THE GOVERNMENT may adopt before its term ends a policy allowing concessionaires of public-private partnership (PPP) projects to tap the capital markets, pension funds and insurance companies for refinancing.
In an interview with reporters yesterday, new PPP Center Executive Director Andre C. Palacios said the interagency PPP Governing Board shall have approved the circular before the next administration takes over.
“I am hopeful that by June 30, the policy circular shall have been approved, meaning, the staff work, consultations and talks with the Philippine Stock Exchange (PSE) and Securities and Exchange Commission have been undertaken,” Mr. Palacios said in a mix of English and Filipino.
The PPP Center is currently drafting the policy circular, which involves the issuance of PPP securities or the “securitization” of the private-sector partner’s rights to revenues arising from their contract with the government.
“Since it is a right arising from the contract, the contract provides that you need approval of your government partner if you are going to mortgage it or assign it to another entity,” Mr. Palacios noted.
The policy could also pave the way for the government’s private sector partner to settle their existing debts with banks and avail of new loans from pension funds and insurance companies at lower interest rates.
“Usually, it’s the banks that finance the construction stage... Because they have a higher appetite for risk, they are more willing to lend but at higher interest rates, of course,” Mr. Palacios noted.
The risk profile improves once the concessionaires complete constructing and start operating the projects, making the case for loan refinancing, the PPP chief added.
“It’s expensive for a concessionaire to pay the bank interest rate when the risk profile has really improved. So, we’re exploring a refinancing policy,” Mr. Palacios said.
In an earlier interview, Insurance Commissioner Emmanuel F. Dooc said the commission is working on encouraging insurance companies to finance infrastructure projects.
Mr. Palacios said the PPP Center already discussed the refinancing policy with the Insurance Commission. The agency also continues to engage in talks with the PSE for the issuance of PPP securities.
“We’re talking to them [PSE] on how we can contribute to the development of the market. PPP Center can contribute by providing in our PPP contracts that the concessionaire can refinance it or securitize their revenue,” Mr. Palacios said.
The PPP Center plans to reflect the proposed policy circular in the contracts covering PPP projects to encourage involved government agencies to allow refinancing.
“We are exploring this, we could allow concessionaires to securitize or to issue a bond to borrow money from the public and pay them using revenues arising from the contract,” Mr. Palacios said.
source: Businessworld
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