Infrastructure & PPPs in Philippines - Q1 2023 Update
PHILIPPINES is embarking on a journey to mobilize finance for infrastructure projects beyond traditional debt finance. Besides use of PPPs as an established modality for project implementation, there are plans to establish a sovereign wealth fund and tap pension funds to meet infrastructure financing needs. There is also a focus to build capacity at local government level to procure PPP infra projects in social sectors like healthcare, waste management etc.
Read more about key developments in Infrastructure and PPPs in Philippines in our latest insight.
PHILIPPINES ACCELERATES MANILA AIRPORT PRIVATIZATION
The Philippines' Department of Transportation (DOTr) is working to accelerate the privatization of the Ninoy Aquino International Airport (NAIA). The process to privatize NAIA, also known as Manila International Airport, will start after rules related to contractual terms are finalized.
The rules of the public private partnership scheme have been revised to allow for disputes to seek arbitration, which will help address any issues. An upgrade would increase the aircraft movement capacity at NAIA to between 50 and 55 per hour from the existing 40 to 44 aircraft movements.
PHILIPPINES GOVERNMENT CONTINUING TO ASSESS REGIONAL AIRPORT PPPS
The Philippines government is continuing to assess unsolicited proposals for regional airport public-private partnerships (PPP). The Philippine transportation secretary, who confirmed that the government received a proposal for the Laguinding an airport in December.
The government is eyeing PPPs for several airports including those in Siargao, Busuanga, Kalibo, Bacolod, Davao, Puerto Princesa, Iloilo, Bohol and Laguindingan. The government is targeting to complete PHP 1 Trn (USD 18 Bn) in regional airport projects in 2023.
NEDA APPROVES PHP 154 BN WORTH OF INFRA PROJECTS IN THE PHILIPPINES
The National Economic and Development Authority (NEDA) has approved plans for seven high-impact infrastructure projects in the Philippines with a combined cost of PHP 154.72 Bn. Some of the key projects includes the Department of Transportation’s (DOTr) New Dumaguete Airport Development Project, under which a new international airport will be built in Bacong, Negros Oriental. The PHP 17 Bn facility will replace the existing Dumaguete-Sibulan Airport. The existing airport is facing physical and operational constraints and the new airport is expected to improve passenger capacity.
PHILIPPINE AGENCY, LOCAL GOVERNMENTS TO JOINTLY FACILITATE PPP LAW
The Philippines’ Public-Private Partnership (PPP) Center and the Union of Local Authorities of the Philippines (ULAP) will coordinate on the PPP Act. The PPP Center will conduct a short briefing on the salient points of the proposed bill.
Local government executives generally support PPPs for their infrastructure projects and want to see the Build-Operate-Transfer (BOT) Law amended. The PPP Act strives to balance the autonomy of local governments to undertake their development strategies and infrastructure agenda with that of the proposed provisions of the Act.
UP-PGH CANCER CENTER APPROVED BY NEDA BOARD
The National Economic and Development Authority (NEDA) Board has approved the University of Philippines-Philippine General Hospital’s (UP-PGH) plans to build a comprehensive integrated 300-bed Cancer Center. The new Cancer Center is a priority thrust of the University of the Philippines which was approved by the UP Board of Regents under the term of President. It is also a part of the 20-year Master Plan of the UP-PGH initiated by its current Director.
The University of the Philippines (UP)-Philippine General Hospital (PGH) Cancer Center PPP project entails the construction of a PHP 6 Bn (USD 111.82 Mn). The Project will be done through a Build-Transfer-Operate (BTO) scheme to help free up fiscal space within the government. Through this arrangement, it is estimated that the government will defray costs and save up to PHP 37 Bn throughout the 30-year cooperation. The Cancer Center, with a lot area of 3,000 sqm, will be located within the UP-PGH campus in Manila.
FIRMS TO DEVELOP AMMONIA CO-FIRING AT COAL PLANT IN QUEZON
Quezon Power (Philippines) Limited Company (QPL) has partnered with South Korea-based Doosan Enerbility Company Limited to develop ammonia co-firing at a coal power plant in Quezon. The partners will conduct feasibility studies on using the technology at EGCO Group’s Quezon power plant to offset carbon emissions at the facility. Ammonia co-firing can be used alongside other alternative energy technologies including renewables, energy storage and carbon capture, utilisation, and storage (CCUS).
