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Infrastructure & PPPs in Philippines - Q2-2021 Update

Updated: Jul 24

PHILIPPINES is encouraging PPP projects among diversified sectors including healthcare, water and urban infra besides the traditional transport and energy sectors. The sentiment remains strong with a strong PPP pipeline aimed at both local and international investors. Read more about key developments in Infrastructure and PPPs in Q2-2021 in Philippines in our latest insight.


June 2021

MEGAWIDE TO RESUBMIT MACTAN-CEBU AIRPORT PROPOSAL NEXT YEAR

Megawide Construction Corporation will review its PHP 208Bn (USD 4.2Bn) proposal to expand the Mactan-Cebu International Airport in the Philippines and resubmit it to the country’s newly elected government next year. The Manila-listed company will take into account the effect of the COVID-19 crisis on the facility as part of the new proposal, Louie Ferrer, executive director of infrastructure development at Megawide.

The government rejected a PHP 109Bn proposal from a consortium led by Megawide to upgrade Manila’s Ninoy Aquino International Airport (NAIA) in January. Megawide and its partner Indian infrastructure firm GMR's current proposal for the Mactan-Cebu International Airport includes the development of a second runway and a new terminal as well as expanding the capacity to 50 million passengers per year from the current 13 million.

The consortium was awarded an initial PHP 14.4Bn PPP to upgrade the airport, located in the Central Visayas region, in 2014.The Philippines' government is currently negotiating with several local authorities to develop land transport terminals across the country.


FOUR FIRMS INTERESTED IN PHILIPPINES' SANGLEY AIRPORT PPP

Four companies have purchased request for proposal documents to bid for the Sangley Point International Airport PPP in the Philippines. The Sangley Airport PPP is one of the billion-dollar airport projects proposed to reduce overcrowding at Manila’s Ninoy Aquino International Airport (NAIA), the country's main gateway. San Miguel Corporation was awarded a 50-year franchise to build, manage and operate a USD 14Bn airport and airport city in Bulacan in 2021, in the northern part of Metro Manila. A second PHP 109Bn (USD 2.2Bn) private proposal to upgrade NAIA was rejected by the government in January 2021.


PHILIPPINES TO SEEK FERRY TERMINAL PPP ADVISOR

The Philippines will launch a process to select a transaction advisor for a new transportation PPP. The project will involve the finance, design, construction, operation, and maintenance of ferry terminals in the cities of Alaminos and Dagupan, in the Pangasinan province, and floating piers in San Fernando City, in La Union province.

The selected consultant will develop a feasibility study for the project. The PPP is set to reduce the commute time for passengers traveling between the three cities and boost the tourism potential of the region, located approximately 200km north of Manila.

The selection process will receive financial support from the Cities Development Initiative for Asia (CDIA), an Asian Development Bank-managed trust fund financing the preparation of infrastructure projects in secondary cities in Asia. The PPP Center is a partner of the CDIA.


PHILIPPINES-ISRAELI JV TO DEVELOP CEBU WATER PROJECT

Philippine’s energy company Vivant Corporation’s subsidiary has won a bulk water supply project, which will include the construction of a desalination plant. Vivant Hydrocore Holdings will work with Watermatic Philippines Corporation - a joint venture between parent Vivant Corporation and Israel's Watermatic - to develop the Cordova Bulk Water Supply Project in Cebu province.

The desalination plant will increase the supply of potable water to the regional system by 20,000 cubic meters per day. The concessionaire will receive PHP 74.5Bn (USD 1.5Bn) per cubic meter of water over a period of 25 years.

The company held a 357 MW portfolio of geothermal, coal and diesel-fired power plants in 2020.


PHILIPPINES PREPARES MARKET SOUNDING FOR UNIVERSITY PPP

The University of the Philippines and the country's PPP Center organized a market sounding event for a public-private partnership project to develop research, academic and community facilities. The University of the Philippines Los Baños (UPLB) Agro-Industrial and Information Technology Parks project will be located at Los Baños, 70km south of Manila.

