THE PHILIPPINE PPP PROGRAM ATTY. FERDINAND D. TOLENTINO PPP Center Deputy Executive Director 1

THE PHILIPPINE THE PHILIPPINE

PPP PROGRAMPPP PROGRAMATTY. FERDINAND D. TOLENTINO

PPP Center Deputy Executive Director

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Outline of PresentationOutline of Presentation

www.ppp.gov.ph 2

PHILIPPINE PHILIPPINE PPP PROGRAM: PPP PROGRAM: AN OVERVIEWAN OVERVIEW

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The Philippine Investment Climate

www.ppp.gov.ph Source: NSCB data as cited in BSP Presentation to Moody’s Investors Service, June 2012

Photo by: Rappler (www.rappler.com)

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Infrastructure Sector

www.ppp.gov.ph

Infrastructure/ other capital outlays spending grew by 58.8% in Q12012; 45.7% in Q22012

DPWH has slated P63.5bn for its Infrastructure Program, and 86% of total infrastructure projects in 2012 are already bid out (as of April 2012)

Several airport projects are being implemented and are under construction

Government is tapping various mechanisms to accelerate infrastructure development in the country—national budget, official development assistance (ODA), and public-private partnerships (PPPs)

“In the ASEAN region, Philippines ranked

highest in terms of PPP readiness…”

--Infrascope 2011 Study (By the Economist Intelligence Unit as

commissioned by ADB)

Sources: Infrascope 2011, BSP Presentation for Moody’s (June 2012)

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The Philippine PPP Agenda

www.ppp.gov.ph

Private sector as partner in development

PPP as a strategyto accelerate infra development

The PPP Center as the main facilitator

of the PPP Program

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PHILIPPINE PPP PROGRAM: PHILIPPINE PPP PROGRAM: LEGAL & INSTITUTIONAL LEGAL & INSTITUTIONAL FRAMEWORKFRAMEWORK

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Legal Framework

www.ppp.gov.ph

RA 7718: The Amended Build-Operate-Transfer (BOT) Law

BOT-IRR: BOT Law’s Implementing Rules and Regulations

RA 7160: The Local Government Code of the Philippines 1991

Other Related Lawso Charters of Government Owned and Controlled

Corporations (Republic Acts and Executive Issuances)o Legal Mandates of Implementing Agencies (Republic

Acts)o Sectoral Regulatory Agencies (Republic Acts and

Executive Issuances)

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CA 146, as amended (Public Service Act)Limits foreign equity to 40% for operation of public utilities

RA 8179 (Foreign Investments Act of 1991)Provides regulations on foreign exchange transactions

RA 4860 (Foreign Borrowings Act of 1966)

EO 226, as amended (Omnibus Investments Code of 1987)Provides fiscal incentives

RA 8974 (Acquisition of ROW)

RA 7160 DILG (Local Government Code)

MC 2011-16 (PPP Sub-Committee in the LDC)

Other Related Laws

www.ppp.gov.ph

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Institutional Set-up

www.ppp.gov.ph

Contracting Parties/Implementing Agencies Line Agencies (national agencies) Government Corporations Local Government Units

Other National Agencies Concerned Line Agencies/ Departments (policymaking) National Regulatory Bodies Sectoral Regulators (e.g. toll regulatory board)

Review and Approving Bodies Inter-Agency Investment Coordination Committee NEDA Board Local Government Councils

Coordinating and Monitoring Agency Public-Private Partnership Center

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Eligible Types of Projects

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SOLICITED

refers to projects identified by an agency/LGU as part of the list of priority projects

Government undertakings are allowed

refers to project proposals submitted by the private sector, not in response to a formal solicitation/request issued by an agency/LGU

Involves new concept or technology and/or is not part of the list of priority projects

No direct government guarantee, subsidy or equity is required

Should undergo COMPETITIVE CHALLENGE

UNSOLICITED

PPP Modes of Procurement

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BOT (and its variants)BOT (and its variants)

Private partner finances, constructs and, in some cases, operates and maintains a facility or project

