Unit 2801, 28/F Antel Corporate Centre 121 Valero St., Salcedo Village, Makati City 2014 CORPORATE PROFILE LGU GUARANTEE CORPORATION “Your link to progress.”
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U n i t 2 8 0 1 , 2 8 / F A n t e l C o r p o r a t e C e n t r e
1 2 1 V a l e r o S t . , S a l c e d o V i l l a g e , M a k a t i C i t y
2014
CORPORATE PROFILE
LGU GUARANTEE CORPORATION “Your link to progress.”
The LGU Guarantee Corporation or LGUGC is
the first private corporation to go into the
financial guarantee business in the Philippines. It
is the recognized private sector link in public-
private partnerships for local development
financing. Anchored on good governance values,
LGUGC mobilizes the resources of private
sector financial institutions toward funding local
development projects.
LGUGC was incorporated in March 1998 with the primary mandate of granting local government units
(LGUs) access to private sources of capital by providing credit enhancement to LGU debts. Its credit
enhancement facilitated the entry of LGUs with development projects in the capital market.
LGUGC has since extended its guarantee services to water districts, electric cooperatives, state
universities and colleges and renewable energy technology providers.
With proven track record for over a decade, LGUGC is the name to trust in the Philippine financial
guarantee business.
LGUGC’s stockholders are the Bankers Association of the Philippines and Development Bank of the
Philippines.
The company has an authorized capital stock of PhP500 million of which PhP297,587,500 are subscribed
and outstanding. As of December 2013, total stockholder’s equity amounts to PhP500.818 million.
Board of Directors
(2014-2015)
Incorporators
Gil A. Buenaventura
Chairman
Lorenzo V. Tan
Vice Chairman
Antonio S. Abacan, Jr.
Director/Treasurer/Secretary
Cezar P. Consing
Director
Alberto S. Villarosa
Director
Benel D. Lagua
Director
Ma. Teresa M. Jesudason
Director
Lilia G. Baun
Director
Lydia N. Orial
Director/President/CEO
Deogracias N. Vistan
Cesar E.A. Virata
Peter B. Favilla
Tirso D. Antiporda, Jr.
Renato T. De Guzman
Leonilo G. Coronel
Alfredo C. Antonio
Francisco F. Del Rosario, Jr.
Ruben O. Fruto
Cesar M. Drilon, Jr.
Palermo L. Soriano
Primary Business Contact
Ms. Lydia N. Orial President/CEO
Phone: (02)845-3386
Fax No.: 888-4217
MISSION
To be the recognized private sector link in public-private
partnerships for local development financing.
VISION
We commit to:
Advocate for reforms that will mobilize resources of
the private sector toward financing local
development projects;
Continue to advocate for policy reforms for LGU
debts, whether bond floatation or direct loans, as a
viable local development financing option; and
Instill values of good governance to enhance the
borrower’s enterprise management and
creditworthiness, especially local governments and
utility companies.
Table of Contents
Corporate Profile ………………………………………………........ 1
Operating Highlights …………………………………………………… 5
Products and Services …………………………………………………… 14
Eligible Projects …………………………………………………… 15
Indicative Terms and Conditions
LGUs …………………………………………………… 16
Water Districts …………………………………………………… 17
Medium and Large Enterprises …………………………………………………… 18
ECPCG Program …………………………………………………… 19
DOE-LGF Program …………………………………………………… 20
Credit Evaluation Process …………………………………………………… 21
LGU Credit and Screening Rating
System
…………………………………………………… 22
LGU Rating Methodology …………………………………………………… 22
Credit Rating for Water Districts …………………………………………………… 23
ECPCG Program …………………………………………………… 24
DOE-LGF Program …………………………………………………… 25
Outstanding Guaranteed Accounts …………………………………………………… 26
Redeemed Accounts …………………………………………………… 28
ECPCG Outstanding Guaranteed
Accounts
…………………………………………………… 30
DOE-LGF Outstanding Accounts …………………………………………………… 30
Institutional Linkages …………………………………………………… 31
Partner Financial Institutions …………………………………………………… 32
1
Considered as a pioneering institution, LGUGC was the first to introduce a guarantee mechanism for
LGU borrowings in the Philippines and the first private corporation to go into the guarantee business in
the country. The company’s vision is to provide a viable alternative to local government financing. Its
operations were in line with the provision for fiscal autonomy specified in the Local Government Code of
1991, which expanded the local government’s fiscal authority by allowing LGUs to borrow from private
financial institutions (PFIs) and float debt instruments even without prior approval from the Department
of Finance (DOF).
