AC ENERGY AND MARUBENI PARTNER FOR PHILIPPINES THERMAL PROJECT
AC Energy and Marubeni Corporation agreed to jointly develop a 150MW diesel-run power project in the Philippines. The subsidiaries signed a shareholder’s agreement to jointly own, develop and operate the project, called Ingrid, in the Pililla district of Rizal province.
Marubeni subsidiary Axia Power Holdings will acquire 50% of the stake and economic rights in the thermal power project, while Philippines-based AC Energy will hold the remaining stake and 45% economic rights. Endevor, another subsidiary of AC Energy, will hold the remaining economic rights in the project.
The project is slated to be operational in the first quarter of 2021 and will supply peaking and reserve power to the Luzon grid in the Philippines. AC Energy, which used to own the project, has invested a total of PHP 570m (USD 11.5m) to develop it till date.
PHILIPPINES ENERGY FIRMS' PROFITS TUMBLE AMID PANDEMIC
Philippines energy majors Aboitiz Power and Meralco reported steep declines in H1-2020 profit, with demand stifled by the country's COVID-related lockdown.
Manila-listed Meralco, the country's largest energy distributor by market share, reported a 43% on-year drop in net income to PHP 6.8bn (USD 138m) for the Jan-Jun period. The company flagged a 7% decline in electricity sales, including a 17% drop in demand in the commercial and industrial sector due to quarantine measures imposed by the Philippines government in mid-March. Income was also impacted by a PHP 2.7bn first-quarter impairment on Singapore unit Pacific Light, due to unfavorable conditions in that country's energy trading market. The company claimed force majeure to reduce its purchase of contract capacity from power plants during the lockdown. Savings from the curtailment were valued at more than PHP 1.8bn.
Aboitiz Power, the power division of Philippines conglomerate Aboitiz, said in a stock filing that its net income for H1-2020 fell 57% on year to PHP 3.7bn. Aboitiz Power, which owns a 15% share of the national grid generation, filed that energy sold during H1-2020 declined by 6% to 10,764 GWh. The company flagged a decrease in demand and several power outages in its plants that offset the revenue increase coming from two new plants and other sources of income.
The Philippines' Department of Energy has proposed fines and penalties for energy players that suffer recurrent power outages at their power plants.
MANILA WATER TO ISSUE SUSTAINABILITY BONDS FOR INFRA EXPANSION
Manila Water is set to issue US dollar-denominated bonds to finance and refinance different infrastructure projects. The proceeds of the issuance will be used to refinance debt and finance programmed capital expenditure for 2020 and 2021, including water and wastewater management projects, affordable and basic infrastructure projects, and biodiversity conservation projects.
The notes will qualify as both sustainability bonds from the International Capital Market Association - bond instruments linked to certain sustainability and ESG objectives - and ASEAN sustainability bonds, focused on projects offering environmental and social benefits.
BPI Capital, Citigroup Global Markets Singapore, Credit Suisse (Singapore), HSBC Singapore, Mizuho Securities, and UBS AG Singapore Branch have been mandated as joint lead managers and joint bookrunners for the transaction.
Manila Water is the water supply concessionaire for the Eastern part of Manila. The company runs other water supply projects in the Philippines and owns interests in projects in Vietnam, Thailand, and Indonesia, according to its latest annual report.
MEGAWIDE-GMR EMERGES AS NEW PREFERRED BIDDER FOR NINOY AQUINO INTERNATIONAL AIRPORT
The Department of Transportation, Philippines has awarded the original proponent status to consortium comprising the Philippines construction firm Megawide and Indian conglomerate GMR to upgrade Manila's Ninoy Aquino International Airport (NAIA).
The PHP 102bn (USD 2bn) upgrade of the airport, one of the major infrastructure projects in the country, was expected to be officially awarded during the second quarter of 2020.
The decision arrives after two years of negotiations between the government and a consortium formed by major Philippines conglomerates, which was awarded the original proponent status in 2018, but the original proponent subsequently rescinded since multiple changes were submitted by that consortium.
