OFFERINGS in the country’s capital markets should cover infrastructure projects beyond those under the public-private partnership (PPP) scheme, according to a regulator and a top financial sector executive.
Securities and Exchange Commission (SEC) Chairperson Teresita J. Herbosa and BDO Capital Investment Corp. President Eduardo V. Francisco separately floated the possibility of “project bonds” in addition to allowing companies with PPP infrastructure contracts to join the Philippine Stock Exchange (PSE).
“In addition to what you would call PPP bond issuances, we’re also thinking of project bonds... we’re conducting a study on that,” Ms. Herbosa told BusinessWorld after the ceremonial listing of P10 billion worth of bonds issued by Ayala Corp. on the Philippine Dealing & Exchange (PDEx) in Makati City on Thursday.
Mr. Francisco, meanwhile, noted that discussions with the PSE included the possibility of expanding the coverage of the listing framework to include companies implementing public infrastructure projects outside the PPP program.
“The thing I’m suggesting is they include other infrastructure [projects] so that if, let’s say the project is not considered a PPP because it was unsolicited, it’s still covered,” Mr. Francisco told reporters in a mix of English and Filipino.
The SEC, along with other organizations, will look into the feasibility of allowing the issue of project bonds by companies engaged in infrastructure developments whether under a PPP contract or not, Ms. Herbosa said.
“Advisers from Treasury of the US and FINEX (Financial Executives Institute of the Philippines) headed by Mr. Francisco as well as PDEx headed by (Chairman and Chief Executive Officer) Mr. (Cesar B.) Crisol would form a committee together with our people to study project bonds or PPP bonds,” Ms. Herbosa said.
In end-May, the PSE released the proposed supplemental listing and disclosure rules applicable to entities undertaking PPP infrastructure projects to solicit feedback from stakeholders.
According to the draft rules, a company or group working on an infrastructure project under a PPP contract worth at least P5 billion can join the stock exchange.
It must have commenced commercial operations or completed construction or a phase at the time of listing.
In addition, the PPP contract of the company or group must have a minimum remaining life of 15 years from the date it filed a listing application.
PSE Chief Operating Officer Roel A. Refran, in an earlier interview, cited that the minimum 15-year remaining life requirement for PPP contracts of interested entities as the “major point” of discussions in public comments.
“That should not be a problem because infrastructure, especially when their implemented under PPP contracts, last 20-30 years, so it’s more on the [inclusion of] other projects,” Mr. Francisco said when asked for comment.
Mr. Francisco also noted that private-sector proponents of PPP projects would rather tap banks for pre-funding requirements rather than the capital markets.
“When you win the PPP, you have 12 months to close. Time-wise, procedure-wise, I don’t think it will work. So, what the PSE did was to open the market when the concerned entities are simply de-risking or close to completing the project,” Mr. Francisco said.
“That will work perfectly for the bank. Sometimes, we lend to these consortium, say for the first four years of construction, and once operational, they can refinance. So, if the PPP comes out with a [better] alternative, they can in turn pay off the banks.”
The administration of President Benigno S.C. Aquino III put together 53 projects in the PPP pipeline. Of these, 12 cumulatively worth P217.4 billion were awarded, although the P5.61-billion Philippine Orthopedic Center modernization contract was rescinded in November last year. The pipeline also includes 15 projects in various stages of procurement, two for rollout, five for government approval and three with ongoing studies.
source: Businessworld
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