US credit agency to finance $1-B worth of big-ticket, high-risk gov’t projects

Overseas Private Investment Corp. (OPIC) of the United States has agreed to finance some $1- billion worth of big-ticket and high-risk projects of government-owned corporations. OPIC’s decision came along with a go-signal for the Philippine Export-Import Bank (PhilEximbank) to pursue its pending project proposals.

Finance Secretary Jose Isidro Camacho said the OPIC decision came as a surprise to Philippine officials who were expecting the proposals to be rejected due to internal policy questions within the OPIC.

"This is the biggest surprise during the Bush administration’s state visit because we thought that OPIC funding was improbable," Camacho said. "But we were told that PhilEximbank could now pursue its proposals and a substantial amount was available for the Philippines."

According to Camacho, OPIC approval was initially considered improbable because the US agency had "internal policy issues" that were not immediately resolved.

"It’s a new facility and in fact OPIC’s participation in the borrowing of the National Power Corp. was the first activity it undertook since its creation," Camacho explained. "Now that they have resolved their internal policy questions, the facility is open to us."

PhilEximbank had initially proposed a $350-million Global Medium Term Note facility to be funded by the OPIC for big-ticket projects of government-owned corporations and private companies.

Phileximbank president Joel Valdez said four major projects have already been approved to tap the facility and more projects would be lined up when OPIC approves the subsequent allocations.

"The initial amount for the facility is $250 to $350 million but that’s only a seed fund," Valdez said. "There will be additional funding eventually, when this initial amount is used up."

Camacho said the total amount available is around $1 billion. "This is the biggest thing that came out of the bilateral meetings between the US and the Philippines," he said.

The funds would come from the US capital market with a guarantee from OPIC which would shoulder the risk of its Philippine investment. The Phileximbank, in turn, would shoulder the credit risk of the individual borrowers of the fund.

PhilEximbank said the OPIC-supported facility would provide long-tenor funding for investment-grade (triple-A) projects and investments with no commitment fees to the borrowers and the tenor stretched over a 10- to 15-year period.

The PhilEximbank facility would be used to guarantee $200-million worth of loans for the $300-million solar wafer cells manufacturing project of the SunPower Philippines Manufacturing Ltd., an affiliate of the US-based SunPower Corp.