PROJECT INFORMATION MEMORANDUM

CEBU MONORAIL TRANSIT SYSTEM PROJECT

Project Cost Duration Project Implementing Agency

PhP101.8 billion, including financial 35 years Department of Transportation

charges and at nominal terms, concession period (“DOTr”)
covering civil and structural works,
electro-mechanical works, and other
related costs.

Project Summary

The Cebu Monorail Transit System (CMTS) Project (the “Project”) involves in the development,
design, construction, supply, completion, testing, commissioning, operations and maintenance of
approximately 27-kilometer monorail transit system. The Project is composed of 17.7-km Cebu
Central Line with 14 stations, 9.3-km Cebu Airport Line with 6 stations, and a total of 14.3 hectares
of depot facility close to the proposed Talisay Station and across the Mactan-­‐Cebu International
Airport Terminal 2.

The project was submitted as an Unsolicited Proposal under the Public-Private Partnership (“PPP”)
framework by the Sugbu Metro Rail (“the Proponent”), a consortium of Udenna Infrastructure
Corp. (“UIC”) and the Intrec Asia Rail and Infrastructure Pte. Ltd. UIC is the construction and
infrastructure holding company of the Udenna group.

1
IMPORTANT NOTICE

All inquiries relating to this ‘Project Information Memorandum (“PIM”)’ must be directed to the
Proponent. No other person is authorized to give any information about or to make any
representations on behalf of the “Proponent” in connection with the Transaction. If any such
information is given or made, it must not be relied upon as having been authorized by the
Proponent. The information contained herein is accurate as of the date hereof and is subject
to change, completion and amendment without further notice. The delivery of this PIM shall not
imply that there has been no change in the Proponent’s affairs or that the information set forth
herein is correct as of any date subsequent to the date hereof.

By accepting this PIM, the recipient acknowledges and agrees that all information contained
herein, and all other information provided by the Proponent, or the Company related thereto is
subject to the terms of the confidentiality agreement previously executed by the recipient
regarding this Memorandum. Without limiting the generality of the foregoing, (i) the recipient
will not reproduce this Memorandum, or such other information, in whole or in part, and will
use this Memorandum and such other information solely for purposes of evaluating the
recipient’s interest in investing into the Company and (ii) if the recipient does not wish to pursue
this matter, the recipient will promptly return this Memorandum and such other information, if
any, to the Proponent, together with any other materials relating to the Proponent which the
recipient may have received from the Proponent, or their respective affiliates, directors,
officers, employees, representatives or agents, as well as any notes or written materials
prepared by the recipient.

The contents of this PIM are not to be construed as legal, business or tax advice. Each reader
of this PIM should consult with his or her own legal, business or tax advisor as to legal, business
or tax advice. If you are in any doubt about the contents of this PIM you should consult your
own professional advisors including stockbroker, bank manager, lawyer, accountant or any
other you deem appropriate. The distribution of this PIM in certain jurisdictions may be
restricted by law. The Proponent requires persons in possession of this PIM to inform
themselves about, and to observe, any such restrictions.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING INFORMATION

This project may include forward-looking statements regarding the Company, including
projections and expectations, which involve risk and uncertainty. When used in this document,
the words “anticipate”, “believe”, “estimate” “expect” and similar expressions, as they relate to
the Company or its management, are intended to identify forward-looking statements. Such
statements are included without any guarantee as to their future realization.

Although the Company believes that the expectations reflected in such forward-looking
statements are based on reasonable assumptions, no assurance can be given that such
projections will be fulfilled. Any such forward-looking statement must be considered along
with knowledge that actual events or results may vary materially from such predictions due
to, among other things, political, economic, financial or legal changes in the markets in which
the Company does business, and competitive developments or risks inherent to the
Company’s business plans. Many of these factors are beyond the Company’s ability to control
or predict. Given these uncertainties, readers are cautioned not to place undue reliance on
any forward-looking statements.

2
Project Information

Project Objectives: • To resolve the current traffic congestion in Metro Cebu;

• To provide a modern, convenient and affordable means of
transport that will complement the other modes of public
transport;
• To reduce the levels of local air pollutants and greenhouse
gases emissions from motor vehicles; and
• To serve the long-term transportation need of a fast growing
and urbanizing Metro Cebu;

Alignment to The Philippine Development Plan (2017-2022) and the Central

National, Regional, Visayas Regional Development Plan (2018-2022) acknowledge the
and Local need to spread the economic growth opportunities more evenly
Development Plans across the country and sectors, including the requirement for
investment in transportation infrastructure in view of the challenges
affecting those living in urban and rural areas in the Philippines.

