Infrastructure & PPPs in Philippines - Q12021 Update
PHILIPPINES has signaled very strong interest in using public-private partnerships (PPP) to develop infrastructure projects as part of its post COVID-19 pandemic economic recovery plan. The country plans to encourage PPPs to continue to develop traditional infrastructure like transport, energy (including renewables), water supply and waste management facilities; along with announcement of multiple healthcare PPP projects to be launched in 2021.
Read more about key developments in Infrastructure and PPPs in Q12021 in Philippines in our latest insight.
PHILIPPINES ROAD PROJECT RECEIVES INTEREST FROM THREE FIRMS
Three companies submitted letters of interest for the PHP 46bn (USD 957m) Metro Cebu Expressway PPP project in the Philippines.
The companies are China Construction First Group Corporation (CCFGC), Singapore-based Intrec Asia Rail & Infrastructure and Metro Pacific Tollways Corporation (MPTC) - a toll road developer owned by infrastructure conglomerate Metro Pacific Investments Corporation (MPIC).In 2019, MPTC and CCFGC submitted unsolicited proposals to the government for the expressway project
The Public Works department in a market sounding event (in Nov’20) said that it was planning to tender the expressway as a PPP project and that construction was slated to start in 2024.
The 56.3km expressway will alleviate traffic congestion in the city of Cebu in the Central Visayas region. It will provide an economic internal rate of return of approximately 17%, and the government is considering providing viability funding to make the project feasible. The busiest section of the highway will have 37,700 vehicles per day by 2040.
Authorities aim to launch a selection process to conduct preparatory studies for the 60km Davao-Digos Expressway in August 2021 as well as the 226km Pacific Eastern Seaboard Expressway in October 2021.
The Davao-Digos Expressway will link Davao city with the Digos-Sultan Kudarat road through the towns of Toril and Santa Cruz, while the Pacific Eastern Seaboard Expressway will start in Atimonan in Quezon province and end at Dingalan in Aurora province.
PHILIPPINES LAUNCHES RENEWABLE ENERGY TENDER
The Philippines invited private companies to develop over 150 MW of renewable energy projects. A total of 22 pre-determined areas have been identified by the government as part of the country's third open and competitive selection process, The projects will be set up in places such as Maricaban Island and Itogon municipality. The developments include 17 hydropower projects with a capacity of 65.4 MW and 5 geothermal power projects with an estimated capacity of 87 MW.
The Department of Energy (DoE) held an event in Jan’21 for the launch and pre-submission of interests from developers for the power projects, which was attended by 114 participants.
PHILIPPINES TO LAUNCH USD 70M ROAD PPP IN Q3/2021
The Philippines plans to launch a tender for the PHP 3.4bn (USD 70m) Kennon road upgrade PPP project in Q3 2021. The final PPP contract is set to be signed with the preferred bidder in August 2022.
The project will involve the reconstruction of the 33km Kennon Road, connecting Rosario to Baguio city, in the northern part of Luzon island. The road is often affected by landslides and rock-falls.The concessionaire, which will operate the asset as a toll road, will need to rehabilitate existing bridges and undertake slope protection work and other engineering measures to prevent landslides onto the road. The road will reduce the travel time from Manila to the city of Baguio from the current five hours to three-and-a-half hours.
PHILIPPINES FLAGS NEW PPP OPPORTUNITIES FOR POST-PANDEMIC RECOVERY
The Philippines has signaled its interest in using public-private partnerships (PPP) to develop new infrastructure as part of its post-pandemic economic recovery plan. The country plans to encourage PPPs to develop waste management facilities, transport and logistics hubs as well as agro-industrial hubs. The plan, which has been updated taking into account the effects of COVID-19, is a blueprint for the economic growth of the country for the five-year period.
Private investment will be encouraged in infrastructure amid narrower fiscal space both at the national- and local-level. The PPP model will be used to establish agro-industrial hubs and regional technology parks focused on the agriculture sector.
Additionally, the government will look at PPPs to strengthen the country's economic zone development program, which aims to create special economic zones in the rural parts of the country. The government will aim to create transportation hubs in rural areas through PPPs. The list of infrastructure projects to be developed by the government includes 22 PPP projects, out of a total of 104 projects.
THREE GROUPS UNDERWRITE PHILIPPINES COASTAL ACQUISITION LOAN
Clifford Capital, DBS and Natixis have underwritten a SGD 300m (USD 226m) six-year amortizing loan to Keppel Infrastructure Trust (KIT) and Metro Pacific Investments Corp. (MPIC) to fund their acquisition of the Philippine Coastal Storage & Pipeline Corporation (PCSPC).The underwriters are yet to start syndication of the debt.
MPIC now holds just less than 50% of PCSPC, while KIT owns 50% plus one additional share. KIT had said in December 2020 it intended to buy 80% for USD 267m, while MPIC would purchase the remaining 20%, putting a total price on the equity of USD 334m.
The target was owned by the Philippine Investment Alliance for Infrastructure (PINAI), a closed-end fund managed by Macquarie Infrastructure Management Asia. PCSPC generated EBITDA of USD 28.8m in the year through December 2019, and net profit of USD 9.4m. The book value and net asset value of the company was USD 72.2m. PINAI shortlisted KIT and MPIC, I Squared, JG Summit, and KKR after they filed non-binding bids for PCSPC in September 2020. Final proposals were submitted in November 2020. Singapore investment banking boutique Rippledot advised PINAI on the sale of PCSPC.