The original consortium submitted that due to the impact of COVID-19 on passenger traffic, it was necessary to review plans to ensure the project's bankability. However, the Philippines government rejected most of the amendments to the project. In May-20, the number of daily flights at the airport averaged 10 per day, compared with 768 before the pandemic, according to the Manila International Airport Authority (MIAA).
The original consortium comprised:
1. Aboitiz Infracapital;
2. Alliance Global Group;
3. Asia’s Emerging Dragon - part of the LT Group;
4. AC Infrastructure Holdings - part of the Ayala Group;
5. Filinvest Development; and
6. JG Summit Holdings.
In Dec-18, the North Luzon Airport Consortium, comprising Filinvest Development, JG Summit, Philippines Airport Ground Support Solution and a Philippines subsidiary of Changi Airports International, was awarded a 25-year contract for the operation and management of the Clark International Airport, which is in the northern part of Luzon island.
METRO GROUP IN DISCUSSIONS FOR WASTE-TO-ENERGY PROJECT
The Metro Global group of companies had discussions with authorities in Baguio city to develop a waste-to-energy project, which will be built jointly with a bus terminal proposed in Jun-20 by the Philippine construction firm Megawide.
The projects will be partially funded by the firms and a government grant. The project cost has not been determined yet.
Infrastructure investment firm Metro Global Holdings indirectly owns a 29% interest in the Metro Manila LRT-Line 1. In 2018, the firm decided it will expand into renewables and waste-to-energy projects, as per its annual report.
FRANCE'S ADF COMMITS USD 150M TO BOOST PHILIPPINES PPPS
The Agence Française de Développement (ADF) has signed a USD 150m credit facility agreement with the Philippines to boost private sector participation in infrastructure finance. The loan will be used to co-finance the Expanding Private Participation in Infrastructure Program (EPPIP), launched by the Asian Development Bank to promote PPPs in the Philippines.
The loan is being granted to strengthen government support for PPPs, expand and efficiently implement the pipeline of projects and reform the legal and regulatory framework of the sector. The Department of Finance said that it aims to secure a grant from the European Union's Asian Investment Facility to encourage the development of PPP projects.
The additional funding will be channelled through the Philippines' PPP Center and one of its focuses will be the development of the healthcare sector using public-private partnerships, the statement added.
The moves come amid an increased focus on PPPs in the Philippines, where President Rodrigo Duterte launched the “Build, Build, Build” infrastructure program, which currently includes 25 projects, in 2016. The government has stressed the need to use infrastructure to restart the country's economy amid the coronavirus pandemic.
KKR TO BUY 11.9% OF FIRST GEN
Investment firm KKR is set to make its first infrastructure investment in the Philippines with the purchase of
an 11.9% stake in First Gen Corporation. KKR-owned Valorous Asia Holdings will make the acquisition through a voluntary tender offer for a total value of PHP 9.6bn (USD 192m).
First Gen is engaged primarily in the generation of power through renewable energy as well as local energy sources such as natural gas, geothermal energy from steam, hydro-electric, wind, and solar power. It has 3.5 GW of installed capacity, which made up 21% of the Philippines’ total power generation last year.
KKR has increased its focus on the Asia-Pacific region, raising USD 1.76bn in commitments. First Gen is KKR’s third investment across asset classes in the Philippines, following its investments in Metro Pacific Hospitals and in technology company Voyager Innovations.
PRIME INFRA TO INVEST USD 30M IN PHILIPPINES SOLAR PROJECT
Philippines-based Prime Metroline Infrastructure Holdings Corp has agreed to invest PHP 1.5bn (USD 30m) for a 50% stake in a solar park owned by renewables developer Solar Philippines.
The investment will enable Solar Philippines to expand the 150 MW Concepcion solar park, the largest in the country, to a capacity of up to 200 MW.
