September 16, 2014

LRT project awarded to AC-MPI consortium

The Department of Transportation and Communication (DOTC) has finally awarded the Light Rail Transit-Line 1 (LRT1) extension project to Light Rail Manila Consortium, the project company led by conglomerates Metro Pacific Investments Corp (MPI) and Ayala Corp (AC). MPI’s Metro Pacific Light Rail Corp leads the consortium with a 55% stake followed by AC’s AC Infrastructure Holdings Corp with 35% and Macquarie Infrastructure Holdings (Philippines) Pte Ltd with 10%.

The award was made despite an existing Supreme Court order temporarily halting the transfer of the location of the common station to Ayala Land Inc’s (ALI) Trinoma mall from SM Prime Holdings Inc’s (SMPH) SM City North Edsa. The DOTC said the awarding of the project does not violate the SC order, which only applies to the transfer of the common station and not the P65b project.

Light Rail Manila Consortium has 20 days to comply with the post award requirements, which includes the partial payment of 10% or P935m of the consortium’s P9.35b premium offer. The remaining balance will be payable during the 32-year concession period. Once the requirements are met, the concession agreement could then be signed. It has 54 months to complete the project.

Our take: With the awarding, the consortium could take over the operations of the existing LRT-1 and begin work on the extension project by next year. This means that the consortium will have access to cash flows from the existing operations while constructing the expansion project. More importantly, the award should boost investor confidence on MPI and AC as the project can be tied in (and create synergy) with the Automatic Fare System project which they earlier won from the government. – WealthSec