Banks ready to fund PPP projects

BAGUIO CITY , Philippines   â€“ Philippine banks are ready and capable of funding capital-intensive public-private partnership (PPP) projects, the flagship project of the Aquino administration.

Adequate financial muscle of lenders and numerous funding options for PPP proponents will support the rollout of more big-ticket infrastructure projects until 2016, an official of the country’s largest bank said.

“Philippine banks are well-positioned and are stronger with increasing capital. Banks are ever ready to support PPPs and the private sector,” Jonathan Ravelas, chief market strategist of BDO Unibank Inc. said, during the 2014 SMC-Economic Journalists Association of the Philippines’ Journalism Seminar.

Ravelas said local banks are now capable of servicing PPP needs as they have already developed the expertise to do cash flow lending and project finance, giving PPP proponents more leeway to raise funds.

For instance, half a decade ago, tenors go as far as five years with a maximum loan of P3 billion. But so far, loans can go up to P80 billion with 15-year maturity.

In terms of options, PPP proponents can take advantage of non-recourse project finance as opposed to plain vanilla corporate loans while single-borrowing limit is already at P40 billion from the previous P1 billion, Ravelas said.

So far, the Aquino administration has awarded six PPP projects worth P45.1 billion, including the P17.5-billion Mactan-Cebu International Airport project and the P1.72-billion Automated Fare Collection System.

Thirteen more projects worth P367.9 billion are in the pipeline. Of these, nine projects worth P187 billion are seen to be awarded before 2016, Ravelas said.

Other big-ticket infrastructure projects to be auctioned off by the government include the P64.9-billion Light Rail Transit Line 1 Cavite extension, the P62.7-billion Metro Rail Transit 7 and the P24.4-billion Bulacan Bulk Water Supply Project of the Metropolitan Water and Sewerage System.

So far, Philippine banks are involved in advisory, funding and other services for PPP projects, Ravelas said. Banks do due diligence and risk assessment, allowing them to advise the government and potential bidders.

For PPP project proponents starting from scratch, Ravelas said a private placement of debt or equity will allow them to raise cash.

Companies with existing businesses can attract investors through initial public offering, follow-on offering or bonds given their track record, Ravelas said.

PPP, the flagship program of the Aquino administration that involves railroad, tollroad and airport ventures was launched in 2010 to address the country’s infrastructure backlog. It has since attracted the attention of top conglomerates like San Miguel Corp., Ayala Corp., SM Investments Corp., Metro Pacific Investments Corp. and JG Summit Holdings Inc.

However, issues like updated feasibility studies are causing delays in the bidding of PPP projects, Ravelas said, adding that companies should take advantage of the low interest rate environment.