Financial sector keen on funding LNG terminal

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The Malampaya offshore gas field -- HMC.HEEREMA.COM

By Victor V. Saulon,

THE Energy department’s plan to put up an integrated liquefied natural gas (LNG) facility has attracted interest from the private sector, including foreign financial institutions that are willing to partner with the government in funding the project, bankers said.

“We have lots of interest coming from overseas — from Asia, from Europe and the US — on how to co-finance this with the government and the private sector,” Bonifacio M. Banzon, BPI Capital Corp. head of project finance, told participants at AVCJ’s Private Equity & Ventures Forum on Wednesday at Fairmont Hotel in Makati City.

He declined to disclose details on the interested entities when asked on the sidelines of the forum. Other bankers also mentioned the government’s LNG project as attractive for investors.

The Department of Energy  plans to develop the domestic natural gas industry as it aims to transform the Philippines into an LNG transshipment hub in the Asia-Pacific region. It is preparing the necessary policies ahead of the expected depletion of indigenous natural gas supply from Malampaya by 2024.

It said LNG has the potential to cover the increasing demand of the Philippines, which it placed at around 18,500 megawatts by 2040 based on the Philippine Energy Plan. It is also looking at the potential of gas-fired power plants to complement the output from renewable energy sources or replace diesel-fired plants in off-grid areas.

An official of one of the world’s top managers of infrastructure funds described LNG as “prolific” as a “healthy volume” exists in terms of buying and selling the resource, which is described as the cleanest of all fossil fuels.

“LNG is the next battleground,” the official who asked not to be named said. “I would even go so far as to say that there is no need for the government to be involved.”

A banker, who asked not to be identified, said the government could come in with the policy, but in terms of money and development, the private sector should take over. The interest in LNG comes in view of the diminishing appetite for coal, making investors assess their way forward as it could affect their exit strategy, the banker added.

For other infrastructure projects, a number of bankers and investors said funding is not a problem as liquidity remains available both locally and overseas.

“Money is available on the debt side. There is so much liquidity in the system,” said the banker, pointing to the country’s benign interest rate for the past several years.

For the government side, Karen G. Singson, undersecretary of the Department of Finance, told the forum that because of the liquidity the government was looking at where private sector financing has an advantage.

She made the comment amid observations about the state’s preference towards funding projects through official development assistance and traditional government procurement.

“That’s in developing basically new projects that introduce new technology, new concept that would deliver infrastructure at lower cost and quicker,” she said.

“These are all innovations that the private sector should have an ability to deliver in some ways better than the government because you don’t have any restrictions from procurement, you have more flexible development teams,” she added.

She said the government has announced that it is “very welcoming” to unsolicited proposals, which allows the original proponent greater probability of bagging a project as it is allowed to match an offer made by rivals.

The government is looking at the proposed LNG facility as an unsolicited proposal.