Private partner allowed to charge user fees to recover its investment

IA and private partner share project risks

• BBuild-and-Transfer (BT)• Build-Lease-and-Transfer (BLT)• Build-Operate-and-Transfer (BOT)• Build-Own-and-Operate (BOO)• Build-Transfer-and-Operate (BTO)• Contract-Add-and-Operate (CAO)• Develop-Operate-and-Transfer (DOT)• Rehabilitate-Operate-and-Transfer (ROT)• Rehabilitate-Own-and-Operate (ROO)

PPP Contractual Arrangements

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PPP Contractual Arrangements: BOT VARIANTS

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PPP Contractual Arrangements: BOT VARIANTS

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www.ppp.gov.ph

Service ContractService Contract• IA procures a private entity to carry out one or more specified

task/s or service/s for a fixed period, typically 1-3 years for a fixed cost

• IA control remains

Management ContractManagement Contract• IA hires private entity for the daily operation and management of

a particular task or service• IA ultimately remains responsible for service provision

Lease ContractLease Contract• Private partner is responsible for service provision in its entirety• Private partner bears financial risk of Operation and

Maintenance (O&M)• IA retains ownership of the facility/infrastructure

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www.ppp.gov.ph

ConcessionConcession• Private partner is responsible for capital investment and full

delivery of services, including O&M, collection, construction/rehabilitation of the infrastructure facility or system

• IA retains ownership of the public assets during concession period

Joint VentureJoint Venture• IA and private partner pool resources (money/capital, services,

assets) to pursue a specific infrastructure facility or project • IA and private partner share in the profits, losses and risks

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Private Sector Returns

www.ppp.gov.ph

Right of Private Partner to Collect Private partner is allowed to recover investments through

tolls, fees, rentals, and other charges from the users of the PPP project facility

Rate of Return BOT Law entitles the private partner to reasonable return

to his investment capital Return should reflect the prevailing cost of capital in

domestic and international markets For negotiated contracts which are public utilities and

monopolies, the return is determined by existing laws, which in no case to exceed 12% on rate base

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Cost Sharing provision of access infrastructure Right of Way (ROW) Transfer of Ownership/usufruct/possession of land, etc. Partial Financing (50%)

Credit Enhancements

Direct Government Subsidy Defray/pay/shoulder portion of project cost or expenses in

operation or maintenance Condone or postpone payment Contribute property/assets Waive/Grant special rates on real property taxes (LGUs) Waive charges/fees on business permits/licenses

Government Support for PPPs

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Government Support for PPPs

www.ppp.gov.ph

Strategic Support

Fund (SSF)

Project Development

Monitoring Facility (PDMF)

IDCA Panel of Firms

CPCS Transcom Ltd. ● Deloitte Touche Tohmatsu India Pvt. Ltd. ●Ernst & Young Australia Infrastructure Advisory ● Hill International SA ● ICRA Management Consulting Services Ltd. ● Manabat Sanagustin &

Co., CPAs ● PricewaterhouseCoopers Services LLP Singapore ● Rebel Group International BV ● SMEC International Pty Ltd. (SMEC),

Australia IMC Worldwide Ltd. ● MMM Group Limited ● Ove Arup & Partners Hong Kong Ltd. ● PARY & Co., Chartered Accountants ● Punongbayan & Araullo ● Feedback Infrastructure Services Pvt. Ltd.

Right of way acquisition (ROWA) and related costs (including resettlement)

Costs of designing, building and otherwise delivering any part of the project

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PDMF FUNDS AVAILABLE: USD 7M initial contribution from the Philippine Government USD 6M contribution from the Australian Government (administered by ADB) USD 9M additional contribution from the Australian Government (administered by ADB) USD 11.5M counterpart contribution of the Philippine Government

PHILIPPINE PPP PROGRAM: PHILIPPINE PPP PROGRAM:

THE PPP CENTERTHE PPP CENTER

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The PPP Center

www.ppp.gov.ph

Executive Order No. 8 signed on September 9, 2010:

BOT Center renamed as PPP Center

Expanded mandate: BOT Law Joint Venture arrangements Other PPP arrangements

PPP Center to: o Provide advisory serviceso Facilitate development of PPP projectso Capacitate national and local implementing agencieso Advocate policy reformso Monitor implementation of PPP projects

