budget.
Robert John Sobrepena, was Metro Rail's Chairman and CEO, overseeing all aspects of the Project from Financing to Construction and turn over. Laurence Weldon, President and Chief Operating Officer, oversaw all aspects of construction of the Project. Mr. Weldon was previously connected as project manager of the Los Angeles “Blue Line” Rapid Transit Project before July 1995. In Manila he was supported by Carlos 'Karl' Quirino, Chief Financial Officer, Robert Ball, Vice-President of Technical Services, William Lathrop & Walter Mergelsberg of the Project Management Team and Harry Redstone and their teams for the engineering aspects of the Project.
JP Morgan and the management team of MRTC negotiated with the support of a team of technical experts and other advisors in arranging project financing totaling US$ 675.5-million from the Japan Bank for International Cooperation (formerly Japan Export-Import Bank or JEXIM), Investicni a Postovni Bank of the Czech Republic, a consortium of Foreign Currency Deposit Unit (“FCDU”) banks led by Citibank, Bank of the Philippine Islands, Far East Bank, ING Bank, Metrobank and the Philippine Government under a Sovereign Credit basis whose blended all-in financing cost amounted to only 4.72% p.a. over the entire life of the loan facilities.
The Rail Vehicle Supply Agreement
The Rail Vehicle Supply Agreement or “Vehicle Contract” was executed between Metro rail and CKD Tatra on October 14, 1996 and has since been the subject of five amendments. It covers the purchase and commissioning by Metro Rail and the production and shipment by Tatra of 73 Rail Vehicles to be used in the EDSA MRT-3 Phase-1 rail system. Simultaneous with the execution of the Vehicle Contract, Metro Rail and Sumitomo entered into an Assignment and Assumption pursuant to which Metro Rail assigned and Sumitomo assumed most but not all of Metro Rail’s rights and responsibilities under the contract. The Assignment is part of the single point of responsibility structure under which Tatra becomes a subcontractor of Sumitomo, who then becomes responsible to Metro Rail for Tatra’s performance.
The Maintenance Agreement that was entered into between Metro rail and Sumitomo Corporation (the “Provider”) sets forth the terms on which the Provider will provide maintenance and repair services (the “Services”), for a period of ten (10) years, for the System. As compensation for Services, Metro rail agreed to pay a base fee (the “Base Fee”) adjusted in accordance with a price escalation formula (the ”Annual Maintenance Fee”), for each year such Services are provided. The Base Fee in the first year is approximately US$ 15.3-million stepping up to approximately US$ 18-million on the 6th year. In addition to the Annual Maintenance Fee, Metro Rail also agreed to reimburse the Provider for the cost of carrying out any special repairs to the System. The Provider subcontracted, with Metro Rail’s consent, all services with respect to the remainder of the System to be carried out by Mitsubishi Heavy Industries, Limited.
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