With the recent roll-out PPP projects requiring larger funding, and the existing regulations of banks and their lending requirements, government is looking for alternative ways of funding from the capital market through the issuance of project bonds.
During the recent PPP Forum organized by the Public-Private Partnership Center of the Philippines together with the Securities and Exchange Commission, The Philippine Stock Exchange and the Asian Development Bank, finance experts from both the domestic and international finance community tackled the issue of tapping the Philippine capital market to finance massive infrastructure projects that are currently part of the country growing pipeline of PPP projects. The discussion centered on the issuer and investor appetite for project bonds as a source of financing for PPP projects and the government’s initiatives to encourage the issuance of project bonds in the Philippines.
“We are experiencing a lack of infrastructure right now. We have to find ways and means to develop projects that can get the interest of the private sector not only for the operation and maintenance, but also in the financing of these future infrastructure PPP projects” PPP Center Executive Director Cosette V. Canilao said.
The PPP Center chief added that the government should create an enhanced environment that would promote infrastructure development and access the capital market.
In more mature PPP implementing countries with significant private-sector pension schemes like the UK, project bonds are used extensively. The key players are pension funds and life insurance companies which both invest directly.
Valery Tubbax who heads the Project Finance Advisory team for Asia of the Sumitomo Mitsui Banking Corporation stressed that project bonds in PPPs will only be possible if these projects are well-structured. He added that there is a real need for PPP experts to be engaged, particularly in the development stage of PPP projects.
Currently, big ticket projects like the Laguna Lake Expressway Project costing USD 2.7 Billion and the South line of the North–South Railway project costing USD 3.79 Billion are being auctioned. They are part of the USD 11.46 billion pipeline of PPP projects undergoing tender. With the Single Borrowers Limit ending by 2016, domestic lending will not be enough to absorb all the funding needs of PPP projects.
Meanwhile the Security and Exchange Commissioner Ephyro Amatong said that the Securities and Exchange Commission supports using the bond market for PPP projects. The SEC Commissioner said that there is a big demand for PPP projects, including from the insurance sector. “The SEC is prepared to work with the industry on these requirements“, the Commissioner said.
With a change in government inevitable in less than a year, the PPP Center Chief underscored that now is the best time for the Aquino Administration to put together what it can recommend to the next presidency to help step up infrastructure development and finance.
