UNIVERSITY OF THE PHILIPPINES

Philippines Copyright 2008. All Rights Reserved.Jose M. Layug, Jr.

PAGE Philippines Copyright 2008. All Rights Reserved.

Jose M. Layug, Jr.

University of the Philippines

College of Law

Diliman, Quezon City

Prof. J. M. Layug, Jr.

COURSE OUTLINE IN PROJECT DEVELOPMENT

AND FINANCE

Second Semester, AY 2011-2012I.Background

A. General Concept of Project Finance An Overview

1. Project Financing Defined

Read:Nevitt, Peter K., Project Financing (7th ed), pp. 1-27 (Handout No. 1)

2. Typical Structures and Trends

Read:The Guide to Financing Power Projects, Baker & Mckenzie, pp. 1-20

B.Philippine Laws Governing Project Development and Finance in General

1. 1987 Philippine Constitution

Read: Article II, secs. 19-20

2.Anti-Dummy Law Issues

Read: Commonwealth Act No. 108

Presidential Decree No. 715

Read: Palacios vs. Ramirez, L-27952, Feb. 15, 1982 PBC v. Lui She, 21 SCRA 52 (1967).

Soriano v. Ong Hoo, et al., 103 Phil. 829 (1958).

Halili v. CA, 287 SCRA 465 (1998).

Read:

Article XII, secs. 2, 3, 5, 7, 10, 16

Read: Chavez vs. Public Estates Authority and Amari Coastal Bay Development Authority, G.R. 133250, July 9, 2002.

Manila Prince Hotel vs. GSIS, et al., G.R. 122156, February 3, 1997.

La Bugal Blaan Tribal Association, et al. vs. Ramos, WMC, et al., G.R. 127882, (final decision after motion for reconsideration), December 2004. Chavez vs. NHA, G.R. No. 164527, August 15, 2007.3. Corporation Code of the Philippines

Read:

Sections 2-6, 10-15, 17(2), 23, 24, 25, 140

4. Republic Act No. 6957 (An Act Authorizing the Financing, Construction, Operation and Maintenance of Infrastructure Projects by the Private Sector, and for Other Purposes) and Implementing Rules and Regulations (IRR) of R.A. 6957, as amended.

Read: Tatad vs. Garcia, Jr., 243 SCRA 436-493 (1995).

MMDA vs. Jancom, G.R. No. 147465, Jan. 30, 2002. (Original Decision)

MMDA vs. Jancom, supra (Resolution on Motion for Reconsideration) Chavez vs. NHA, G.R. No. 164527, August 15, 2007.5. Republic Act No. 7718, amending R.A. No. 6957

Read: Sec. 2 (Definitions) and corresponding provisions of IRR

Comparative Analysis (Handout No. 3)

6.Foreign Investments Act of 1991

a.What is a Philippine national?

b.Doing Business in the Philippines

B. Van Zuiden Bros. vs. GTVL Manufacturing, G.R. No. 147905. May 28, 2007.

Agilent Technologies Singapore vs. Integrated Technology Phil. Corp., G.R. No. 154618. April 14, 2004. Hahn vs. Court of Appeals, G.R. No. 113074. January 22, 1997.

7.Omnibus Investments Code, Executive Order No. 226

8.Other executive orders, presidential decrees, executive issuances and memoranda

9.Rules and regulations implementing various laws, executive orders, presidential issuances.

II.Project Finance in the Philippine Context An Overview

A.Parties

1.Philippine Government

i.Authorized Signatories

Read:Book I, Chapter 12, Secs. 47-51, Administrative Code of 1987 (E.O. 262)

Book IV, Chapter 5, Sec. 27, supra

Book IV, Chapter 13, Secs. 57-65, supra

ii.Limitations in Contractual Amounts

2.Project Proponent

Read:Sec. 2(k), R.A. 7718 and corresponding provision of IRR

Read: Philippine Law Governing Joint Ventures, Appendix C, Philippine Corporate Law, Cesar Villanueva.

Heirs of Tan Eng Kee vs. Court of Appeals, G.R. No. 126881, October 3, 2000.

JG Summit Holdings vs. Court of Appeals, G.R. No. 124293, November 20, 2000.

3.Contractors, suppliers and other parties

Read:Sec. 2(l), R.A. 7718 and corresponding provision of IRR

4.Lending Institutions and Security Arrangements

Read:

Civil Code of the Philippines, articles

2047-2141

B. Contracts

1. Government Contracts

i.Public Bidding Requirement

Read: Manila International Airport Authority, et al. vs. Mabunay, G.R. 126151, January 20, 2000. JG Summit Holdings vs. Court of Appeals, G.R. 124293, November 20, 2000. Information Technology Foundation of the Philippines, et al. vs. COMELEC, et al, G.R. No. 159139, January 14, 2004.

Oani vs. People of the Philippines, G.R. No. 139984. March 31, 2005.

Agan vs. PIATCO, G.R. Nos. 155001, 155547, 155641; May 5, 2003.