Prime Metroline, also called Prime Infra, will also develop two other solar power projects with Solar Philippines to service the Luzon and Visayas grids in the country. Through the partnership, the two companies have teamed up for a total of up to 800 MW solar projects in advanced stages of development, and this is the largest solar joint venture in the country.
The transaction is expected to add to Prime Infra's power generation portfolio in the Philippines. The company is developing a 150 MW to 250 MW Chico hydropower project, a run-of river project in Lubuagan, which is in the Kalinga province of the Philippines. Prime Infra is also engaged in construction and water treatment businesses.
MEGAWIDE SUBMITTED BUS TERMINAL PROPOSAL FOR BAGUIO CITY
Philippines developer Megawide submitted an unsolicited proposal to develop a bus terminal in Baguio city, and the company is planning to discuss the project with bus operators in the city.
In Philippines, the original proponent status for the company could be awarded 30 days after receiving the unsolicited proposal, while a Swiss Challenge will be launched within 120 days from when the status is awarded
The project will be in Santo Tomas district in the southern part of Baguio city and will help ease vehicular traffic and reduce pollution.
Construction firm Megawide is currently upgrading and operating the Mactan-Cebu Airport in the Philippines' Visayas region with India's GMR Infrastructure. In 2015, a consortium formed by Megawide and WM Property Management won a PPP to build and operate the Parañaque Integrated Terminal Exchange in Parañaque city.
Baguio is a university town in the northern part of Luzon island with a population of approximately 350,000 people. In Feb-20, the local government signed an agreement with the Philippines’ Public-Private Partnership Center to receive technical assistance for developing new infrastructure projects.
PHILIPPINES PORT OPERATOR POSTPONES USD 90M EXPANSION AMID PANDEMIC
Philippines port operator Asian Terminals will delay its USD 90m expansion projects scheduled for 2020 until next year due to the COVID-19 crisis, as per a stock filing report. The Manila-listed company said that the international container volume of its operational ports suffered a 26% on-year drop during the first four months of 2020.
Asian Terminals operates the Manila South Harbour, the Port of Batangas, and complementary logistics facilities in the country. Manila South Harbour had a container output of more than 1.3 million TEUS in 2019, while the Batangas Container Terminal registered a foreign container throughput of 312,000 TEUS in 2019. The company's net profit in 2019 was PHP 3.7bn (USD 72.3m), a 32% year-on-year increase compared to the previous year.
SUMITOMO ACQUIRES 19.2% STAKE IN MANILA'S LRT LINE
Japanese trading house Sumitomo has acquired an indirect 19.2% stake in the Manila Light Rail Transit System Line 1 for about PHP 3bn (USD 59m).
Philippines conglomerate Metro Pacific Investments Corporation (MPIC) sold a 34.9% stake in its subsidiary Metro Pacific Light Rail Corporation (MPLRC) to the Japanese firm. MPLRC holds a 55% stake interest in Light Rail Manila Corporation, the concessionaire of the railway line. The remaining is held by AC Infrastructure and Macquarie Investment Holdings (Philippines).
The operation of Line 1 is set to benefit from Sumitomo’s global rail expertise. The Japanese firm said that this was its first investment in a passenger railway asset in Southeast Asia and stressed that the Philippines is one of the fastest-growing countries within the region.
Line 1, which is 20km, currently connects Quezon City and Pasay City in northern and southern Metro Manila, respectively.
In 2014, Light Rail Manila Corporation won a bid to build and operate an 11.7km extension of the line. The project has a total cost of PHP 64.9bn, with PHP 19.8bn being financed through official development assistance, according to the Philippines PPP Center.
ADB ISSUES LOAN TO BOOST PHILIPPINES' INFRA FINANCING
The Asian Development Bank has approved a USD 400m loan to boost capital growth and sources of infrastructure financing in the Philippines. The program is set to increase long-term funds for infrastructure through policy reform, according to a concept paper for the project. Among other objectives, the policy changes are aimed at increasing participation from the contractual savings sector - which includes pensions funds and life insurance companies - in infrastructure financing.