The market sounding event was aimed to gauge private sector interest, obtain insights from private players on how to make the project more attractive and bankable, and identify potential problems. The project involved the development of a research center on plant breeding and a plant genetic bank, a conference center, a business complex park and a visitor’s center, as well as walk-up apartments, a hostel or dormitory, and a commercial complex.


PRIME METROLINE INFRA GAINS CONTROL OF MANILA WATER

Philippine’s infrastructure investor Prime Metroline Infrastructure Holdings - led by local tycoon Enrique K. Razon Jr. - has gained control of Manila Water. Prime Infra subsidiary Trident Water Company has bought a 25% stake for PHP 10.6Bn (USD 222Mn). The transaction will be funded through a bank loan secured by Trident.

Trident will also receive proxy voting rights for 2.6 million preferred shares held by Ayala Corporation, the previous majority holder of the company. This will result in Trident getting 51% voting rights. Ayala will continue holding a 38.6% stake.

Manila Water and its competitor Maynilad signed new concession agreements to supply water in Manila. The new contracts extend the concession periods to 2037 from 2022. It also limits tariff adjustment for inflation to only two-thirds of the consumer price index growth, and caps rate increases at 30%.

Prime Infra currently has interests in the power, transport, and utility sectors in the Philippines, including in a joint venture to develop the Wawa Bulk Water Supply project, which will increase supply to eastern Manila.


MACQUARIE SETS UP 1.25 GW PHILIPPINES SOLAR JV

Blueleaf Energy - a unit of Macquarie’s Green Investment Group (GIG) - has partnered with renewables developer SunAsia Energy to build solar power projects in the Philippines' Luzon area. They aim to jointly develop 1.25 GW of projects in the country. The projects will be developed incrementally over the next couple of years. The companies have an existing pipeline of solar power projects.

SunAsia, a company set up in 2013, owns the country's fourth-largest solar power plant in Cebu. It also operates the biggest floating solar pilot project in the town of Bay, in Laguna Lake. Blueleaf, previously known as Conergy, is looking to expand its operational capacity in the Asia-Pacific region to about 4 GW in the next five years. It will fund the investments through Macquarie's balance sheet.

Blueleaf has developed and operated almost 2 GW of solar capacity across the world, including over 500 MW in the Asia Pacific and 250 MW in the Philippines.


PHILIPPINES THERMAL POWER DEVELOPER PLANS RENEWABLES PROJECTS

SPC Power Corporation (SPC) is looking to develop renewable energy projects in the Philippines. The company is conducting due diligence for solar and hydro power projects and is in discussions with various firms to partner for the development of battery energy storage systems (BESS).

The Philippines-based thermal power developer has evaluated two BESS and one solar project. SPC is also looking to partner with other power developers for hydropower projects in the Visayas island of Philippines and other parts of the Luzon region.

For 2021, the company plans to invest PHP 262Mn (USD 5.5 Mn) in the development of the power projects, SPC has outlined capital expenditure of PHP 42m for 2021 and is seeking board approval for an additional PHP 220m.

The company's power portfolio includes a 200 MW coal-fired plant in Naga, Cebu province, a 146.5 MW Panay Diesel Power Plant in Iloilo, a 22 MW diesel power plant in Tagbilaran city and 24 MW diesel power plants in Bohol. SPC also owns the right to develop a 300 MW coal-fired power project in Cebu, which has currently ceased construction due to a government order.


ORMOC CITY TO LAUNCH WATER SUPPLY PPP

The city of Ormoc in the Philippines plans to launch a PHP 6.2Bn (USD 126Mn) water supply PPP in the third quarter of 2021. A feasibility study for the project was completed in May 2021. The project scope will include the development of new water sources for the local water supply system, including the construction of a reservoir and new pipelines, and the establishment of a clarifier and filtration gallery.

The project will be implemented as a joint venture with the government. Ormoc, located in the Eastern Visayas region, has a population of approximately 215,000.

