BOT, BLT, BTO

When a French-led consortium offered to build the next light rail transit system in Manila, it offered to do it on a BLT basis. But the Philippine government said it preferred the BOT structure. As a compromise, both are now talking of a BTO scheme. Confusing? The shifting letters and changing acronyms mean more than merely new names. They signify a shift in government policy on how to finance badly-needed mass transit projects.

Everybody, from proponents to bankers, already know that the BLT - which was the structure of the LRT 3 in EDSA - is on the way out. "The structure of LRT 3 is perceived as very much in favor of the private sector," says a source at the Investment Coordination Committee (ICC), the high level government body that approves infrastructure projects worth US$300 million and more. "Almost all risks were absorbed by the government, including market and operating risks. Even the private group was guaranteed its return to equity. We're trying to move away from all that."

The change in policy was evident when the ICC turned down the proposal of a French consortium to build the LRT 4 line from Lerma in old Manila to Fairview, Quezon City on a BLT basis, but without an LC from a state bank. The consortium was composed of French companies led by Bouygues, Systra-Sofretu-Sofrerail and Javlon Int Phil, together with Ayala Land. Under the BLT, the proponent would build the system, which government would lease for a fixed term, in this case 25 years, and at the end, it would own the system. To make the project acceptable to proponents and lenders, most of the risks were covered by the government, which would pay for the full cost of the project. Initial cost estimate of the 15.1kilometre light rail project is US$580 million.

A study commissioned by the Philippine government and funded...