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PPP Center Services

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Capacity Development

Pre-investment financing (PDMF)

Advisory services (legal, technical, financial matters)

• Preparation of PPP transaction documents (bid documents, draft contract, etc)

•Monitor project implementation and contract compliance

•Participate as non-voting observer of BAC •Provide advice during procurement process

The Role of the PPP Center

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IMPLEMENTATON IMPLEMENTATON PROCESSPROCESS

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www.ppp.gov.ph

PPP Process Framework

Development

Development

ApprovalApproval

CompetitionCompetition

CooperationCooperation

Project Identification

Project Identification

Project Preparation

Project Preparation

Contractual Considerations

Contractual Considerations

Contractual ArrangementContractual

ArrangementNEDA ICC

NEDA BOARDNEDA ICC

NEDA BOARD

Tariff SettingTariff Setting Independent RegulatorIndependent Regulator

Bidding/Solicitation of Comparative ProposalsBidding/Solicitation of Comparative Proposals

Award/Construction/Development of Facility Award/Construction/Development of Facility

Concession/CooperationConcession/Cooperation Facility Users/PublicFacility Users/Public

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• Project Identification• Completed Feasibility Study• Right of Way Acquisition (ROWA) Plans• Draft PPP agreement• Proposed risk allocation• Valuation of direct and contingent

government support• Implementation plan with

organizational & administrative requirements

• Project Identification• Completed Feasibility Study• Right of Way Acquisition (ROWA) Plans• Draft PPP agreement• Proposed risk allocation• Valuation of direct and contingent

government support• Implementation plan with

organizational & administrative requirements

ProponentProponent

Implementing Agency/GOCCImplementing Agency/GOCC

Activities/OutputActivities/Output

PHASE 1: Development

www.ppp.gov.ph

FACTORS TO CONSIDER IN SELECTING

• Commercial sustainability• Potential development impact• Moderate complexity• High operating costs relative to total

project costs• Other planning and policy inputs

based on development plans

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www.ppp.gov.ph

PHASE 2: Approval/Review

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• IAs/GOCCs evaluate project proposal• Approving body to recommend Rate of Return (ROR)• Negotiation and Contract Approval

Solicited Proposals (6 months)

Unsolicited Proposals (9 months or more)

• Pre-qualification • Qualification Procedure

PHASE 3: Competition

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PHASE 4: Cooperation

www.ppp.gov.ph

The life of the PPP during Cooperation Period involves: Implementation and operation of the project by the

private sector Performance monitoring and contract enforcement

by the IAs/GOCCs

Basic components of this phase may include: Pre-Construction Construction Operation and Maintenance (O & M) Asset Transferring/Turn-over

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UPDATES AND RECENT UPDATES AND RECENT DEVELOPMENTSDEVELOPMENTS

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PPP Achievements

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PPP Achievements

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PPP Achievements

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Thrusts & Priorities

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www.ppp.gov.ph 37

Pipeline of PPP Projects

www.ppp.gov.ph

TRANSPORTATION 8 projects | USD 1.88B

ROAD NETWORK4 projects | USD 1.29B

WATER SECTOR3 projects | USD 1.08B

LGU PROJECTS2 projects | 6.28M

AGRICULTURE 2 projects | USD 186.9M

EDUCATION1 project | USD 233M

HEALTH SECTOR2 projects | USD 126M

*Project Costs of O&M of LRT-2, O&M of Puerto Princesa, ITS, Bulacan Bulk Water, El Nido Project= TBD

TOTAL PROJECT COST: aprx. USD 4.80B*

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STATUS OF PPP PROJECTS as of September 18

*Approved PDMF Support

PROJECT INDICATIVE COST (USD)

STATUS

PPP for School Infrastructure Project Phase I*

239.0M Project awarded to private sector proponents

LRT Line 1 Cavite Extension and O&M 1.4B Bidder due diligence ongoing

NAIA Expressway Phase II 377.6M Bidder due diligence ongoing

Modernization of Philippine Orthopedic Center*

128.3M Approved by the NEDA Board

NLEx-SLEx Connector 480.5M For Submission to ICC

Vaccine Self-Sufficiency Project Phase II* 11.3M In the process of securing Government approvals

