N. Luzon road breakthrough

BY JENNEE GRACE U. RUBRICO, Sub-Editor/BusinessWorld Ausphil to proceed with P7.8-B project Seven years after it submitted its proposal for the North Luzon East Expressway (NLEE) project, Filipino-Australian consortium Ausphil Tollways Corp. has finally been allowed to proceed with the P7.8-billion build-operate-transfer (BOT) undertaking. The government, through the Metropolitan Waterworks and Sewerage System (MWSS), issued a notice of award to Ausphil for the use of the water regulator’s right-of-way inside the La Mesa Reservation for the 18.9-kilometer tollroad project that will connect Commonwealth Avenue, Quezon City to Norzagaray, Bulacan. The notice of award, however, was given on the following conditions: that a feasibility study on the project be completed; that its final design and engineering details be submitted; that the financial model incorporating a tariff study and a guaranteed maximum price for the use of the road be presented; and, that an environmental compliance certificate be secured by the proponent. Ausphil’s compliance with the requirements will be monitored by the Department of Public Works and Highways, the implementing agency for the project, the award notice said. Ausphil is a 40-60 joint-venture company between an Australian group and a Filipino consortium. "The MWSS, as sponsoring agency, hereby issues the Notice of Award to Ausphil as original proponent [of the project]," the MWSS said in the award notice dated May 4. Once the company complies with all requirements, "Ausphil shall undertake to organize, incorporate, and register in accordance with the existing laws of the Republic of the Philippines as North Luzon East Expressway ’La Mesa Parkways’," the award notice said. The new entity will then negotiate and conclude a toll concession agreement, which will be presented to National Economic and Development Authority, or NEDA, it added. The award notice was released after the NEDA issued its go-signal for the project through a letter dated April 10, 2007. Ruben Reinoso, director of NEDA’s Infrastructure Staff, said in an interview that as soon as MWSS and Ausphil sign a contract, they can then submit it to the NEDA Board for approval. He said NEDA has yet to see the contract to be able to determine whether it can give the green light to the La Mesa Parkways project. "Each project is peculiar. Although the general terms of the law can be applied to them, the risk profile will be different for each," said Mr. Reinoso. He said that among the things to be considered in the approval of the project is a reasonable rate of return, and if the exposure of the government is within the bounds of the BOT law. Mr. Reinoso said if the contract terms are clear and complete upon submission to the NEDA, then the approval, if ever, may be issued in a matter of four to eight weeks, according to NEDA Board rules. Socieconomic Planning Secretary Romulo L. Neri confirmed in an interview Friday that the MWSS and Ausphil were expected to seek NEDA approval for the toll concession agreement. "The only thing left for NEDA to do is to determine the rate of return of the project then after that they can go ahead with the contract," said Mr. Neri. He added that since the project was under a BOT scheme, NEDA’s involvement in the project was now limited to evaluating the its rate of return. Chona Balanquit, MWSS media consultant, said in a separate interview that the notice of award was issued by the water regulator because the project would use its property. She also said that Ausphil and MWSS would be signing a lease contract for the use of the La Mesa corridor. The MWSS and Ausphil had signed a memorandum of understanding for the project proponent’s use of the water regulator’s right of way in La Mesa in 2003. Ms. Balanquit added that the issuance of the award notice effectively allowed Ausphil to finally start on the project "subject to meeting the requirements." For his part, Ausphil President Ricardo Penson expressed relief that the project "finally" got the notice of award and said that his firm had four months to meet the government’s conditions for pre-construction works. "It’s during the pre-construction works that the actual cost will be determined. The rates will also be determined during this time," he said in a telephone interview from Australia. He said that while toll rates would have to be approved by government, Ausphil’s base rate has been pegged at P3. "I think the [approved] toll rates will come out to be less than P4," he said. Once Ausphil completes pre-construction works, it will start on the construction proper of the tollway. This is expected to take 20 months, Mr. Penson said. He added that because of the delays in the project, Ausphil incurred losses of P121 million. The tollway project-which will pass through the San Jose del Monte reservation, then to Bigte, Norzagaray-was conceptualized in 1997 and proposed to the government in 2001. Under the original schedule, the tollway was supposed to be operational by mid-2007. The project, however, got delayed as Ausphil experienced difficulties in getting NEDA approval. The agency had raised several issues, including whether Ausphil would use government funds for the project. The agency had required Ausphil to secure approvals from the Bangko Sentral ng Pilipinas, as well as from the Budget and Finance departments to prove that the project would not be getting financing support from the government. Ausphil had maintained that as BOT proponent, it could not go to these government agencies to secure the needed approvals. It had said that it needed its sponsoring agency to work on the approvals. It could not be decided then, however, if the project would be sponsored by the MWSS or the DPWH. Last year, the BOT proposal was subjected to a swiss challenge, after which Ausphil arranged and received a firm offer from Hong Kong private infrastructure fund Gold Standard International Ltd to provide $3.6 million in convertible bonds to complete the detailed engineering, environmental and feasibility studies and project construction documentation cost. The expressway, one of President Arroyo’s priority projects, is expected to have an initial traffic load of 69,000 vehicles per day from the tollway project. The tollway will later be extended toSan Diego in Cabanatuan City. Another component of the project will involve the production of 15.2 million cubic meters of raw water annually, and the construction of a 35 megawatt hydroelectric power plant for the host community’s use. - with a report from Beverly T. Natividad