The reforms will include:
· Amendment of the charter of the Philippines’ Central Bank to boost financial market stability;
· The creation of a national registry of script-less securities to facilitate the entry of new institutional investors into the government securities market;
· Lowering of barriers to international participation in the capital markets, reducing and rationalizing tax rates; and
· Issuing guidance for local insurance companies to invest in infrastructure projects.
The Bangko Sentral Ng Pilipinas, the Bureau of the Treasury and the Securities and Exchange Commission will be the implementing agencies.
The paper said that the Philippines has been aiming to boost its GDP growth through infrastructure spending in recent years, especially through President Rodrigo Duterte’s “Build, Build, Build” infrastructure program. The program aims to increase public spending on infrastructure towards 7% of the country’s GDP by 2022 and has already been flagged as key for the country's post-coronavirus economic recovery.
PHILIPPINES TO CONSIDER MORE SOLICITED PPPS FOR FUTURE INFRA PROGRAMS
The Government of Philippines has increased focus on PPPs for infrastructure development in the form of solicited proposals, where the government conducts the preliminary studies and then invites interest from the private sector, as per National Economic and Development Authority (NEDA).
NEDA's list of infrastructure projects contains major projects to be carried out under the country's Build, Build, Build programme, which has taken on renewed vigor amid the coronavirus outbreak. The latest published version of the list contains 100 projects, including 29 PPP projects valued at PHP1.7trn (USD 33.4bn) -15 of which are unsolicited proposals, valued at PHP 1.2trn.
Multiple government officials have emphasised the need to accelerate its infrastructure modernization program to get the economy back on track at the earliest. Other measures include passing a new tax stimulus, which includes “flexible tax and non-tax incentives” to attract investors and manufacturing products with strong and inelastic demand, such as those in the food industry.
GOVERNMENT SIGNALS SOFTER STANCE ON MANILA WATER SUPPLY CONCESSIONS TO ATTRACT INVESTORS
In May-20, the Government of Philippines signaled a softer stance to the two Ayala Corporation and Metro Pacific Investments, which hold a stake in water management firms Manila Water and Maynilad, respectively.
Maynilad and Manila Water started renegotiating their contract agreement with the government in January, after an extension in their concession agreements was revoked in Jan-20. Since then, the government had criticized both companies over provisions included in their concession agreements to supply water to Manila, including threats to nationalize both companies.
Analysts have previously seen the attacks on both companies as increasing regulatory risk in the market. In Feb-20, Metro Pacific issued a statement that it would shift away from new investments in infrastructure, as it saw increased risk in long-term contracts with the government.
However, recent statements (including a statement from Presidential Communications Operations Office) indicate that the government will be reasonable in future negotiations with Ayala and Metro Pacific as the government recognizes it will need to attract private investment in the infrastructure sector after the COVID-19 crisis, in order to kickstart the economy.
BAGUIO CITY MARKET PPP
The Philippines' Baguio City will choose one of two unsolicited proposals to proceed with plans to upgrade a local market area. The authorities launch a Swiss Challenge in Jul-20 as per the Public-Private Partnership for the People Selection Committee at Baguio City, and the project will be awarded in latest Q4-2020.
The PPP project received two unsolicited proposals from real estate firms Robinsons Land Corporation and SM Prime Holdings in February. A third proposal did not qualify and was rejected.
Robinsons' proposal had an approximate cost of PHP 5.6bn (USD 110m), while the SP Prime project was valued at around PHP 4.5bn.
The concession period and revenue structure will be negotiated after one of the proponents receives the original proponent status.
Approximately 4,000 vendors of the market have formed a cooperative and are planning to participate in the Swiss Challenge. Other PPP projects in the city that were at an earlier stage of development, including a waste-to-energy facility and a transport project, have been delayed due to the COVID-19 crisis.