SOUTHRAIL PROJECT

SCOPE/DESCRIPTION

• The project will be implemented in two phases, as follows:
  Phase I : Rehabilitation and reconstruction of the existing railway line from Calamba                 to Legazpi City (423 kilometers)
  Phase II : Construction of a new railway extension line from Comun, Camalig, Albay                 to Matnog, Sorsogon (135 kilometers)
• The Project also includes the provision of signal and communication systems and the acquisition of rolling stock.

OBJECTIVES/BENEFITS

• The rehabilitated line will allow train speeds of up to 120 kph in some sections.
• As such, PNR will be able to operate much faster (and therefore competitive), safer, more punctual, and therefore more economical passenger train services to the Bicol region.
• The above, therefore, will spur the economic and social development, boost tourism, and improve the peace and order situation in the Bicol Region.
• Extending the line to Sorsogon will not only benefit the people of Sorsogon but will provide opportunities for a continuous travel from Manila to the Visayas and Mindanao, through the interconnection with the Ro-Ro system between Matnog and Allen, Samar and down to Mindanao.

RIDERSHIP PROJECTIONS

• Under this project, first year of operations will commence two years after the start of the project. This will be along the Manila-Lucena corridor.
• Train services will reach Legazpi after another two years, and will extend to Sorsogon after another two years, and will extend to Sorsogon after another two years, or six years after the start of the project.The above, therefore, will spur the economic and social development, boost tourism, and improve the peace and order situation in the Bicol Region.
• Ridership is projected at 34,220 daily or 12.319 million annually for the first year of operation, increasing to 89,076 daily or 32.067 million when the service reaches Legazpi, and to 109,659 daily or 39.477 million annually when the service is extended to Sorsogon. Ridership increases gradually thereafter.
• Current daily ridership is about 1,000 passengers.
• In addition, 3,779 tons of freight cargo will be transported daily increasing to 6,391 tons daily after two years, and to 7,643 tons when the service reaches Sorsogon.

COSTS AND FINANCING

• Total project cost is estimated at US$932.037 million, broken down as follows:
  Phase I : US$627.811 million
  Phase II : US$304.226 million
• Per utilization, the project cost is broken down as follows:
  Development cost, including Right - of - Way clearance and relocation - US$37.476 million (4.02%)
  Construction works - US$736.249 million (79.00%)
  Acquisition of rolling stock - US$121.500 million (13.04%)
  Contingency - US$ 36.812 million (3.94%)
• 95% of the project cost (US$885.435 million) is proposed to be funded by a loan from the Export-Import Bank of China.
• 5% (US$46.602 million) will be the local counterpart fund, to be funded thru a bond flotation by the National Development Company based on AGRI-AGRA qualification.

FINANCIAL RESULTS

• Given the assumptions in the Feasibility Study of the project (operations, revenue/cost projections, capital costs, financial sources, etc.), the following are the financial results:
  - Phase I : FIRR - 6.53%; WACC - 2.85%
  - Phase II : FIRR - 4.20%; WACC - 2.85%

IMPLEMENTATION

• Memorandum of Understanding (MOU) between PNR and China National Technical Import Export Corporation and China National Machinery Import and Export Corporation, providing for the latter to undertake the Feasibility Study, without cost to PNR, was signed on November 15, 2002.
• Feasibility Study was submitted to PNR on March 17, 2003
• Feasibility Study was approved by the PNR Board of Directors on December 11, 2003
• Feasibility Study was submitted to DOTC for endorsement to NEDA on January 22, 2004
• Feasibility Study was submitted to NEDA on February 11, 2004
• Feasibility Study is being reviewed/evaluated by NEDA
• Endorsement by the Regional Development Council of Region V has been secured. Endorsement by the RDC Region IV-A has been sought.
• In a letter dated 28 December 2004, PNR wrote to the Ambassador of the People’s Republic of China to the Philippines seeking assistance to get a letter from the proper Chinese Government authority that the Government of China is prepared to consider providing suitable financing for the project.

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