The first mandate of LGUGC was to open up private banks to direct lending to LGUs, but due to the
available bond issuances planned for some LGUs in 1999, LGUGC shifted strategy immediately from
slowly opening up PFIs to the LGU debt market thru direct loans to guarantees of bond issues and LGU
bond market development. In 1999, LGUGC extended guarantees to the City of Urdaneta and the
Province of Aklan for bond issues of PhP25MM and PhP40MM, respectively. Extensive work advocacy
was done on LGU Leagues, multilateral agencies, Bangko Sentral ng Pilipinas (BSP) and national
government agencies such as the DOF and the Department of Interior and Local Government (DILG).
These efforts paved the way for the development of a municipal bond market in line with LGUGC’s
vision of an active capital market for LGU debts.
Through the years, LGUGC remains unwavering in its advocacy to obtain an open declaration of national
government support for the LGU bond market development in the country. The effort to liberalize the
trusteeship of LGU bonds then limited only to government banks finally paid off with the BSP’s approval
of the proposal to allow PFIs to serve as trustee agents of any mortgage or bond issuances by LGUs.
This was however not enough to provide a conducive policy environment for LGU bond flotation. The
competitive stance adopted by the government financial institutions (GFIs) after LGUGC
operationalization, threatened as they were by competition, made LGU bond flotation appear costlier with
a more complicated process, and unfavorable alternative for Local Chief Executives (LCEs). GFIs,
especially Land Bank of the Philippines (LBP), adjusted loan terms and conditions from off-market to
prime market after LGUGC made its presence felt. After the PhP50 million Baliuag Star Bonds were
issued on June 19, 2006, there was a three and a half year lull until the next LGU bond issuances
guaranteed by LGUGC, those of the Province of Aklan and Municipality of Alfonso Lista, Ifugao in 2009
and Infanta Water Bonds in 2011. A total of 17 bond issuances have been guaranteed by LGUGC over 15
years, aggregating PhP3.20 billion.
While LGUGC remained steadfast in supporting the capital market for LGU debts, the opportunity to
expand LGUGC’s services to other than the LGU market surfaced with the signing of a Memorandum of
Agreement among the U.S. Agency for International Development (USAID), Japan Bank for
International Cooperation (JBIC), Development Bank of the Philippines (DBP) and LGUGC to pilot a
financing scheme for water projects, referred to as the Municipal Water Loan Financing Initiative
(MWLFI). The MWLFI was aimed at testing the possibility of blending official development assistance
(ODA) with private bank financing to make the latter more affordable to water service providers, which
otherwise cannot meet pure private sector credit finance terms. The Metro Iloilo Water District was the
pilot and only water district assisted under the program. The MWLFI was the precursor of the Philippine
Water Revolving Fund (PWRF) of JBIC, the USAID, DBP, Municipal Development Fund Office
(MDFO) and LGUGC, which is designed to support the Philippine government attain its Millennium
Development Goals for water and sanitation. The PWRF leveraged public resources with private sector
CORPORATE PROFILE
2
financing in the water sector at terms and conditions that were affordable to local utilities. As of end
2013, LGUGC has guaranteed 15 water districts (WDs) aggregating PhP1.64 billion in loan amount.
In 2004, LGUGC ventured on a new type of service offering: program management. The World Bank
(WB), with the full backing of the DOF, tapped LGUGC as its Program Manager for the USD10 million
Electric Cooperative System Loss Reduction Project Partial Credit Guarantee Program (ECPCG)
executed by the Department of Energy (DOE).
