Gov't drops Obuchi Fund plan, picks SNC Lavalin for LRT extensionproject

Government has decided not to avail itself of the Obuchi Fund of Japan for the expansion of the Light Rail Transit (LRT) and has instead taken up the revised offer of the Canadian firm SNC Lavalin.

The Presidential Committee on Flagship Projects (PCFP) has endorsed SNC Lavalin's proposal which reduced the total cost of the project from $620 million to $597 million.

PCFP chairman J. Roberto Aventajado told reporters that Lavalin would now lead the private consortium that would undertake the project, together with Marubeni Corp. of Japan. It was not clear, however, if the AMA Group of Companies would still be the local partner.

Aventajado said that based on the committee's evaluation, the SNC Lavalin proposal was the best for the government despite the fact that the $30-billion Obuchi Fund was a special yen loan package which offered concessionary terms.

According to SNC Lavalin, the capital cost of the project was based on unit prices obtained from local contractors and quotations from international equipment suppliers.

The company said it also considered labor productivity and cost of materials such as concrete, structural steel, reinforcing steel, architectural materials., piping/plumbing, miscellaneous electrical materials and piling.

In its revised cost estimate, Lavalin said $324 million would be for electrical and mechanical works, $250 million would be for civil works and $23 million would be for land acquisition costs.

The PCFP had originally favored the Obuchi Fund for the project, saying that government-to-government financing was the most advantageous since government could avail itself of loans at 0.75 percent interest over a 30-year-old period with a 10-year grace period.

However, the loan is tied to the use of Japanese goods, equipment and technology that would be needed in the project.

"But since Lavalin has revised its proposal and it is more advantageous, we decided to stick to Lavalin," Aventajado said. "Our bottom line is to always get the best deal available."

SNC Lavalin, as the principal proponent, also wanted the project to be a joint venture with the government but it also wanted bigger private participation in the project. This also meant that the group would have to source its financing elsewhere and at commercial rates.

Lavalin said it would be better to avail of the regular loan package which is not tied to Japanese equipment and technology.

When completed, LRT 1 Extension will cover 27 kilometers from Baclaran to Dasmariñas, Cavite. It will serve one of the most congested growth areas south of Manila leading to the Calabarzon area.