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Infrastructure & PPPs in Philippines - Q2 2022 Update

YOG INFRA Q2 2022 insight series

PHILIPPINES is seeing new initiatives from the government to drive PPPs in social infra and WASH sectors, including via unsolicited route. The renewable energy sector is on a growth path driven by private sector players, both local and international players. A noteworthy development is a 55km commuter railway project being developed with support from ADB in the country.

Read more about key developments in Infrastructure and PPPs in Philippines in our latest insight.

 

April 2022

IFC TO START PHILIPPINES RENEWABLES STUDY THIS MONTH

The International Finance Corporation (IFC) and Manila-based Aboitiz Power are close to selecting advisers for a study to evaluate the potential of renewable energy in the Philippines.

The IFC and Aboitiz Power agreed to conduct a technical and financial evaluation on sources like hybrid solar and battery storage to replace fossil fuels and help reduce carbon emissions. Philippines aims to grow its renewables capacity to 35% of the overall energy mix by 2030, compared with 24% in 2020.

Aboitiz Power had operational renewables assets with a capacity of 3.5 GW at the end of 2020 and will spend PHP 190 Bn (USD 3.6 Bn) to add 3.7 GW through 2030.


AC ENERGY AND IB VOGT FLOAT ASIA SOLAR VENTURE

Philippines' AC Energy and German renewable power developer IB Vogt will set up a joint venture to build and operate solar power projects with a capacity of at least 1 GW across Asia. AC Energy hopes to invest up to USD 200 Mn as equity in the new platform as well as debt funding for the solar projects.

The joint venture platform will focus on late-stage and construction-ready large scale solar projects in the Asian markets including Indonesia, Vietnam, Malaysia, Laos, Bangladesh, and others.

The majority of projects will stem from IB Vogt’s Asia development pipeline of more than 5 GW with initial projects planned to start construction this year. AC Energy and IB Vogt agreed to set up a joint venture to develop solar projects in the Philippines with an initial 300 MW solar capacity.

AC Energy owns more than 3.8 GW of renewable energy generation capacity in the Philippines, Vietnam, Indonesia, India, and Australia and is looking to reach 5 GW renewables capacity by 2025. Globally, it has built and is now constructing solar projects with a total capacity of more than 2.5 GW and owns a pipeline of more than 40 GW of projects.


PHILIPPINES OFFERS TOURISM DEVELOPMENTS AS UNSOLICITED PPPS

The Philippines is seeking unsolicited public-private partnership (PPP) proposals to construct tourism facilities in the Clark Special Economic Zone in the Central Luzon region.

The Tourism Infrastructure and Enterprise Zone Authority (TIEZA), the procuring agency, recently discussed the development of several villas in the area with an undisclosed investor and is planning to market the project aggressively to local and international firms.

This time, TIEZA will offer the projects individually, including a transport terminal, a theme park, retail and residential areas, and a facility for meetings, incentives, conventions and exhibitions. It has not set a deadline for the submission of proposals.

In the Philippines, private investors can submit unsolicited proposals to procuring agencies. TIEZA is currently soliciting expressions of interest for a PPP project to build a 150-room hotel in the area. It is yet to receive prequalification bids, the project will be switched to the unsolicited model if it doesn’t receive interest from the market.


PHILIPPINES DEVELOPERS ADDING 44 MW AT LUZON SOLAR PARK

Philippines developers AC Energy and Citicore will add 44 MW generation capacity in the second phase of the development of a solar park in the Luzon region. The partners have secured financing, which includes debt from AC Energy. Both companies have an equal stake.

The first stage of 72 MW was completed and will start supplying power to the Luzon power grid after the National Grid Corporation of the Philippines (NGCP) completes testing. It will produce 105 GWh of renewable energy annually and power about 45,000 households in the region. The project is in the Pampanga province of the Philippines. The 116 MW project will be managed and operated by a Citicore unit.

Manila-based Citicore, through its renewable energy development arm, owns and operates solar projects in the Luzon, Visayas and Mindanao regions. It owns a development pipeline of 634 MW and is planning to spend PHP 70 Bn (USD 1.4 Bn) to reach a portfolio capacity of 1.5 GW in the Philippines over the next five years.