This was followed in 2006 by the management of two other DOE executed programs, the Capacity
Building to Remove Barriers to Renewable Energy Development-Loan Guarantee Fund (CBRED-LGF),
and the RPP-Loan Guarantee Fund (RPP-LGF) for Photovoltaic Systems loans of rural households in off-
grid areas. The LGUGC’s management of these programs opened LGUGC to opportunities among
electric cooperatives (ECs) and renewable energy technology providers (RETPs). With these experiences
to support its venture to other markets, LGUGC further expanded its guarantee coverage to include ECs
and RETPs. An opportunity to entertain state universities and colleges (SUCs) arose with the issuance of
a memorandum by the Commission on Higher Education (CHED) for the establishment of e-laboratories
for all SUCs. This CHED memorandum caused the expansion of LGUGC coverage to such projects on a
Build Lease Transfer (BLT) basis. Notwithstanding the opportunities present for the LGUGC guarantee in
various other markets, the LGUGC Board and Management would still want to promote LGU Bond
Market development and are just waiting for the right time to aggressively advocate for the same. While
bond floats are almost nil presently, LGUGC has entertained applications for guarantee of direct LGU
loans from PFIs.
Through experience, LGUGC management is aware that as the PFI is exposed to and learns more of a
particular borrower sector, the need for the LGUGC guarantee diminishes. There is therefore the constant
need for LGUGC to develop new markets and be a “Market Maker”. By being thus will LGUGC continue
to be relevant and viable.
In January 2010, the Guarantee Facility for Medium and Large Enterprises (MLEs) was launched
pursuant to the Board’s directive to expand LGUGC guarantee service to sectors other than its existing
market. This facility has terms and conditions that will encourage PFIs to utilize the LGUGC guarantee
when funding MLE projects that have risk factors beyond PFI internally acceptable limits. The facility
focuses on the middle market engaged in basic infrastructure projects. LGUGC also successfully extended
its guarantee services to bulk water suppliers or borrowers that have contracts, joint ventures or build-
operate-transfer projects with traditional LGUGC clients.
On December 2, 2013, the Asian Development Bank (ADB) exercised its option to redeem its LGUGC
shares under its Subscription Agreement with LGUGC. ADB believed that its developmental objective
has been met which is to provide funding for a period of time until LGUGC achieved commercial
stability and growth.
After only 15 years of operationalization, LGUGC’s credit enhancement has caused the flow of PhP7.687
billion in private sector funds toward critical local development projects of LGUs, WDs, ECs and MLEs.
The total volume of loans guaranteed at PhP6.969 billion is 31x LGUGC’s paid up capital of PhP226
million as of end 2013.
3
Despite the exit of ADB, LGUGC maintained its PRS Aa+ (corp.) issuer credit rating from the Philippine
Rating Services Corporation since November 8, 2010 which enables LGUGC to maintain the 20% risk
weight for its guaranteed debts.
Below is a summary of the results of LGUGC’s continuing pro-active institutional marketing strategy
over a span of 15 years:
Signing in September 1999 of an agreement with the USAID/Development Credit Authority
(DCA) where DCA undertook to guarantee 30% of the risk of qualified borrowers up to an
exposure of USD8.55 million. The original five-year agreement was extended for four years
and expired on September 30, 2008. A second agreement for the USAID/DCA to co-guarantee
up to 50% of LGUGC’s exposure to LGU water utilities, water districts and private water
supply providers up to an exposure of USD12.75 million was signed on September 24, 2008.
Receipt of various technical assistance from USAID for the (a) design and development of the
LGUGC internal LGU Credit Screening and Rating System (LCSRS), (b) computerization of
the LCSRS, (c) LCSRS database update, (d) review of and recommendations on the LGUGC
guarantee policies and procedures, (e) design of the Water District Credit Rating System, and
(f) development of LGUGC guarantee pricing mechanism.
Receipt of technical assistance from Australian Aid through the Philippines-Australia
Governance Facility for the (a) review and improvement of the LCSRS, and (b) design and
computerization of the LGUGC Portfolio Monitoring and Management System.
BSP approval of LGUGC’s proposal to reduce the risk weight of LGUGC-guaranteed LGU
bonds from 100% to 50%.