Cavite-Laguna Expressway 468.8M In the process of securing Government approvals

O&M of Angat Hydro-Electric Powerplant Turbines 4&5*

38.1M On-going ICC Project Review

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STATUS OF PPP PROJECTS as of September 18

*Approved PDMF Support

PROJECT INDICATIVE COST (USD)

STATUS

Automatic Fare Collection System* 42.9M For submission to NEDA

Mactan Cebu International Airport Passenger Terminal Building*

241.7M For submission to NEDA

Enhanced O&M Panglao Airport* 190.5M Finalization of Project Structure On-going

O&M of Laguindingan Airport* 42.9M Finalization of Project Structure On-going

Grains Central Project 29.8M Ongoing Preparation of Feasibility Study

Establishment of Cold Chain Systems* 121.2M Ongoing Preparation of Feasibility Study

O&M of LRT Line 2 TBD Ongoing Preparation of Feasibility Study

O&M of Puerto Princesa Airport TBD Ongoing Preparation of Feasibility Study

Talisay City Plaza Complex Heritage Restoration and Redevelopment Project

6.28M Ongoing Business Case /Feasibility Study

Integrated Transport System* TBD For procurement of Transaction Advisor

New Centennial Water Supply* 595.2M For procurement of Transaction Advisor

Bulacan Bulk Water Supply Project* TBD For procurement of Transaction Advisor

Rehabilitation of Quirino Highway Project*

TBD For procurement of Transaction Advisor

El Nido Solid and Liquid Waste Management Facility*

TBD For procurement of Transaction Advisor

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PPP IN LGUs PPP IN LGUs

PPP Capacity Building Program

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PRE-IMPLEMENTATION IMPLEMENTATION

EXITEXIT

INTRODUCTION/ INCEPTION:

PPP: What and Why

Needs Analysis

Options Analysis

Economic Valuation

Policy & Institutional Setup

PLANNING/ IDENTIFICATION/ STRUCTURING/ APPROVALS

Project Identification & Plan (Pre-FS/FS)

Project Preparation/ Structuring

Review and Appraisal Processes/Requirements

Procurement Documents Preparation

Procurement Plan

PROCUREMENT AND AWARD

Invitation and Prequalification

Transparency and Competitive Requirements

Evaluation, Review, and Selection

Negotiation and Award Processes

IMPLEMENTATION/ MONITORING AND EVALUATION

Construction and Commissioning

Contractual Compliance, Monitoring & Evaluation

Risk Monitoring & Mitigation

Project Management

Progress Reporting

DELIVERYDELIVERYDEVELOPMENTDEVELOPMENTPHASE IIIPHASE IIIPHASE IIPHASE IIPHASE IPHASE I

www.ppp.gov.ph

LGU PPP Manual Vols. I-III

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The LGU PPP Manual is envisioned as a tool that should guide its users in developing infrastructure projects using PPP processes.

VOLUME 1: Understanding PPP Concepts and Framework. Overview of PPP concepts and framework in the context of local development finance

VOLUME 2: Developing PPP Projectsfor Local Government Units. Comprehensive step-by-step process on PPP project preparation and development

VOLUME 3: PPP Project Templates and Bid Documents. Compilation of template documents and sample projects on PPP at the local level

www.ppp.gov.ph

Establishing Template Assistance for LGUs

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www.ppp.gov.ph

Success Story: Case of Bohol— BOHOL WATER SUPPLY SYSTEM PROJECT

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IMPLEMENTING AGENCIES:Provincial Government of Bohol and the consortium of Salcon International, Inc., Salcon Power Corporation, and Pure and Pam, Inc. (Consortium).

RATIONALE: Project was driven by the need to improve the efficiency through reduction in system loss and increase in the capacity of Provincial Waterworks System to meet the growing demands for potable water.