The Project is expected to complement the Department of

Transportation’s (DOTr) Cebu City Bus Rapid Transit Project with
huge potential for connectivity and integrated fare collection system.

The introduction of rail-based transit system in Metro Cebu was

identified in the Department of Transportation (DOTr)’s National
Implementation Plan on Environment Improvement in the Transport
Sector: Low Pollution-Low Emission, 2012.

3
Proposed Alignment:

Cebu Central Line - 17.7-km with 14 stations

Cebu Airport Line – 9.3-km with 6 stations

Demand Projection:

The ridership estimation process utilized the JICA STRADA-based Metro Cebu Transport
Model (Road and Transit sub-models) from the DOTC-led Development of Public
Transportation Strategic Plan for Metro Cebu (2011) as adjusted/updated using the latest
origin-destination, traffic flow, and trip pattern data from the JICA Project on Master Plan
Study and Institutional Development on Urban Transport System in Metro Cebu (Interim
Report issued in June 2018). The resultant daily ridership projections are as follows:

Annual Ridership, Million Passengers

500
450
400
350
300
250
200
150
100
50
0
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
2044
2045
2046
2047
2048
2049
2050
2051
2052
2053
2054
2055
2056
2057
2058

Central Line Airport Line

4
PPP Structure:

The Project will be undertaken using a Build-Transfer-Operate-and-Maintain scheme (“BT-

OM”), a hybrid of the Build-and-Transfer and Build-Operate-Transfer schemes provided for
by the BOT Law.

In the hybrid contractual arrangement of BT-OM, the Proponent shall cause the financing,
design, construction, supply, completion, operation, maintenance, and management of the
Project. The National Government shall be making annual amortization payments to the
Proponent for the transfer of ownership of the infrastructure facility, and all systems.
Proponent, on its own or upon appointment of a Facility Operator, shall operate and maintain
the Project for the rest of the Concession Period.

The Proponent will finance the Project through equity and debt financing in accordance with
existing Bangko Sentral ng Pilipinas (BSP) regulations on foreign financing components.

Development Rights:

The Concession Agreement (“CA”) enables the National Government to grant the Proponent
exclusive commercial development rights, including the right to lease/sublease components
of the project site to other entities. In addition, the Proponent is not precluded from collecting
and receiving revenue generated by advertising activities, naming rights, installation of cables,
telephone lines, fiber optics, water mains, water lines and other commercial ventures within
the project area outlined by the CA.

Project Economic Benefit Indicators:

The Project is expected to benefit passengers through time and cost savings resulting from
the efficient and reliable service to be provided by the monorail. Due to the reduction in vehicle
usage, the corresponding corridors that will be traversed by the project will be decongested
and consequently, savings in vehicle operating costs will also be realized.

Economic analyses of the project show the following indicators:

NPV (at 10%) = PhP18,956m

EIRR = 13.4%

Project Status:

• Original Proponent Status conferred by Department of Transportation (DOTr) to the

Proponent on December 13, 2018.
• For submission of complete and updated proposal based on the new BOT IRR

5
Financial Analysis:
Key Highlights
 Stable cash flows owing to a government-backed amortization payment accruing to the
Proponent in the first 15 years of operation.
 Growing ridership on the back of a robust domestic economy in Cebu City and the
whole Cebu province.

Project Cost
The total project cost required to construct the monorail asset is estimated at PhP139.2 billion.
Nominal cost estimates encompass pre-development costs, civil works, rolling stock,
electromechanical supply and other equipment required to operate a monorail system.
A breakdown is presented below:

Project Cost (in PHPm)

Pre-dev't and other costs 4,417
Electromechanical Systems and Rolling Stock 30,884
Civil works 51,379
IDC 8,691
Upfront Fee, DST, Commit. Fee 2,680
Pre-funded WC facility 476
DSRA 3,308
Total Project Cost 101,837

Revenue
The major components of project revenue are farebox revenue, amortization payment and non-
farebox revenue.
Farebox Revenue
The fare setting principle adopted for the project is one that considers public acceptability while
keeping the project financially viable. It should meet the appropriate level of competitiveness
as long as the expected returns are met. The fares of the existing transport modes along the
proposed project corridor are also considered in the establishment of the base fare for the
project.