Insurance Commission approval of LGUGC’s proposal to make LGUGC-guaranteed LGU
bonds automatically qualify as reserve instruments of insurance companies.
BSP approval of LGUGC’s proposal to allow private banks to serve as trustee agents of LGU
bond proceeds.
Selection of LGUGC by the DOF and the DOE as program manager for the following
guarantee funds:
o EC-PCG Program funded by Global Environment Facility (GEF) through the WB. The
program provides 80% guarantee cover for private banks’ loans to electric cooperatives
(ECs) where at least 50% of the loan will be utilized for system loss reduction.
o CBRED-LGF Program funded by GEF through the UNDP. The program provides up
to 85% guarantee cover for private banks’ loans to renewable energy proponents. The
program has been transferred to the Republic of the Philippines in May 31, 2011
through the DOE and has been renamed as DOE-LGF.
o Rural Power Project – Loan Guarantee Fund program funded by the GEF through the
WB. The program provides automatic guarantee lines of up to PhP5 million to micro
finance institutions to cover up to 50% of their loans to rural households for the
purchase of solar home systems. The program was terminated on June 30, 2009 in
accordance with the DOE-WB RPP Project Agreement.
Equity infusion by the Asian Development Bank (ADB) taking up 25% of total LGUGC paid
up capital.
4
Inclusion of the LGUGC in the JBIC and USAID sponsored PWRF Program, which
institutionalizes the private-public partnership formula in addressing the country’s water supply
millennium development goal. LGUGC plays a major role as the guarantor of LGUGC partner
private banks that will co-finance with DBP loans to water service providers such as LGUs,
water districts and private water suppliers. The Memorandum of Agreement among the PWRF
parties was signed on October 20, 2008.
Signing of a Memorandum of Agreement with Local Water Utilities Administration (LWUA)
on July 31, 2007 to collaborate and provide water districts (WDs) with a funding option that
addresses the need of the WDs for longer term financing at the same time Executive Order No.
279’s intention to eventually graduate WDs to the formal financial system.
Invited to the Philippines Development Forum Sub-Working Group on Water Supply and
Sanitation, specifically as a member of the Task Force on Financing and Infrastructure
Development alongside DOF, Department of Budget and Management, DBP, LBP, LWUA,
LGU Leagues, WB, ADB, Japan International Cooperation Agency (JICA) and KfW.
Signing of a Memorandum of Understanding with Private Finance Advisory Network (PFAN)
to promote clean energy investments in the country.
Signing of a Memorandum of Agreement with the National Electrification Administration
(NEA) on June 16, 2009 for LGUGC PFIs to co-finance EC capex requirements.
Invited by the World Bank to present in the Energy Week 2011: Sustainable Energy: Low
Carbon, Acess and Governance Forum held in Washington D.C.
BSP approval of LGUGC’s proposal to reduce the risk weight of LGUGC-guaranteed debts
from 50% to 20%.
Capital infusion of East West Bank Corporation amounting to P7.5 million.
Capital infusion of Robinsons Banking Corporation amounting to P7.5 million.
Exit of ADB as LGUGC shareholder on December 2, 2013.
5
1998
LGUGC was formally incorporated on March 2, 1998 with a total paid-up capital of PhP216
million. This was the culmination of more than one year of planning and preparation. Then DBP
Chairman Mr. Alfredo C. Antonio invited the Bankers Association of the Philippines (BAP) to join hands
and form a guarantee corporation primarily to encourage private banks to lend to LGUs.
Considered as a pioneering institution, LGUGC was the first to introduce a guarantee mechanism
for LGU borrowings in the Philippines and the first private corporation to go into the guarantee business in
the country. The company’s vision was to provide a viable alternative to local government financing. Its
operations were in keeping with the provision for fiscal autonomy specified in the Local Government Code
of 1991, which expanded the local governments’ fiscal authority by allowing them to borrow from private
financial institutions or float debt instruments even without prior approval from the DOF.
LGUGC was expected to accelerate the competitive access of LGUs to financial markets and
ultimately to pave the way for further development and growth opportunities for both the government and
the private banking sector.