PHILIPPINES FERRY TERMINALS PPP STUDY

The feasibility study for a public-private partnership (PPP) to build three new ferry terminals in the Philippines is set to be completed by the end of October.

The Tri-City Ferry System project will seek approval from the Philippines’ National Economic and Development Authority (NEDA) before the tender is issued. The PPP involves the finance, design, construction, operation and maintenance of ferry terminals in the cities of Alaminos and Dagupan, in Pangasinan province, as well as floating piers in San Fernando City, in La Union province.

It will reduce the commute time for passengers traveling between the three cities and boost the tourism potential of the region, located approximately 200 Km north of Manila.


PHILIPPINES CONSIDERING PPP OPTIONS FOR KENNON ROAD PROJECT

The Philippines is reviewing different concession structures to improve the commercial viability of the PHP 11 Bn (USD 213 Mn) Kennon Road public-private partnership (PPP) project. Potential operators raised concerns about difficulties in recouping the investment because of an existing alternate route that is free to use, which would deter motorists from paying for the new infrastructure.

Government is currently considering four types of contracts:

A build-operate-transfer scheme in which the concessionaire would collect user charges, supported with viability funding from the government.

  • an availability-based payment model with the department paying a fixed amount per year to the operator.

  • a concession in which the private partner collects toll as well as qualifies for subsidy from the government based on the traffic; and

  • a hybrid scheme combining toll collection and an availability payment.

The project involves the upgrade of a 33 KM road connecting the cities of Rosario and Baguio. The concession period will be between 20 to 30 years, including a four-year construction phase.


CHELSEA LOGISTICS REVIEWING DAVAO PORT BID

Manila-headquartered Chelsea Logistics and Infrastructure Holding is considering participating in the tender for a PHP 9.8 Bn (USD 187 Mn) port upgrade project after the government ruled out its original investment proposal for the facility.

In 2018, the Philippines Port Authority (PPA) received a PHP 19.9 Bn unsolicited proposal from Chelsea Logistics to upgrade the port. The government agency decided to tender the project instead, in order to expedite the process and open it to potential competitors.

The bid winner will operate the facility for 20 years. It will have to pay a concession fee of at least PHP 8.6 Bn to the PPA.


ORMOC PLANS WATER SUPPLY PPP TENDER NEXT QUARTER

The Philippine city of Ormoc plans to launch the tender for a PHP 5.7 Bn (USD 109 Mn) water supply public-private partnership (PPP). The local government is studying different concession structures and expects to approve the tender. The PPP Center is advising Ormoc on the project.

The project involves the building of new water sources and supply facilities and will carry a 40-year concession. The city's current water supply is 52 million liters per day. Consumption will rise to an estimated 78.8 million liters per day by 2045.

The potential water sources to be developed include the Danao Lake and the rivers of Pagsanga-an, Panilahan and the Ahag. Ormoc, located in the Eastern Visayas region, has a population of approximately 230,000, which is projected to increase to 268,000 by 2030.


SN ABOITIZ POWER SECURES FINANCING FOR PHILIPPINES ENERGY STORAGE PROJECT

SN Aboitiz Power Group (SNAP) has signed construction and financing agreements for a 20 MW battery energy storage system project at the Magat hydropower plant in Ramon, Isabela, in the Philippines.

SNAP, a joint venture between Norwegian independent power producer Scatec and electricity generator Aboitiz Power, secured financing from the Bank of the Philippine Islands and the China Banking Corporation. The engineering, procurement and construction agreement is with Hitachi Energy. Construction is expected to start with a targeted operations date in the first quarter of 2024.

The project, which is expandable to 24 MW, is the first of more initiatives in the Philippines.


May 2022

FIRST GEN IN TALKS WITH POTENTIAL INVESTORS FOR RENEWABLES PROJECTS

KKR-backed First Gen is in talks with potential investors for renewable energy projects as it chases decarbonization opportunities.First Gen plans to significantly expand its wind and solar portfolio over the coming years. It anticipates strong demand from grid operators serving large urban areas, as well as off-grid communities and contestable customers operating commercial and industrial establishments.

