the philippine ppp program - unescap.org - the experience of... · issuance of performance...
Post on 17-Nov-2018
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OUTLINE
1. Overview of PPP Projects
2. Financing Case Study: Tarlac-Pangasinan-La Union Expressway (TPLEX)
3. Sources of Financing
4. Domestic Financing: Limitations and Measures to Facilitate
5. Alternative Financing Options
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OUTLINE
1. Overview of PPP Projects
2. Financing Case Study: Tarlac-Pangasinan-La Union Expressway (TPLEX)
3. Sources of Financing
4. Domestic Financing: Limitations and Measures to Facilitate
5. Alternative Financing Options
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PPP PROJECTS STATUS NO. OF
PROJECTS ESTIMATED COST
(in billion USD)
PROJECTS UNDER IMPLEMENTATION
Awarded 10 4.20
Other projects for implementation 2 2.13
PROJECTS IN THE PIPELINE
Project for Awarding 1 .09
Projects under procurement 14 11.46
Projects approved for roll-out 2 2.39
For approval of relevant government bodies 6 3.41
Projects with ongoing studies 4 1.28
For procurement of consultants 7 TBD
Under conceptualization or development 7 TBD
Sub-Total 41 18.04*
TOTAL 53 24.96* *This does not include 18 projects with no estimated costs yet
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OUTLINE
1. Overview of PPP Projects
2. Financing Case Study: Tarlac-Pangasinan-La Union Expressway (TPLEX)
3. Sources of Financing
4. Domestic Financing: Limitations and Measures to Facilitate
5. Alternative Financing Options
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FINANCING CASE STUDY: TPLEX PROJECT BRIEF
Scheme BTO
Project Cost USD 358 Million (as approved in 2010)
Length 88.85 km
Financial Close Y2011: by 3 local banks
Status Y2014: Phase 1 (49.3 km) opened Y2015: Phase 2 (13.72 km) opened Y2016: Phase 3 (25.83 km) expected to be completed
First PPP project in the Philippines to feature an all-domestic cast of sponsors
and lenders
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OUTLINE
1. Overview of PPP Projects
2. Financing Case Study: Tarlac-Pangasinan-La Union Expressway (TPLEX)
3. Sources of Financing
4. Domestic Financing: Limitations and Measures to Facilitate
5. Alternative Financing Options
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SOURCES OF FINANCING PPPs are primarily financed by domestic banks
• Stable macroeconomic fundamentals • High levels of liquidity and low interest rates • Express government commitment to PPP program • Improved capability of domestic banks (availability of longer tenors,
larger SBLs, expertise in project finance) • Lack of alternative options due to institutional and regulatory issues
Issuance of 10-year corporate notes to
local banks
Syndicated loan and security agreement with 6 local banks
Targeting local bank financing
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OUTLINE
1. Overview of PPP Projects
2. Financing Case Study: Tarlac-Pangasinan-La Union Expressway (TPLEX)
3. Sources of Financing
4. Domestic Financing: Limitations and Measures to Facilitate
5. Alternative Financing Options
DOMESTIC FINANCING LIMITATIONS OF DOMESTIC FINANCING
Regulatory restrictions
• Bank lending to a single entity is limited to 25% of bank’s net worth
• Additional 25% SBL limit for PPP projects will expire in December 2016
• Limitation of loans to director, officer, stockholder or related interest (DOSRI) to an amount equivalent to his unencumbered deposits or book value of his paid-in capital contribution to the bank
• Except with prior approval, combined outstanding DOSRI loans and guarantees should not exceed 15% of bank’s total loan portfolio or 100% of bank’s net worth, whichever is lower
Single Borrower’s Limit (SBL)
• Limitation on real estate loans: 20% of loan portfolio
Related Interest Loans
Real Estate Loans
DOMESTIC FINANCING LIMITATIONS OF DOMESTIC FINANCING
Banking practice
• To mitigate appropriations risk, banks often request for issuance of performance undertakings for PPP projects
• While banks now offer longer tenors (10-15 years), there is still a gap in terms of long-term financing (given the long-term nature of the concession agreement, i.e. 25-30 years)
Lack of long-term financing
Performance undertakings
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DOMESTIC FINANCING MEASURES TO FACILITATE DOMESTIC FINANCING
Regulatory support • Additional 25% SBL limit for PPP projects
Provisions in Concession Agreement
• Step-in rights • Termination principles • Permitted security interests • Refinancing and securitisation • Deficit payments • Grantor compensation payments
• Active domestic credit market • Involvement of government financial
institutions in PPP advisory and financing Financial institutions
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OUTLINE
1. Overview of PPP Projects
2. Financing Case Study: Tarlac-Pangasinan-La Union Expressway (TPLEX)
3. Sources of Financing
4. Domestic Financing: Limitations and Measures to Facilitate
5. Alternative Financing Options
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ALTERNATIVE FINANCING OPTIONS There is a need to tap alternative financing options given the scale of PPP projects in the pipeline
PPP Projects in the
Pipeline: USD 18.04B+
Laguna Lakeshore Expressway Dike Project USD 2.73 Billion
North-South Railway Project USD 3.79 Billion
NAIA Development Project USD 1.66 Billion
Regional Prison Facilities Project USD 1.12 Billion
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ALTERNATIVE FINANCING OPTIONS
Financial institutions
Capital markets
• International banks: legislative support allowing full entry of foreign banks to the Philippines
• Multilateral banks (ex. ADB, World Bank and IFC): already involved in PPP advisory
• While capital market is still underdeveloped, market activity is picking up
• Bond market: Volume increased from USD40.3B in 2013 to USD45.9B in 2014
• Corporate bond sector is growing faster than government bonds
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Various Initiatives to Develop Capital Markets
Government
• Consultations and roundtable discussions on mechanisms for regulatory support, credit enhancement and rating and tax incentives
Private Sector
• First infrastructure bonds expected to be issued soon
• Philippine Investment Alliance for Infrastructure (PINAI): fund investing in Philippine infrastructure equities
ALTERNATIVE FINANCING OPTIONS
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