1999
In its first year of operation, LGUGC institutionalized the systems and procedures for an effective
guarantee mechanism. It extended its guarantees to the City of Urdaneta and the Province of Aklan for
bond issues of PhP25 million and PhP40 million, respectively. Four financial institutions and a financial
advisor were involved in the bond issues. The LCSRS was pilot-tested on these two accounts.
Extensive advocacy work was done on LGU Leagues, non-government organizations, multilateral
agencies and the DILG, and a pro-active marketing stance was developed to hurdle institutional challenges.
In September, the USAID/ DCA signed an agreement with LGUGC where DCA undertook to co-guarantee
30% of the risk of qualified borrowers up to an aggregate exposure of USD8.55 million.
With these efforts, LGUGC laid the groundwork for the development of a municipal bond market
in line with its vision of an active capital market for LGU debts.
2000
In less than three years, LGUGC hit the PhP1 billion mark in guarantee portfolio, with a total of
PhP940 million bond issuances guaranteed for the Puerto Princesa “Green” Bonds and the Caloocan City
“Katipunan” Bonds during the year. Two financial advisors submitted a total of five projects for evaluation
during the year and the number of involved financial institutions increased from four to five.
To sustain its growth in portfolio and the achievements during its early years of operations,
LGUGC worked on the following: (1) extension of financial advisory and credit rating services, (2)
completed the pilot-testing of its internal LCSRS, (3) institutionalization of a Project Monitoring Board
(PMB) for each guaranteed LGU bond issue, (4) entered into escrow arrangement with DBP-Trust to ring-
fence a guarantee fund that may be used only for payment of claims, and (4) started negotiations for equity
infusion with various BAP member banks and bilateral/multilateral institutions. Recognizing LGUGC’s
thrusts and achievements, the USAID Regional Urban Development Office for South and Southeast Asia
chose LGUGC as a model of public-private sector partnership for other Asian developing economies.
OPERATING HIGHLIGHTS
6
2001 Despite the local elections, LGUGC guaranteed the bond issuances of Tagaytay City for PhP220
million and Iloilo City for PhP130 million. LGUGC took advantage of the lull in guarantee activities to
review its internal policies and procedures. Work toward the computerization of its LCSRS and Portfolio
Monitoring System (PMS) began with technical assistance from the Philippines-Australia Governance
Facility (PAGF) of Australian Aid. USAID, on the other hand, approved a technical assistance for the
expansion of the LCSRS database from 120 to 500. LGUGC likewise participated in various presentations,
seminars and forums of the DOF, DILG, Department of Budget and Management (DBM) and FINEX.
Management’s efforts to make LGU bonds attractive investment instruments resulted to two BSP circulars
making LGU debts eligible alternative agri-agra compliance and reducing LGUGC-guaranteed LGU
bonds’ risk weight from 100% to 50%.
The company evaluated a total of four project feasibility studies during the year, worked with two
financial advisors and maintained its close relationship with its existing partner financial institutions.
2002
Total guarantee portfolio stood at PhP1.231 billion by yearend with two deals aggregating PhP117
million booked for the bond issuances of the municipalities of Daraga and Bayambang for a public market
and reconstruction of a dry goods market, respectively. Ten feasibility studies were actually evaluated. The
company worked with five private financial advisors and added an investment house to its pool of active
partner financial institutions.
LGUGC continued to advocate for a policy environment conducive to LGU debt market
advancement through the development of strong ties with national government agencies and private
financial sectors. LGUGC signed Memoranda of Agreement with DOF/Bureau of Local Government
Finance (BLGF) as well as with individual government financial institutions (GFIs) on information
exchange regarding LGU debts. LGUGC had a wider pool of private sector partners – six financial
advisors, seven lead and participating underwriters and two trustees. Complementing these partnerships
was the completion of the computerization of the LGU rating and portfolio management systems through
the PAGF technical assistance.
Noteworthy were the various recognitions accorded to LGUGC: cited by the USAID as one of the
Successful Development Models for the 21st Century, and as one of the Six Best Practices of USAID/DCA.
2003
2003 marked the fifth year of LGUGC as a credit enhancer for LGU debts. LGUGC capped the
year with two bond issues of PhP205 million and PhP390 million for an academic center in Leyte and a
commercial complex in San Juan, respectively.