Mindanao project

Bislig city, on the island of Mindanao, also aims to launch a PPP next year to improve its water supply system. The project will include the development of new water sources and the construction of septage treatment facilities. The total cost of the PPP will be determined after the feasibility study is finalized. The auction process will be launched in the first quarter of 2022 and the preferred bidder is set to be chosen by the third quarter. The project aims to reduce non-revenue water - which refers to water lost in the distribution process - to 10% from the present 26%.


May 2021

FIRST GEN PLANS USD 530M CAPEX TO ADVANCE PROJECTS

Manila-listed power company First Gen plans to spend about USD 530Mn in 2021 to develop new projects. geothermal subsidiary Energy Development Corporation will use USD 280Mn to catch up on drilling activities that were postponed in 2020 due to the pandemic. The company spent PHP 6.1Bn (USD 127Mn) on geothermal projects in 2020, compared with a target of PHP 10.8Bn.

First Gen will also spend USD 120Mn on the construction of a new LNG terminal in the province of Batangas. The project is scheduled to start commercial operations in the third quarter of 2022. First Gen selected BW Gas to provide a floating storage regasification unit for the project.


PHILIPPINES DEVELOPER SIGNS 20 MW SOLAR PPA WITH SHELL

Philippines-based renewables company Citicore Power will supply electricity from a 20 MW solar project to Dutch oil and gas giant Shell's local energy unit. The solar plant is located in the Mariveles area of Bataan province of Philippines.

Citicore, a company affiliated to Philippine infrastructure and engineering group Megawide Construction, owns a total of eight solar power plants with a combined capacity of over 160 MW in the country. The company also owns a hydropower plant and three biomass projects as well as two desalination plants.

Citicore is also developing a 75 MW solar power project in Pampanga province across the municipalities of Arayat and Mexico. The project is an equal joint venture with AC Energy, the power unit of the Philippines conglomerate Ayala Group. It is slated to start operations in the fourth quarter of 2021.


MITSUI TO INVEST IN 115 MW PHILIPPINES SOLAR PROJECT

Japanese trading house Mitsui has decided to invest in a JPY 7Bn (USD 64Mn) project to build and operate a 115 MW solar power generating plant in the Philippines. It will team up with local independent power producer Global Business Power to construct and manage the solar farm in Rizal province, on the northern island of Luzon.

Mitsui will contribute about 40% of the total project cost. The solar farm, which is scheduled to be completed around March 2023, will sell electricity to distributor Manila Electric (Meralco) under a 20-year power purchase agreement.

For Mitsui, the project is its first large scale solar investment in Southeast Asia. As of March 2021, it had a combined 11 GW of generating assets globally, with renewables accounting for 15%.


PHILIPPINES TOURISM AUTHORITY SOUNDS OUT MARKET FOR PPP PROJECT

The Philippines’ Tourism Infrastructure and Enterprise Zone Authority (TIEZA) and the PPP Center are gauging market interest for a public-private partnership project to upgrade a tourism complex on central Luzon Island. The Mount Data Lodge project will involve the construction of a pavilion, a conference hall, a house for the complex staff and additional accommodation facilities in the municipality of Bauko, in Mountain Province. It will also involve the operation and maintenance of the complex.

The facility occupies a total area of 7.7ha and has 22 private rooms. It is located 80km away from the Banaue Rice Terraces Word Heritage Site.


April 2021

SAN MIGUEL TO INVEST USD 1BN IN ENERGY STORAGE

Philippines-based conglomerate San Miguel Corporation's power development arm will invest USD 1Bn to develop battery energy storage projects across the country. San Miguel Global Power Holdings will construct up to 31 facilities with a combined capacity of 1 GW. San Miguel would develop a total of 43 battery storage projects and was looking to commission 31 facilities by the end of 2021. The projects will be developed in the regions of Luzon, Visayas and Mindanao.

The company issued USD 600Mn senior perpetual capital securities and the proceeds will partly be used to finance battery energy storage and other expansion projects. San Miguel built its first storage facility in 2018 in the municipality of Masinloc in Zambales province.

List of key transactions - Philippines Q2-2021

Source: YOG INFRA analysis, Public Information



List of upcoming infrastructure projects - Philippines (as of Q2-2021)

Source: YOG INFRA analysis, Public Information

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