ESTIMATED PROJECT COST: PHP 967M

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PROJECT OBJECTIVES: Ensure adequacy and sustainability of water supply

with the end goal of stimulating economic growth by creating an investment-ready environment

Reduce system loss, thereby improving the financial viability of both utilities

Improve the health an well-being of the people, by providing quality water in compliance with world health standards

Develop reliable and safe water sources to meet future demand

Expand water service to a bigger area outside of Tagbilaran City

PPP STRUCTURE: Joint Venture Agreement

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SUCCESS STORY: In 1998, recorded system loss reached an average of 29%. The Project has

aimed to reduce that to 20% at the end of Phase 1. As of June 2012, system loss is at 20.30% which is below the industry standard at 25%.

Daily water production and system capacity has continuously exceeded the daily water demand.

The annual subsidy was eliminated and the Province used this additional money (freed-up money) to fund other priority projects.

Growth in tourism-related investments is fuelled by the fact that investors are now assured of a stable water supply, improve efficiency in service delivery and improve water quality.

www.ppp.gov.ph

“…these (PPP) projects promise so much for our economy and for the Filipino people, and they (private partners) will play a vital role in our administration's fulfillment of our Social Contract with our people.”

--President Benigno S. Aquino III

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THE PHILIPPINE THE PHILIPPINE

PPP PROGRAMPPP PROGRAM

THANK YOU!

PROJECT PROJECT INDICATIVE INDICATIVE COST (USD)COST (USD) DESCRIPTIONDESCRIPTION

LRT Line 1 South Extension

1.37B

The proposed alignment for the LRT 1 South Extension has an approximate length of 11.7 km from its tie in point at the terminus of LRT Line 1 at the Baclaran Terminal, to the Niyog Station at Bacoor, Cavite, of which approximately 10.5 km will be elevated and 1.2 km will be at-grade. The total length of the integrated LRT Line 1 will be approximately 32.4 km.

LRT Line 2 Operation & Maintenance

TBD

Operation and Maintenance of the existing LRT Line 2 and the proposed 4 km extension from Santolan, Pasig to Masinag, Antipolo. The existing 13.8 km Line 2 runs along the Recto Station in Manila to the Santolan Station in Pasig, along Recto Avenue, Magsaysay Boulevard and Marcos Highway.

Operation & Maintenance of the Laguindingan Airport

41.71MOperation and maintenance of the newly constructed international-standard airport in Laguindingan, Misamis Oriental.

Enhanced O&M of New Bohol (Panglao) Airport

TBD Operation and Maintenance of the New Bohol (Panglao) Airport.

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PROJECT PROJECT INDICATIVE INDICATIVE COST (USD)COST (USD)

DESCRIPTIONDESCRIPTION

Mactan Cebu International Airport Passenger Terminal Building

235.20MConstruction of a new world-class passenger terminal building in Mactan, Cebu International Airport with a capacity of about 8 million passengers/year.

Operation and Maintenance of the Puerto Princesa Airport

TBD

The project involves the privatization of the operation and maintenance of the airport. The existing Puerto Princesa Airport will be upgraded/ improved into an international gateway meeting standards of the International Civil Aviation Organization (ICAO).

Automatic Fare Collection System

41.71M

Decommissioning of the old magnetic-based ticketing system and replacing the same with contactless-based smart card technology on LRT Lines 1 and 2 and MRT 3, with the introduction of a centralized back office that will perform apportionment of revenues.

Integrated Transport System (ITS) Project

TBD

The project will establish three (3) mass intermodal terminals at the outskirts of Metro Manila – one in the north (of EDSA) serving passengers to and from northern Luzon, and two in the south serving passengers to and from Laguna/ Batangas side and those to and from the Cavite side. The terminals will connect passengers from the province to other urban transport systems– railway, city bus, taxi, PUV-serving inner Metro Manila.

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NLEX-SLEX Connector

467.63M

Construction of a 13.4 km. 4-lane elevated expressway over the Philippine National Railway (PNR) right of way which starts at Caloocan City and ends in Buendia, Makati City. The project will connect North Luzon Expressway (NLEX) and South Luzon Expressway (SLEX) to decongest traffic in Metro Manila.

NAIA Expressway Phase II Project

365.44M

The proposed elevated expressway starts at the existing Skyway then generally follows the existing road alignment over Sales Avenue, Andrews Avenue, Domestic Road and NAIA Road and has entry/exit ramps at Roxas Boulevard, Macapagal Boulevard and PAGCOR City. The project provides access to NAIA Terminals I, II, and III and links two existing expressways namely the Skyway and Manila-Cavite Toll Expressway.

