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Philippines Infrastructure Report Q3 2010

Philippines Infrastructure Report provides industry professionals and strategists, corporate analysts, infrastructure associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on the Philippines' infrastructure industry.

Real growth data for the Philippines construction industry value in 2009 has been revised down to 4.3% year-on-year (y-o-y) from a previous 5.8% y-o-y. While this represents a notable revision, it still indicates solid growth for the country against a difficult economic backdrop. On the plus side, nominal industry value has been revised upwards, from PHP378.67bn to PHP390.45bn (US$8.46bn), for 2009. Despite the slowdown in construction industry growth experienced in 2009, we are still optimistic for growth to rebound in 2010 to previous highs. In 2010, we are anticipating real growth of 7.16%, with this increasing into double digit growth later in the forecast period. Between 2010 and 2014 we are anticipating average growth of around 10% y-o-y.

Evidence that our optimism for 2010 and beyond is well founded is shown in the number of investment pledges recorded by the Philippine Board of Investments. In the first half of the year investment approvals increased by 318% to PHP124.42bn in the same period in 2009 and higher than those approved in the whole of 2009. Investment pledges have been received for 87 projects, of which, 70% were for power projects, including renewable energy and rehabilitation projects. This data presents further upside potential to our forecasts.

However, there are a number of threats to our outlook. Rising construction material prices will threaten the execution of projects. Prices for construction materials increased in April and May 2010, and in June Holcim Philippines announced it would increase its cement prices in the country, starting June 21 2010, further confirming the announcement made by the Board of Investments (BoI) that Philippine cement is one of the most expensive in Asia, second only to Indonesia. Rising prices for cement in the country have been blamed, in part, on the cost of electricity, one of the key inputs. The high cost of electricity, and the intermittent supply, could also pose a threat to construction industry value growth.

Another risk is to one of the largest areas of potential in the Philippines’ infrastructure sector – the renewable energy sector. Despite the passing of the renewable energy act in 2008, which set up a feed-in tariff for renewables, it has yet to define the levels for each individual technology under the renewable bracket, including - solar, geothermal, biomass, wind and small hydro. This is causing uncertainty in the market; indeed, in June 2010, Northwind Power Development put a new wind farm on hold for a year to be located in Aparri, Cagayan..

Despite this, the creation of the Wind Energy Development Association (WEDAP) of the Philippines by a number of power companies, in June 2010, does present potential for better regulations in the sector, and therefore facilitating investment. The association's main focus is to promote and support the development of wind power in the Philippines, as well as influence policy creation under the Renewable Energy Act. So far, WEDAP has called for a reasonable rate of compensation to counteract the high sunk costs of setting up a wind farm, and has suggested feed-in tariffs to make wind competitive with fossil fuels and has called for investment into transmission lines in order to hook up more remote areas to the national grid.
Executive Summary

SWOT Analysis

Philippines Infrastructure SWOT
Philippines Infrastructure Project Finance SWOT
Philippines Economic SWOT
Philippines Political SWOT

Market Overview

Industry Forecast Scenario
Table: Construction Industry Data
Construction And Infrastructure Forecast Scenario

Transport Infrastructure
Transport Infrastructure Overview
Table: Competitiveness Of Philippines Transport Infrastructure
Major Projects – New And Ongoing Projects
Road Networks
Rail Networks
Major Projects Table – Transport
Table: Philippines Major Infrastructure Projects – Transport

Energy And Utilities Infrastructure
Energy And Utilities Infrastructure Overview
Major Projects – New And Ongoing Projects
Power Plants And Transmission Grids
Major Projects Table – Energy And Utilities
Table: Philippines Major Infrastructure Projects – Energy & Utilities

Business Environment
Philippines Business Environment
Limits Of Potential Returns
Risk To Realisation Of Potential Returns
Regional Overview
Asia Pacific Infrastructure Business Environment Ratings
Table: Regional Infrastructure Business Environment Ratings

Project Finance Ratings
Philippines Project Finance Ratings
Design And Construction
Commissioning and Operating
Overall Project Finance Rating
Regional Overview
Project Finance Ratings: Outlook For Asia Pacific
Table: Design and Construction Rating
Table: Commissioning and Operating Rating

Table: Overall Project Finance Rating

Macroeconomic Outlook
Table: Philippines – Economic Activity

Political Outlook
Domestic Politics l
Domestic Politics ll
Long-Term Political Outlook

Company Monitor
EEI Corporation
First Philippine Balfour Beatty Inc (FPBB)
San Miguel Corporation (SMC)

Global Overview
Global Project Finance Ratings
Table: Design and Construction Rating
Table: Commissioning and Operating Rating
Table: Overall Project Finance Rating
Global Infrastructure Business Environment Ratings
China And India Break Into Top 10
Table: Global Infrastructure Business Environment Ratings, April 2010

Industry Forecasts
Construction Industry
Data Methodology
Capital Investment
Construction Sector Employment
Infrastructure Business Environment Ratings
Ratings Overview
Table: Infrastructure Business Environment Indicators
Project Finance Ratings
Table: Design And Construction Phase
Table: Commissioning And Operating Phase – Commercial Construction
Table: Commissioning And Operating Phase – Energy And Utilities
Table: Commissioning And Operating Phase – Transport
Companies Mentioned
- EEI Corporation
- First Philippine Balfour Beatty Inc
- San Miguel Corporation
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