In 2021, the company - which has a market capitalisation of PHP 72 Bn (USD 1.3 Bn), started the development of the 3.6 MW Mindanao 3 binary plant in Cotabato in the southern Philippines and the 29 MW Palayan binary plant in Bicol. The facilities will use brine from the geothermal plants to generate additional energy without the need for drilling.

It is also developing the 120 MW Aya pumped-storage facility in Nueva Ecija in the northern Philippines. First Gen is doubling up on its decarbonization initiatives. Possibly with clean hydrogen, as technology develops and attain commerciality. It is also pursuing energy efficiency schemes, as well as taking stock of other technologies that will further advance its net zero goal.


June 2022

PRIME INFRA PLANS TO BUILD WORLD'S LARGEST SOLAR PLANT

Prime Infrastructure Holdings plans to build what it said will be the world's largest solar energy facility, with generation capacity of 2.5-3.5 GW and a battery energy storage system (BESS) of 4,000 to 4,500 MWh.

Terra Solar Philippines, a subsidiary of Prime Infrastructure, will build the project together with Solar Philippines Power Project Holdings.


ADB CLEARS USD 4.3 Bn FOR PHILIPPINES RAIL PROJECT

The Asian Development Bank approved a maximum project financing of USD 4.3 Bn - its largest commitment so far - to fund the construction of the 55 Km South Commuter Railway Project in the Philippines.

The money will go towards the project's infrastructure, such as stations and tunnels. The Japan International Cooperation Agency will help fund the procurement of rolling stock and railway systems.

The railway line, which will connect the country's capital of Metro Manila to Calamba city, is part of the North-South Commuter Railway (NSCR) network. It will be implemented by the Department of Transportation. The ADB financing will be disbursed in tranches, with the first USD 1.75 Bn coming this year.


PHILIPPINES’ NEW ADMINISTRATION TO PRIORITISE TOLL ROAD PPPS

The Philippines’ incoming Ferdinand Marcos administration will seek more investors in public-private partnership arrangements for its infrastructure.

The government will focus on high-impact projects. These will include transportation projects such as the ones that can ease traffic congestion. The government will not be able to shoulder the financial burden alone to create new infrastructure.


SOLAR PHILIPPINES PROJECTS WIN MAJORITY OF RENEWABLES AUCTION

Solar Philippines has won 70 % of the 1.97 GW renewables capacity in the government’s first round of the ‘Green Energy Auction’. The capacity awarded also represents 91 % of the total solar capacity allocated.

Part of this will be sourced from the 500 MW being developed by Solar Philippines Nueva Ecija Corporation (SPNEC), with the remainder to be sourced from projects developed by entities that would be owned by SPNEC after an asset-for-share swap with its parent company. These include the 400 MW Tarlac-2 Solar Farm, the 800 MW Quezon Solar Farm, the 400 MW Leyte Solar Farm, and the 200 MW GenSan Solar Farm.

The total capacity of Solar Philippines’ substantially contracted projects now stands at more than 6 GW. The company has 10 GW of projects in the development stage which are scheduled to commence operations between 2025 and 2026.


PHILIPPINES' PRIME INFRASTRUCTURE PLANS USD 515.8 Mn IPO

The Philippines' Prime Infrastructure Capital is planning an initial public offering (IPO) with a target to raise PHP 28 Bn (USD 515.8 Mn) in gross proceeds to finance new projects.

The company is looking to sell up 1.76 billion common shares at PHP 14.60 each, with an over-allotment option of up to 175.58 million shares. It plans a local listing on or about 12 October.

Prime Infrastructure will earmark PHP 23 Bn for its energy business, and PHP 3.5 Bn will be allocated to the firm's water segment. The remaining PHP 1.1 Bn will be given to projects under its waste and sustainable fuels business. The firm is constructing a 140 MW solar power plant in Tanuan, Batangas, which will be developed in two phases.


 

List of key transactions - Philippines Q2 2022


Source: YOG INFRA analysis, Public Information

 

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