CALA Expressway (Cavite and Laguna Side)

456.27M

Involves the construction of two expressways. One is on the Cavite Side which is a 27.5km, 4-lane highway from the terminus of R-1 Expressway in Kawit, Cavite to Aguinaldo Highway at Silang, Cavite. For the Laguna Side, this will involve the construction of a 14.3km, 4-lane at-grade expressway. The CALA Expressway will be connected to SLEX near Sta. Rosa, Laguna.

Improvement/ Rehabilitation of Quirino Highway

TBD

The proposed project entails the improvement/rehabilitation and operation and maintenance of Quirino Highway, a 93.45 km., 2-lane national road that traverses three (3) provinces, namely Quezon, Camarines Norte and Camarines Sur. It starts at the junction of the Pan-Philippine Highway in Tabugon, Sta. Elena, Camarines Norte and ends at the junction of the Pan-Philippine Highway in Sipocot, Camarines Sur. 52



New Centennial Water Source Project

579.32M

The project will involve the construction of a dam, a water treatment plan and an associated main pipeline to deliver water from the project location to Metro Manila. This project will provide water supply security in the metropolis.

Operation and Maintenance of Angat Hydro-Electric Power Plant (AHEPP) Auxiliary Turbines 4 & 5

37.08M

The project involves the repair and privatization of the operation & maintenance of the existing auxiliary turbines owned by MWSS which are installed in the AHEPP. These auxiliary turbines contribute 28 megawatts to the Luzon Grid (10 MW from AN-4 & 18 MW from AN-5). The proposed project also entails procurement, installation, operation and maintenance of the second turbine for the Macua mini-hydro power plant.

Bulacan Bulk Water Supply Project

TBD

The project aims to address the water supply requirements of the municipalities of the Province of Bulacan. The project involves the construction of the following: treated water transmission mains, including appurtenances, from the WTPs to the agreed delivery points of the municipalities; water treated plants and ancillary facilities; treated water reservoirs; and pumping stations. This also includes installation of flow metering devices after the WTPs pumping stations, transmission branch points, and at the agreed delivery/ interconnection points; and installation of appropriate pressure monitoring stations.

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Vaccine Self-Sufficiency Project (Phase II)

10.50M

The project is envisioned to accelerate progress in vaccine production in the Philippines, and ensure vaccine sufficiency in the country. VSSP II is expected to reduce overall vaccine procurement costs of finished vaccines through local refilling, labeling, and packaging of the following vaccines: Pentavalent (DPT-HepB-Hib, Diptheria, Pertussis, Tetanus-Hepatitis B and Hemphylus Influenza B), Tetanus Toxoid (TT), Single HepB.

Modernization of the Philippine Orthopedic Center

115.86M

This project involves the construction of a 700-bed capacity super-specialty tertiary orthopedic hospital to be located within the National Kidney and Transplant Institute (NKTI) Compound along East Avenue, Quezon City.

PPP for School Infrastructure Project

232.66M

The project will involve the design, financing and construction of about 9,300 one storey and two-storey classrooms, including furniture and fixtures, in various sites in Regions I, III, & IV-A. The project aims to supplement the current program of the Department of Education in reducing classroom backlog.

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Grains Central Project

28.97M

The project will establish grains bulk handling systems with corn grains processing centers and transshipment stations in major corn producing areas and selected sea ports by upgrading, expanding and enhancing the existing operations in at least fifteen (15) corn postharvest processing and trading centers.

Establishment of Cold Chain Systems Covering Strategic Areas in the Philippines

122.92M

Construction and operationalization of Cold Chain Centers to be located in major production and consolidation areas of agri-fishery products. The Centers will be equipped with the required facilities and machineries for minimal processing of livestock, fisheries and high value crops.

Talisay City Plaza Complex Heritage Restoration and Redevleopment Project

6. 28M

Involves the restoration and redevelopment of the Talisay City Plaza Complex, including the conversion of the Talisay City Central Public Market and the Old Talisay City Hall into mixed-use facilities.

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