LGUGC advocacy initiatives included: (1) tapping insurance companies for possible partnerships
which resulted to the Insurance Commission’s acceptance of LGUGC-guaranteed bonds as reserve
investments of insurance companies, (2) hosting a consultative meeting among technical representatives of
national government agencies involved in LGU bonds, (3) conducting an orientation on the mandate and
services of LGUGC to the National Economic Development Authority (NEDA) Regional Development
Officers, (4) participating in the nationwide advocacy campaigns of FINEX on alternative LGU fund
sourcing, and (5) a meeting with JBIC. Moreover, USAID support remained evident with a technical
assistance obtained on portfolio risk management and determination of actuarially-sound leveraging ratio
and the expansion of LGU database from 120 to 500 LGUs and publication of the screening results of said
LGUs.
A total of six project feasibility studies were submitted and evaluated. The company added two
new financial advisors to its pool of seven and increased the number of its active partner financial
institutions from six to eight.
7
2004
For the first time since its operationalization LGUGC covered 100% of its total expenses by
operating income consisting of guarantee fee, program management fee and interest income from these
fees.
2004 marked the beginning of a new milestone for LGUGC with its new service offering -
program management. World Bank, with the full backing of the DOF, tapped LGUGC as its Guarantee
Program Manager for the USD10 million Electric Cooperative System Loss Reduction- Partial Credit
Guarantee Program (ECPCG) to be conduited through the DOE.
At the same time, LGUGC enhanced the bond floatation of three LGUs for infrastructure projects
worth PhP697 million. These were extended to the Municipalities of Carmona and Imus and the City of
Pasay for middle-income housing subdivision, slaughterhouse and the construction of a two-storey
modern public market and commercial center, respectively. Nine project feasibility studies were
submitted and evaluated during the year. The company held extensive discussions with ten financial
advisors and eight financial institutions for various prospective LGU projects.
The institution remained unwavering in its advocacy to obtain an open declaration of national
government support for the LGU bond market development in the country. The effort to liberalize the
trusteeship of LGU bonds then limited only to government banks finally paid off. BSP approved the
proposal and allowed PFIs to serve as trustee agents of any mortgage or bond issuances by LGUs and
issued a circular containing the guidelines for PFI eligibility as trustee of LGU debt instruments.
Another milestone in 2004 is the signing of Memorandum of Agreement among USAID, JBIC,
DBP and LGUGC to pilot a financing scheme for water projects, referred to as the MWLFI. The
MWLFI was aimed at testing the possibility of blending official development assistance (ODA) funds
(from JBIC via DBP) with PFIs’ loan co-guaranteed by LGUGC and USAID to make it affordable to
water service providers, which otherwise cannot meet pure private sector credit finance terms. The
MWLFI was eventually pilot tested through Metro Iloilo Water District in 2006. The MWLFI was the
precursor of the PWRF that will be proposed by JBIC and USAID in 2006.
2005
The company successfully completed negotiations for additional capital infusion by the ADB. A
subscription agreement was entered into between ADB and the LGUGC, whereby ADB formally
expressed its desire to subscribe shares equivalent to 25% of the outstanding capital stock of the
Company, fully diluted. This further enhanced LGUGC’s financial position as a credit guarantee
institution in the eyes of the various stakeholders its serves.
LGUGC continued to actively pursue a policy environment conducive to the development of the
LGU bond market through its various advocacies and involvement in both government and private
sector–led forums concerning LGU financing. The advocacy activities included: 1) eligibility of PFIs as
LGU depository bank, 2) adoption of LGUGC FA accreditation system, 3) LGU credit rating as a pre-
requisite for bond issuance, 4) amendment of the local government accounting system to introduce
separate record-keeping for each economic enterprise, and 5) review and implementation of the 1996
DOF LGU Financing Policy Framework.
In late 2005, LGUGC management also reviewed its corporate vision, mission and strategies to
maintain its competitive edge. The company expanded its guarantee coverage to include WDs, and
opened its services to include direct loans and not just bond issuances. It likewise implemented a more
aggressive direct marketing strategy.