The fare structure to be adopted for the project is as follows:

2028 Fare Structure Central Line Airport Line

Boarding fare PHP/pax 29.85 29.85
Additional fare per km PHP/km 2.39 2.39
Avg. trip length per pax Km 6.98 5.05
Total fare PHP/pax 46.52 41.91

6
Upon commencement of commercial operations until the end of the concession period, the
proposed base fare is expected to increase every three (3) years based on the following
formula:

𝑇𝑇𝑇𝑇𝑛𝑛 = � 𝑇𝑇𝑇𝑇𝑛𝑛−1 ∗ (1 + 𝑥𝑥)�

Where:
TRn = Adjusted Fare
TRn-1 = old Fare as of the last periodic adjustment
x = Fixed percentage increase in fare
𝑥𝑥 = (1 + 4%)3

To illustrate, the base fare in 2037 is presented below.

2037 Fare Structure Central Line Airport Line

Boarding fare PHP/pax 38.95 38.95
Additional fare per km PHP/km 3.12 3.12
Avg. trip length per pax km 6.98 5.05
Total fare PHP/pax 60.70 54.68

Amortization Payments
The Proponent is entitled to an amortization payment that will be paid by the National
Government of the Philippines thru the Department of Transportation (DOTr) as the
implementing agency. The proposed amortization payment is derived by estimating the
required total capital expenditure and financing costs which is then converted into an annuity
stream over a period of 15 years for Phase 1 and 10 years for Phase 2 at a rate of return of
7.18% and 6.84% respectively.
Based on preliminary estimates submitted to Department of Transportation (DOTr), total
required capital expenditure and financing cost (sans reserve accounts) totals to PhP101.8
billion. Using a rate of return of 7.23% for Phase 1 and 7.02% for Phase 2, the amortization
payment is calculated at PhP9,360 million per annum, for Phase 1 for a duration of fifteen (15)
years and PhP433 million per annum, for Phase 2 for a duration of ten (10) years.

Non-Farebox Revenue
The Project is expected to generate revenue streams outside the farebox collection and
amortization payments thru indoor & outdoor station ads, transit ads, innovative / digital ads,
air rights, naming rights and land lease.
The base assumption is pegged at 1% and maximum of 2% of total farebox revenue.

7
A summary chart of total revenue break-up follows:

Annual Revenues, PhP Million

60000

50000

40000

30000

20000

10000

0
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
2044
2045
2046
2047
2048
2049
2050
2051
2052
2053
2054
2055
2056
2057
2058
Farebox Revenue Non-farebox Revenue BT payments

Farebox revenue makes up about 77.7% of total revenue, while the amortization payment and
non-farebox revenue account for 20.9% and 1.4% of total revenue, respectively.

Expenses
Expenses required to operate and maintain the asset for a period of thirty-five (35) years have
been estimated based on quotations received from equipment suppliers and current market
rates of labor and utility costs. The major components of opex are the monorail system’s
periodic / heavy maintenance expenses, power supply, manpower-related expenses, taxes
and concession fees. For all monorail lines, the total Operation and Maintenance (O&M) Cost
on initial year of operation is estimated at PhP1,879 (Taxes and Concession fees), PhP907
million (Manpower), PhP1073 million (Maintenance cost), PhP361 million (Power Supply),
PhP682 (Insurance), PhP24 million (Miscellaneous Expenses) for a total of PhP4,926 million,
with annual increase pegged at 4.0% and 2.8% p.a. (inflation based) for the local and foreign
cost components, respectively.

8
 Annual Expenses, PhP Million
12,000

10,000

8,000

6,000

4,000

2,000

-
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
2044
2045
2046
2047
2048
2049
2050
2051
2052
2053
2054
2055
2056
2057
2058
Maintenance Power Supply Manpower
Miscellaneous Expenses Insurance Taxes and Concession Fee

EBITDA and Net Income Margins

Both EBITDA and net income margins are relatively stable during the first fifteen (15) years of
operations due to the amortization payment providing a constant steam of inflows. In the year
that immediate follows the final amortization payment, both margins take a dip prior to steadily
picking up until the end of the concession period.
The farebox ratio (total farebox revenue / total operating costs) of the project is 3.13.

