NORTH LUZON RAILWAYS CORPORATION

The North Luzon Railways Corporation (NorthRail), a wholly owned subsidiary of the Bases Conversion Development (BCDA), was incorporated on August 22, 1995.

NorthRail's corporate objective is to develop, construct, operate and manage a railroad system to serve Metro Manila, Central and Northern Luzon and to develop, construct, manage, own, lease, sublease and operate establishments and facilities of all kinds related to the railroad system.

NorthRail has an authorized capital stock of P100 million, fully subscribed and paid by BCDA as of 31 December 2002.

In September 1994, a Memorandum of Understanding (MOU) was signed between President Fidel V. Ramos and King Juan Carlos of Spain to jointly develop the rail system to Northern Luzon. Subsequently, a Joint Venture Agreement was executed on 10 June 1885 among the BCDA, the Philippine National Railways (PNR), the Spanish Railways Corporation (SRG), and the Euroma Development Corporation in order to accelerate the development of the infrastructure and the delivery of basic services at a pace synchronized with the vision of Philippines 2000.

In 07 February 1996, an Engineering, Procurement and Construction (EPC) Contract was executed between NorthRail and the SRG which is composed of Construcciones y Auxiliar de Ferrocarriles (rolling stock), Cobra Instalaciones y Servicios (electrification, signaling and communications) and Cubiertas y Entrecanales (civil works). This was terminated on 14 August 1998 as parties could not agree on the Guaranteed Maximum Price.

In 08 February 1996, the JVA was amended to include D.M. Consunji, Inc. (DMCI) as private sector investor. Subsequently, on 17 July 1996, Fort Bonifacio Development Corporation (FBDC) and Metro Pacific Corp. (MPC) were also included as private sector investors.

In 17 July 1996, the NorthRail Board resolved to increase its NorthRail's authorized capitalization. However, in 13 May 1997, the application for the increase in authorized capital stock was withdrawn to comply with Obuchi Fund requirement that the Borrower must be wholly owned by the Philippine Government.

In September 1999, the NEDA-Investment Coordinating Committee (ICC) approved the Manila-Clark Rapid Railway System (NorthRail Project Phase 1 - Caloocan to Calumpit) with Japan Bank of International Cooperation (JBIC Obuchi Fund) as the source of fund. As part of the JBIC requirement, the initial relocation activities were undertaken by NorthRail at Caloocan on November 2000. However, in February 2001, a Presidential Directive was issued declaring moratorium on demolition and relocation activities.

The NorthRail Project was included in the 8-Point Agenda (priority projects) of President Gloria Macapagal-Arroyo. Thus, on 14 September 2002, a Memorandum of Understanding was signed between NorthRail and China National Machinery and Equipment Group (CNMEG) on the updating of the Feasibility Study of the NorthRail Project to incorporate the presidential instruction that the new alignment will be from Caloocan to Malolos, among others.

In 05 August 2003, the NEDA-ICC approved the NorthRail Project Phase 1 Section 1 (Caloocan to Malolos) with the CNMEG proposal as financing facility.

In 19 August 2003, President Gloria Macapagal-Arroyo signed EO 232 directing the Secretary of the Department of Transportation and Communications (DOTC) to exercise primary oversight function over the Northrail project, transferring the Northrail Corporation from the Office of the President to the DOTC, and reorganizing the respective governing boards of Northrail and the Philippine National Railways (PNR). The BCDA remains as an investor of the Northrail.

In 20 August 2003, a Memorandum of Understanding was signed between the Department of Finance and the Export-Import Bank of China for the utilization of US$400 million for the construction of the NorthRail Project Phase 1 Section 1.

It is expected to accelerate development in the region by interconnecting and improving access to major transportation facilities in the Manila-Clark-Subic economic triangle.

Project Description:

The 32.2-kilometer project is being implemented by the North Luzon Railways Corporation. Construction of the NorthRail is being undertaken by the China National Machinery Group (now known as SINOMACH) and is expected to be completed in three years.

The components of the project are:

• Phase I - 80-kilometer rail line between Caloocan City in Manila to the Diosdado Macapagal International Airport (DMIA) at the Clark Special Economic Zone (CSEZ) in Pampanga;
• Phase II - branch line to Subic Freeport Zone;
• Phase III - extension to Bonifacio Global City
• Phase IV - extension to Poro Point in San Fernando, La Union

The initial phase of the Northrail Project entails the reconstruction and upgrading of the line from the existing Caloocan Station to the DMIA at the CSEZ. This was born out of a plan to reactivate rail service to the North to develop the CSEZ as Asia-Pacific's regional transshipment logistics hub. Phase I is further divided into two sections: Section 1 from Caloocan to Malolos and Section 2 from Malolos to DMIA. Construction of Section 1, Phase 1 began in October 2006 following the successful relocation of almost 20,000 project-affected families occupying the site of the Philippine National Railways (PNR).

Features:

The Project entails the following features and estimates:

Type of trains	Diesel Multiple Units (DMUs)
Number of DMUs	21 DMUs
Number of Tracks	Double track (separate tracks for north and south bound trains to allow for simultaneous operation)
Track Gauge	Narrow gauge (1067 mm gauge similar to existing track gauge of the South Rail to allow for interconnection/connectivity of the North and South Rail Projects) will require Right-of-Way acquisition with width of at least 30 meters (15 meters per track).
Operating Speed	Approximately 80 t0 130 kph (for Inter-Urban Service)
Travel Time	Approximately 32 minutes (with 3 minutes headway)
No. of Stations & Depot	6 train stations (Caloocan, Valenzuela, Marilao, Bocaue, Guiguinto, Malolos) and 1 depot in Valenzuela
Estimated daily number of passengers	41,186 passengers per day (based on an estimate that the Northrail System would only be able to attract 25% of total number of commuters estimated at 164,745 passengers commuting daily in the north and south bound directions)
Estimated farebox structure	P10.00 boarding fee plus P1 per kilometer or a total fare of P42.00 from Caloocan to Malolos or vice versa

Funding:

The total cost of the project is $503 million.

• $421 million will be funded by the Chinese government through the Export-Import Bank of China; with an interest rate of 95 percent per annum and repayable in 20 years (inclusive of the 5-year grace period)
• $82 million will be funded by the Philippine Government as counterpart fund and will be used for right-of-way acquisition and relocation; among others.