Improving Financing Access of LGUs to Energy Projects: Financing Options and Facilities 6 September 2013 NG-LGU Joint Energy Forum

Alfonso L. Salcedo, Jr. Executive Vice President and Group Head Corporate and Investment Banking Group

I. Available Bank Financing to Local Government Units (LGU) II. The Role of LGU Guarantee Corporation (LGUGC)

III. BPI-LGUGC Working Relationship

IV. BPI Financing to LGUs

V. Financing Options

VI. Making Your Energy Projects Bankable

Presentation Outline

NG-LGU Joint Energy Forum

Government Banks

• Development Bank of the Philippines

• Land Bank of the Philippines

Private Commercial Banks

• All Bankers Association of the Philippines (BAP) member banks (34 members)

• LGU Guarantee Corporation (LGUGC) participation is valuable

Available Bank Financing to LGUs

NG-LGU Joint Energy Forum

• Private guarantee institution established in 1998 and owned by the BAP, DBP and ADB

• Provides credit ratings of provinces, cities, municipalities and local water districts

• Provides guarantee up to 85% of bank loans and 100% of bond issues of LGUs and WDs

• Also manages guarantee program for electric cooperatives

• As of July 2013, has guaranteed P5B out of total of P6.3 billion in loans and bonds ○ LGUs: P4.5 billion to 33 LGUs ○ Water districts: P1.8 billion to 14 WDs

LGU Guarantee Corporation (LGUGC)

NG-LGU Joint Energy Forum

BPI-LGUGC Working Relationship

NG-LGU Joint Energy Forum

BPI uses LGUGC’s credit rating system

Aaa ] Aa ] Creditworthy standing A ] Ba ] - - - - - - - - - - - - - - - - - - - - - - - - - - - -

B ] C ] Below creditworthy standing

• Credit ratings look at political risk, economic situation, overall governance, operating efficiency and financial performance

BPI-LGUGC Working Relationship (2007-Present)

NG-LGU Joint Energy Forum

BPI and LGUGC jointly evaluate credit worthiness of projects to be financed

BPI approves loans with 85% LGUGC guaranty

LGUGC leads Project Monitoring Board composed of representatives from LGUGC, LGU/WD and BPI

• Loan drawdowns calibrated with project progress • Periodic visits during term of loan

BPI Financing To LGUs and WDs

NG-LGU Joint Energy Forum

Financed 30 projects worth P2.8 billion

Approved loans of more than P2 billion to more than 20 LGUs and WDs

All loans with 85% LGUGC guaranty

BPI finances all types of energy projects

• Power generation and distribution • Energy efficiency

Project: Hotel

Project Construction of an energy efficient hotel with commercial arcade

Project Cost P70 Million

Loan Amount P50 Million

Borrower City

Payment Source Revenues from hotel operations and arcade; Internal Revenue Allotment (IRA)

NG-LGU Joint Energy Forum

Project: Reclamation and Tourism Development

Project Land development and construction of energy efficient resort facilities

Project Cost P210 Million

Loan Amount P150 Million

Borrower Province

Payment Source Lease rental from resorts; IRA and other provincial revenues

NG-LGU Joint Energy Forum

Project: Waste to Energy

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Project Construction of plant to convert municipal waste to energy

Project Cost P300 Million

Loan Amount P150 Million

Proponent Municipality is a shareholder

Payment Source Sale of fuel

Project: Slaughterhouse

Project Construction of a semi-mechanized and energy efficient slaughterhouse with waste water treatment facility

Project Cost P25 Million

Loan Amount P20 Million

Borrower Municipality

Payment Source Service fees from meat wholesalers/vendors

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Project: Bulk Water Supply System

NG-LGU Joint Energy Forum

Project Design, construction and operations & maintenance of a bulk water supply and filtration plant

Project Cost P230 Million

Loan Amount P140 Million

Borrower Technology Provider

Payment Source Water billings to the water district; LGUGC guaranty on payments of water district

Loan

• Loan Amount: P20-200 Million depending on type of project

• Equity contribution: 20-30% of total project cost

• Loan Term: Up to 10 years

• Acceptable collaterals: ○ Land ○ Building ○ Assignment of Contract Receivables ○ Assignment of Internal Revenue Allotment ○ Assignment of Water Billings ○ Guaranty of LGUGC

Financing Options

NG-LGU Joint Energy Forum

Lease

• Available only for purchase of equipment

• Equity Contribution/Guaranty Deposit: 10-20% of cost of equipment

• Lease Term: Up to 5 years

• Collateral ○ Equipment to be purchased ○ Guaranty of LGUGC

Financing Options

NG-LGU Joint Energy Forum

Making your Energy Projects Bankable

Ensure Project Viability

• Fulfills social and economic needs of the community

• Good revenue streams

• Good overall governance and management of project

NG-LGU Joint Energy Forum

Making your Energy Projects Bankable

Partner with Reliable Stakeholders

• Technology and equipment provider

• Fuel suppliers

• Power off-takers

Be open to Outsourcing and Management of Project

Ensure completeness of Regulatory Requirements, e.g.

Monetary Board opinion, DENR permits and licenses, DOE certifications, DOF clearance, etc.

NG-LGU Joint Energy Forum

Make BPI Your Bank! We make it easy.

NG-LGU Joint Energy Forum

Thank you!