Funding
The total funding requirement for the Project covering pre-development costs, civil works,
electromechanical supply and financing costs amounts to PhP101.8 billion. Funding is
foreseen to be sourced through a combination of both debt and equity. The assumed leverage
ratio of the Project is established at 67.3% bringing the total debt requirement to PhP94.5
billion. The balance funding requirement of PhP40.3 billion, 29.10% will be sourced from equity
and PhP4.1 billion, 3% will come from internal funding.

Sources and Uses during construction period

Sources PHPm Uses PHPm
Debt 68,528 67.3% Development 4,220 4.3%
Equity 29,369 28.8% Construction 78,522 80.6%
3.9% Financing Fees &
Internal funding 3,939 14,680 15.1%
DSRA

SOURCES 139,207 100.00% USES 134,450 100.00%

9
Estimates for the total uses represent all project spend required to bring the project forward
from the pre-development stage into an operational basis. These have been matched with
funding sources drawn in accordance with the assumed gearing ratio.

PHPm
50,000
40,000
30,000
20,000
10,000
-
(10,000)
(20,000)
(30,000)
(40,000)
(50,000)
2024 2025 2026 2027 -
Equipment Civil works Financing
Equity Drawdown Debt Drawdown Other costs

The above chart shows the disbursement of funds and its relevant uses for the duration of the
construction period from year 2024 through 2027.

10
Financing assumptions
The Project assumes a gearing ratio of 70% yielding a total debt requirement of PhP94.5 billion.
Other parameters used in the analysis are presented below:

Funding
Target Gearing 70.00% %
Total Debt Requirement 68,528 PHPm
Loan term 15 years Years
Interest rate 9.00% %
Repayment method Sculpted Option
Target DSCR 1.35x Multiple
Min. DSRA 6 months Months
Grace period 48 months Months
Upfront fee 1.00% %
Commitment fee 1.00% %
GRT (<=5yrs) 5.00% %
GRT (>5yrs) 1.00% %
DST 0.75%

The tenor of the senior debt tranche is assumed at twelve (15) years with a grace period on
principal repayment effective during the construction period. The repayment method assumed
in the analysis is sculpted repayments; whereby repayments are sculpted based on cash flow
available for debt service and the target coverage ratio. Upon commencement of negotiations
with lenders, the proponent will endeavor to raise the maximum level of debt that the project
can handle.
Returns
On the basis of the assumptions elaborated above, the Project and Equity IRR are 15% and
15.3%, respectively.
The Weighted Average Cost of Capital (WACC) estimates are 10.6% and 9% for pre-tax and
post-tax, respectively.

11
Pro- forma Financials

Income Statement
31-Dec-24 31-Dec-25 31-Dec-26 31-Dec-27 31-Dec-28 31-Dec-29 31-Dec-30 31-Dec-35 31-Dec-40 31-Dec-45 31-Dec-50 31-Dec-55 31-Dec-56 31-Dec-57 31-Dec-58

Total revenue - - - - 13,858 16,337 18,980 22,966 28,010 33,209 31,836 42,491 43,467 44,465 49,664

Total operating expenses - - - - (4,926) (5,202) (5,499) (5,977) (6,624) (7,436) (8,442) (9,948) (10,131) (10,320) (11,047)
EBITDA - - - - 8,933 11,135 13,481 16,989 21,386 25,773 23,393 32,543 33,336 34,145 38,617
EBITDA margin - - - - 64.5% 68.2% 71.0% 74.0% 76.4% 77.6% 73.5% 76.6% 76.7% 76.8% 77.8%

Amortization - - - - (3,346) (3,346) (3,346) (3,346) (3,346) (2,444) (2,427) (2,413) (2,410) (2,408) (69)
EBIT - - - - 5,587 7,789 10,134 13,643 18,040 23,330 20,966 30,131 30,926 31,737 38,548
Interest expense - - - - (6,486) (6,121) (5,836) (2,716) - - - -
EBT - - - - (899) 1,667 4,298 10,927 18,040 23,330 20,966 30,131 30,926 31,737 38,548
Income tax - - - - (2,732) (4,510) (5,832) (5,242) (7,533) (7,731) (7,934) (9,637)
Net income (loss) - - - - (899) 1,667 4,298 8,195 13,530 17,497 15,725 22,598 23,194 23,803 28,911
NPAT margin - - - - (6.5%) 10.2% 22.6% 35.7% 48.3% 52.7% 49.4% 53.2% 53.4% 53.5% 58.2%

Cashflow Statement
31-Dec-24 31-Dec-25 31-Dec-26 31-Dec-27 31-Dec-28 31-Dec-29 31-Dec-30 31-Dec-35 31-Dec-40 31-Dec-45 31-Dec-50 31-Dec-55 31-Dec-56 31-Dec-57 31-Dec-58

