ADB guarantee to cover North-South Commuter Railway operator payments

THE PHILIPPINES is seeking to borrow up to $800 million from the Asian Development Bank (ADB) to serve as a partial credit guarantee (PCG) that will ensure payments to the operator of the North-South Commuter Railway (NSCR) project, the bank said.

According to a project data sheet, the ADB said that the government requested the ADB to provide a PCG to ensure the winning operator is paid, while also addressing market concerns on the possibility of delayed or non-payment.

The availability of the PCG will ensure efficient and sustainable operations of the NSCR project, the ADB said, adding that this mechanism will encourage bidder participation, improve competition and strengthen the financial viability of the transaction.

“The PCG will backstop a standby letter of credit issued by a reputable commercial bank, mitigating liquidity risk and enhancing bankability,” the ADB said.

The proposed PCG of up to $800 million is the equivalent of 24 months of availability payment obligation, it said, adding that it is de-risking the Department of Transportation’s (DoTr) NSCR O&M public-private partnership (PPP).

“This PCG-backed letter of credit will support private sector participation in the operations and maintenance (O&M) of the NSCR under a long-term PPP arrangement,” it said.

Last year, the DoTr conducted  roadshows in Japan, Singapore and France to promote the P229.32-billion O&M contract for the NSCR project.

According to the instructions to prospective bidders, the final O&M concession agreement will be released on April 30. Bids will be accepted by May 29 at 11 a.m., according to the PPP Center.

To qualify for the project, the bidder must have a minimum net worth of P114.65 billion or its equivalent in foreign currency as of the 2024 financial year. For consortia, the lead member of the group must have an equity interest of at least 34% of both voting and non-voting shares of the O&M concessionaire, the DoTr said.

Bidders including consortium members or affiliates must include at least one entity with 10 years of experience in rail operations, specifically in managing a rail line that handles at least 45,000 passengers per hour in each direction.

At least one entity must have eight years of experience in maintaining railway infrastructure and systems, including the use of a computerized maintenance management system, and another must have eight years of experience in track and civil infrastructure maintenance.

The NSCR O&M deal will cover 15 years from the signing date of the contract, the DoTr said.

The 147-kilometer NSCR will connect Malolos, Bulacan with Clark International Airport, and Tutuban, Manila with Calamba, Laguna. The P873-billion project is co-financed by the Japan International Cooperation Agency and the ADB. It will have 35 stations and three depots.

Full operations are expected by January 2032; partial operations on the Malolos to Valenzuela segment by December 2027; and operations on the Clark to West Valenzuela segment by October 2028. — Ashley Erika O. Jose