This move is in line with EGCO’s mid-term goal of reducing emissions from its power plants by 10 per cent before 2030.
DOTR TO PRIVATISE METRO MANILA LRT-2 ANDMRT-3 OPERATIONS
The Department of Transportation (DOTr) of the Philippines has announced plans to privatise the operations and maintenance (O&M) of Light Rail Transit Line 2 (LRT-2) along with Metro Rail Transit Line 3 (MRT-3). The two lines will be offered as a bundle to private operators. A task force has been created to finalise the contract.
Variation of plans to privatise the urban transit lines includes O&M of both railway systems with the LRT Line 2 extension to Tutuban and Pier 4, O&M and the rehabilitation of light rail vehicles (LRV) or O&M and the LRV replacement.
MRT-3 is currently operated by Metro Rail Transit Corporation (MRTC). The assets will be transferred to the government after the private concession period ends in 2025. LRT-2 is operated by the Light Rail Transit Authority (LRTA), a wholly owned government corporation.
PHILIPPINES PROPOSES SWF TO EASE PUBLIC INFRA FINANCING
Philippines’ first proposed sovereign wealth fund is expected to increase investments for big-ticket infrastructure projects. The Maharlika Investment Fund will serve an additional vehicle to help the government tap surpluses that cannot be used under current legal frameworks. It will be open to co-financing with foreign investors and multilateral institutions to facilitate capital-intensive, significant infrastructure projects, including in roads, green energy, water and telecommunications.
The Philippine government currently uses multiple financing mechanisms for public infrastructure. These include the national budget, public-private partnership arrangements and official development assistance.
CHINESE STATE-RUN CONSTRUCTION FIRM PROPOSES 270 KM PHILIPPINE HIGHWAY
China Communications Construction Company (CCCC) has proposed building a 270 km long highway between Laoag City and Rosario in the Philippines, and has committed more investments to the Southeast Asian nation, particularly through public-private partnerships (PPPs).
The government has changed regulations for the establishment of PPPs to make it more attractive for private corporations, the administration will not limit partnerships to just PPPs. It has also eased rules to allow foreign contractors to bring in their own professionals with the aim of encouraging technology transfer.
PHILIPPINES TO TAP STATE PENSION FUNDS FOR PPP PROJECTS
The Philippines government, through the Public-Private Partnership (PPP) Centre, is considering tapping state-run pension funds Social Security System (SSS) and Government Service Insurance System (GSIS) to invest in PPPs or buy out proponents once it amends rules to allow alternative financing mechanisms to fund the development of big-ticket projects.
SSS, GSIS and possibly the proposed sovereign wealth fund Maharlika Investment Fund can offer staple financing, come in as an equity investor, or provide an exit mechanism to investors of PPP projects. After the usual holding period, state-run funds can come in and buy out existing investors who would want to divest their stake.
Under the lower house version of the proposed PPP Act, private proponents may explore alternative sources of financing such as green financing, corporate or project bonds, securities and other forums of capital market financing.
The proposed law also updates the approval thresholds for national PPP projects. Projects that cost more than PHP 5 Bn (USD 90.5 Mn) will require the approval of the National Economic and Development Authority (NEDA) Board, which is chaired by the Philippine president. Projects worth PHP 3 Bn to PHP 5 Bn only need to be submitted to the NEDA-Investment Coordination Committee (ICC) for approval. Those projects that are worth less than PHP 3 Bn would only require the approval of the implementing agencies. Local PPPs, on the other hand, will be approved by local governments regardless of project cost, as proposed.
PHILIPPINE AUTHORITY SEEKS PRIVATE PARTNER FOR 25 MW SOLAR
The Bases Conversion and Development Authority (BCDA) is looking for a private sector partner for a 25 MW solar project in New Clark City in Central Luzon. The development will cost an estimated PHP 1 Bn (USD 18 Mn).
A plot of land measuring 37 hectares will be offered as a 25-year lease to the developer, which can be renewed for another 25 years. New Clark City is being developed as a sustainable and inclusive city and has various projects in different stages of procurement and development. These include a mixed-use township, a virology and vaccine institute, educational institutions, solid waste and waste-to-energy projects, a data center, affordable housing and multimodal transport stations.
List of key transactions - Philippines Q1 2023
Source: YOG INFRA analysis, Public Information
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