PCSPC operates petroleum storage and pipeline facilities at the former Subic Bay Naval Base. It is scheduled to grow to 6 million barrels next year. The Subic Bay Freeport Zone is tax-friendly with easy access from North and Southeast Asia. It has deep water berthing facilities and is a natural shelter from typhoons. Most of its customers are blue chip companies or government entities and many of them have take-or-pay contracts.
PHILIPPINES WASTE-TO-FUEL PROJECT LOOKING FOR EQUITY PARTNERS
Wastefuel, a company developing a waste-to-fuel facility in Manila, is in talks to take on new equity partners for the project. It plans also to raise debt financing for the project, which will cost more than USD 600m. The project is set to reach financial close in the Q1 of 2022.
Philippines infrastructure developer Prime Metroline Infrastructure Holdings Corporation had invested in Wastefuel jointly with Netjets, a private jet operator, in order to develop a waste-to-fuel plant in Manila.
US-based investment firm i(x) investments also owns a stake in Wastefuel.
The waste-to-fuel facility will have the capacity to convert 1 million tons of municipal waste into 30 million gallons of aviation fuel per year. Netjets will acquire a minimum of 100 million gallons of aviation fuel from the plant over the next 10 years. The plant is scheduled to become operational in 2025.The company secured a supply contract providing waste.
PHILIPPINES MONORAIL PROJECT SET FOR SWISS CHALLENGE IN Q3 2021
The Philippines city of Baguio is set to launch a Swiss Challenge for a transportation system PPP in the Q3 of 2021. The city received an unsolicited proposal to develop a PHP 11.5bn (USD 236m) mass transportation project from Manila-listed Metro Global Holdings Corporation.
The PPP Committee started to review the proposal . If the proposal is accepted, the government will have 80 days to negotiate the terms of reference with the company. It will launch the Swiss Challenge afterwards.
The proposal includes the development of a 4km elevated monorail in the central business district of Baguio and the creation of several bus lines served by a fleet of 300 battery-powered vehicles. Metro Global, led by Philippines tycoon Robert Sobrepeña, indirectly owns 29% of Metro Manila LRT-Line 1. The city is planning to launch a Swiss Challenge for a market upgrade in April 2021 , and for water sanitation and transportation projects in the Q3 of 2021.
AC ENERGY TO SELL STAKE IN PHILIPPINES COAL PLANT
AC Energy and Infrastructure Corporation, a unit of Philippines' conglomerate Ayala Corporation, will divest its 85% stake in a 540 MW coal-fired plant in the country. The sale of the Kauswagan plant to the asset's project developer Power Partners is valued at a base price of USD 453.24m.
The remaining stake is owned by the Philippine Investment Alliance for Infrastructure (PINAI) - a fund managed by Macquarie Infrastructure and Real Assets. The power asset, which includes 4 x 135 MW facilities, will be transferred in tranches to Power Partners and the purchase price will be paid on a deferred basis. Located in the Lanao del Norte province, the plant supplies power to the Mindanao islands in the Philippines since it started commercial operations in 2019.
As part of the divestment, AC Energy will also sell the plant site to PMR Group Retirement Plan, the firm affiliated with the plant's holding company, for an additional USD 15.9m.
AC Energy and Infrastructure Corp, previously known as AC Energy, is looking to rebalance its power generation portfolio as the company looks to grow its renewable energy assets with a target of achieving at least 5 GW of capacity by 2025 from the current 1.35 GW. AC Energy tried to sell its Kauswagan stake twice. At the end of 2018, it was in advanced negotiations to sell the asset to San Miguel Corp.
ABOITIZ TO RAISE DEBT TO FUND 2021 INFRA INVESTMENTS
A unit of Philippines company Aboitiz Equity Ventures (AEV) plans to use a mix of debt and equity to fund its PHP 13bn (USD 267m) infrastructure investment in 2021. Aboitiz Infracapital, whose capital expenditure was PHP 3.7bn in 2020r, will invest approximately PHP 2.5bn in passive digital infrastructure, including common towers and small cell sites.
Aboitiz InfraCapital signed agreements to develop common towers for the country's two major mobile operators, PLDT and Globe Telecom. Another PHP 6.5bn has been earmarked to finance water supply projects, including Apo Agua Infrastructura's bulk water supply project in Davao city.
Aboitiz owns a 70% stake in the project, which is set to supply 300 million liters of water per day to customers. Local developer J.V. Angeles Construction Corporation holds the remaining interest in the project, which has a total cost of PHP 13.3bn.
The company also plans to invest PHP 2.8bn to expand three industrial estates it owns: the Lima Estate in the city of Batangas, the West Cebu Industrial Park and Mactan Economic Zone II in the city of Cebu.
List of key transactions - Philippines Q12021
Source: Inframation, YOG INFRA analysis
List of upcoming infrastructure projects - Philippines (as of Q12021)
Source: Inframation, YOG INFRA analysis
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