EBITDA PHPm 8,933 11,135 13,481 16,989 21,386 25,773 23,393 32,543 33,336 34,145 38,617
(-) Taxes paid (2,732) (4,510) (5,832) (5,242) (7,533) (7,731) (7,934) (9,637)
(-) Increase in receivables PHPm (1,732) (310) (330) (59) (256) (82) (89) (556) (122) (125) 5,558
(-) Increase in inventory outstanding PHPm (18) (1) (1) (1) (1) (1) (1) (1) (1) (1) 42
(-) Increase in input VAT balance PHPm (110) (1,458) (4,343) (2,954) 1,488 1,781 2,094 - - - -
(-) Increase in WC facility balance PHPm (476) - - - 476
(+) Increase in payables PHPm 296 8 8 9 11 13 15 17 17 18 (664)
Cash Flow from Operating Activities PHPm (110) (1,458) (4,343) (3,430) 8,966 12,613 15,252 14,207 16,630 19,870 18,076 24,471 25,499 26,103 34,393

Capital expenditure PHPm (2,881) (13,403) (39,070) (29,894) - - - -

Cash Flow from Investing Activities PHPm (2,881) (13,403) (39,070) (29,894) - - - -

Debt drawdown PHPm 2,094 10,403 30,389 25,643 - - - -

Repayments to local debt PHPm (131) (2,127) (4,150) (9,869) - - - -
Interest payments to local debt PHPm (6,486) (6,121) (5,836) (2,716) - - - -
Movement in DSRA PHPm (3,308) (816) (869) (410) (121) - - - -
Equity drawdown PHPm 897 4,458 13,024 10,990 - - - -
Dividends PHPm 653 3,752 1,276 14,136 16,890 15,365 20,800 21,674 22,187 29,234
Cash Flow from Financing Activities PHPm 2,991 14,861 43,413 33,324 (7,432) (8,464) (6,644) (11,429) 14,136 16,890 15,365 20,800 21,674 22,187 29,234

Net Movement in Cash PHPm - 1,534 4,149 8,607 2,778 30,766 36,760 33,441 45,270 47,173 48,290 63,627
Balance Sheet
31-Dec-24 31-Dec-25 31-Dec-26 31-Dec-27 31-Dec-28 31-Dec-29 31-Dec-30 31-Dec-35 31-Dec-40 31-Dec-45 31-Dec-50 31-Dec-55 31-Dec-56 31-Dec-57 31-Dec-58

Assets
Cash PHPm - 1,534 4,378 5,482 7,774 16,097 29,429 43,770 59,836 63,661 67,576 72,735
WC facility PHPm 476 476 476 476 476 476 476 476 476 476 476 -
DSRA PHPm 3,308 4,124 4,993 5,403 6,413 - - - -
Fixed assets PHPm 2,881 16,284 55,354 85,248 81,902 78,555 75,209 58,478 41,747 31,137 18,970 6,878 4,468 2,060 1,991
Trade receivables PHPm 1,732 2,042 2,373 2,871 3,501 4,151 3,979 5,311 5,433 5,558 -
Inventory PHPm 18 18 19 22 25 30 35 40 41 42 -
Input VAT PHPm 110 1,568 5,911 8,865 7,377 5,596 3,502 - - - -
Total Assets PHPm 2,991 17,852 61,265 97,898 97,163 96,059 92,464 76,034 61,847 65,225 67,231 72,542 74,080 75,713 74,727

Liabilities
Trade payables PHPm 296 303 312 356 406 481 550 629 646 664 -
Local debt PHPm 2,094 12,496 42,886 68,528 68,398 66,271 62,121 24,937 - - - - - - -
Total Liabilities PHPm 2,094 12,496 42,886 68,528 68,693 66,574 62,433 25,293 406 481 550 629 646 664 -

Equity
Share capital PHPm 897 5,356 18,380 29,369 29,369 29,369 29,369 29,369 29,369 29,369 29,369 29,369 29,369 29,369 29,369
Retained earnings PHPm (899) 115 662 21,372 32,071 35,375 37,312 42,544 44,064 45,680 45,357
Total Equity PHPm 897 5,356 18,380 29,369 28,470 29,485 30,031 50,741 61,441 64,744 66,681 71,914 73,434 75,050 74,727