Philippines CALA PPP to drop government financing

The $822m project has applied to change its structure so that it's now 100% privately financed.

One of the Philippines’ largest public-private partnership (PPP) projects put forward by the Aquino administration – the PHP35.58 billion (€636 million; $822 million) Cavite-Laguna (CALA) Expressway – has applied to change the terms of its agreement, thanks to greater-than-expected private sector interest. 

The toll road was originally divided into two sections: the 28.9-kilometre Cavite section, and the 18.1-kilometre Laguna section. According to the project’s original terms, the private sector is expected to finance, design and construct the Cavite section, while the Department of Public Works and Highways (DPWH) would finance, design and construct the Laguna section through an Official Development Assistance (ODA) loan. The private sector would also be granted the rights to maintain and operate the entire CALA Expressway for 35 years, including construction. 

However, DPWH has now put forward a new PPP structure that leaves out the ODA financing. After the government issued the pre-qualifying bid invitations in April, several private sector bidders came forward saying they would be willing to finance and construct the entire expressway. 

Given the success of the Ninoy Aquino International Airport (NAIA) Expressway Phase II Project – in which a San Miguel Holdings Corporation subsidiary paid the government PHP11 billion up front – the government department and the PPP Centre decided to change the terms of the project from a “hybrid” structure to a purely privately-financed project, according to Rois Concordia, director of the PPP Centre’s Project Development Service. 

“The appetite of the private sector is such that they said they are willing to take on the entire stretch, and so we were excited to change that,” Concordia told Infrastructure Investor

Removing the government financing does not mean the government will play no role in this project, however. Concordia explained the government would still be helping the private sector winner with paperwork and obtaining right-of-way licenses for the toll road. 

DPWH has submitted the proposed changes to the National Economic and Development Authority Board of the Philippines for approval. Although the PPP Centre and DPWH have not received the official approval yet, Concordia believes it could come as early as next week, since they have already received several queries about the changes from interested private sector partners. 

Although this represents the second PPP project of the DPWH to drop government financing, Concordia said that the structure of future PPP projects will largely depend on government agencies, as some prefer using ODA. She believes, however, it is better for the private sector to finance as much as it can, thus freeing the ODA financing for social projects like schools.