Sec. 5, R.A. 7718

Rule 3, IRR

ii. Unsolicited Proposals and Direct Negotiation

Read: Secs. 4-A, 5-A, R.A. 7718

Rules 9 and 10, IRR

iii. Government Procurement

Read:Republic Act No. 9184, Government Procurement Reform Act

iv. Other Contracts to be discussed in Part IV

C. Sources of Financing

1. Equity, Loans, Debt and Capital Markets

Read:The Guide to Financing Oil and Gas Projects, Milbank, Tweed, Hadley & McCloy, pp. 11-22.

2. Multilateral Lending and Export Credit Agencies

Read:The Guide to Financing Oil and Gas Projects, Milbank, Tweed, Hadley & McCloy, pp. 11-22.

3. The World Bank Group

Read:Philippe Benoit, Project Finance at the World Bank, pp. 19-35, 59-67, 69-78.

IV.Project Finance in the Philippine Context Industry Specific

Power and Energy

A.Upstream Energy Industry Exploration, Development and Utilization of Resources

1.Petroleum Oil and Gas

Read:

Article XII, Section 2, 1987 Constitution Presidential Decree No. 87 (1972) Proclamation No. 72 The Guide to Financing International Oil and Gas Projects, Milbank, Tweed, Hadley & McCloy, pp. 59-81.

Executive Order No. 66 (designating DOE as lead agency for development of Philippine natural gas industry) Case Study: The Malampaya Deep Water Gas to Power Project

2.GeothermalRead:

Article XII, Section 2, 1987 Constitution Presidential Decree No. 1442

Case Study: Tiwi-Makban Power Plant

3.Coal Energy

Read:

Presidential Decree No. 972 Presidential Decree No. 11744.Alternative and Renewable Energy

Read:

Republic Act No. 7156 Executive Order No. 462 Executive Order No. 2325. Mining

Please see IV.E below.B. Midstream Energy Industry Power Generation and Distribution

1.Power Generation Sectori. Independent Power Producers

Read: The Guide to Financing Power Projects, Baker & Mckenzie, pp. 21-37.

Administrative Order No. 10, May 26, 2001, Office of the President

R.A. No. 8975, Prohibiting Injunctions and TROs

ii. Project Documentation

Read:The Guide to Financing Power Projects, Baker & Mckenzie, pp. 37-65.

iii. Philippine Power Industry

Read:Republic Act No. 9136, Electric Power Industry Reform Act of 2001

iv. Case Study

Quezon Power Plant

IMPSA

2. Distribution Sector3. Transmission Sector

4. Supply Sector

C. Downstream Energy Industry

1.Oil

Read: Republic Act No. 8479 Garcia vs. Corona, G.R. No. 132451. December 17, 1999.2.Compressed Natural Gas

3.Biofuels - Republic Act No. 9367 (Biofuels Act of 2006)

Transportation

D. Transportation

1.Secs. 2-3, Article XII, 1987 Philippine Constitution

2.Revisit: Concept of Public Utility in Tatad case

3.Case Study

i. Metro Rail Transit Corporation

Land Registration Authority Consultaii.Light Rail Transit 1 Cavite Extension Project

Read: Request for Opinion of Department of Justice (DOJ) re: Sec. 4-A, R.A. No. 7718

DOJ Opinion No. 075, September 4, 2002

Mining Resources

E. The Mining Industry

a. General Background

Read: R.A. No. 7942, Philippine Mining Act of 1995

La Bugal Blaan Tribal Association, et al. vs. Ramos, WMC, et al., G.R. 127882, (final decision after motion for reconsideration), December 2004.

Southeast Mindanao Gold Mining Corp. vs. Balite Mining Corp., G.R. 135190, April 3, 2002.

Isagani Cruz, et al. vs. DENR Secretary, et al., G.R. No. 135395, December 6, 2000.

Republic vs. Marcopper Mining, G.R. No. 137174, July 10, 2000.

b. Case Study

i.Western Mining Corporation

ii.Anglo American Exploration (Philippines), Inc.

IV.Selected Legal Issues in Project Financing

A.Choice of Law Procedural and Substantive Law

B.Dispute Resolution

Read:Project Finance: Selected Issues in Choice of Law, Skadden, Arps, Slate, Meagher & Flom, pp. 63-70

C.Environmental Concerns

i. Philippine Environmental Impact Statement System

ii. Environmental Compliance Certificate

Read:

Presidential Decree No. 1586

Philippine EIS System Guide: Policies and Procedures, EMB-DENR, pp. 1-29

R.A. No. 8749, Philippine Clean Air Act of 1999

V.Privatization in the Philippines

A.Introduction

B.Regulatory Framework

Read:

Proclamation No. 50; R.A. Nos. 7661, 7886 and

8758; Executive Order Nos. 298 (1996), 12 (1998), 323 (2000)

C.Privatization Council and Privatization Management Office

These sections are flagship provisions for the Philippine economy recognizing the role of private initiative and enterprise in a self-reliant and independent national economy effectively controlled by Filipinos.

PAGE 4