A total of five project feasibility studies were evaluated for possible bond floatation but nothing
materialized. One account was disapproved by the Board. At this time, partner financial advisors cannot
get mandates from LGUs primarily due to relatively cheaper cost of funds in loans over bonds.
8
2006
LGUGC continued to pursue an active marketing campaign in accordance with its revised
strategies. This resulted in two closed deals aggregating PhP89 million, one of which is a WD direct loan
guarantee. Toward the second half of the year, LGUGC rationalized its organizational structure and
enhanced its marketing unit. The year also saw LGUGC sign two more guarantee program management
agreements for 1) CBRED-LGF Program and 2) RPP-LGF. Moreover, the company further expanded its
guarantee coverage to include ECs, RETPs and SUCs.
During the fourth quarter of 2006, management started its aggressive marketing campaign
particularly among private banks. Advocacy with PFIs was a strategy implemented to allow LGUGC to
piggy back on PFI’s branch networks. While a total of 11 financial institutions participated in the past 15
projects of LGUGC only PNB, Allied Bank and Maybank were still actively marketing the LGUGC
guarantee. As a result of initial presentations to PFIs, BPI, MetroBank and Union Bank committed to
market the LGUGC guarantee.
LGUGC continued to coordinate with its pool of FAs (currently at 10) though only three had live
mandates for potential LGUGC guarantee extension. Three projects were being reviewed as of year-end,
all of which came from LGUGC direct marketing efforts with an LGU and WDs.
In 2006, LGUGC was made a member of the Steering Committee that was constituted to design
the PWRF. The PWRF Steering Committee was formed in 2005 by the DOF, NEDA, BAP, JBIC and
USAID. The Steering Committee and its Technical Working Group have been working to explore
options and modalities for such a water revolving fund.
With LGUGC’s continued advocacy, PFIs’ interest on water sector financing grew as evidenced
by their attendance in several PWRF consultation meetings. In February 2006, five PFIs indicated
interest to fund the second water project to be reviewed by LGUGC. Given the profile of accounts in the
pipeline, it was anticipated that substantial portion of LGUGC’s new guarantees for 2007 shall be from
water projects.
LGUGC management did not slow down on its advocacies for the development of the LGU debt
market. Advocacy activities included (1) Proposal to BSP for the application of the 50% risk weight
applied on LGU bonds also to LGU loans under the same conditions, with LGUGC guarantee and
covered by a deed of assignment of IRA of the LGU, (2) Insurance Commission approval of the request
to make LGU bonds guaranteed by LGUGC as automatic reserve eligible for insurance companies, and
(3) Proposal to the Office of the President for an Executive Order declaring LGU bonds as a core
developmental concern of the National Government.
2007
2007 being an election year, the management implemented a shift in strategy and focused its
marketing efforts on WDs, with encouraging results. It made landmark deals on water projects with eight
water district loans totaling PhP1.046 billion approved for 85% guarantee cover during the year. Booked
guarantees were, however, only at PhP385 million or 64% of the PhP600 million target due primarily to
some borrowers’ decision to delay loan availments to 2008. The loans approved for guarantee were for
efficiency improvement, water supply improvement, and expansion projects.
To further assist the water sector, LGUGC entered into a Memorandum of Agreement with
LWUA on July 31, 2007 where LWUA agreed to co-finance loans to WDs with LGUGC accredited
banks, provide a standby liquidity guarantee to co-lender after the latter’s maximum loan term expires to
allow loan terms to stretch to as long as 25 years, and take over the management and policy making
functions of defaulting WDs on behalf of LGUGC and its partner accredited bank.
The year also saw the Company venturing into development sectors such as the renewable energy
sector and the e-laboratory projects of SUCs, with one project each approved for guarantee aggregating
PhP55 million.
Despite its shift in market focus, LGUGC management continued to keep an eye on opportunities
among the LGUs. As of year-end, the guarantee applications of three LGUs were being processed.
Due to its aggressive marketing campaign among private banks to avail of its guarantee, LGUGC
9
ended the year 2007 with a total of 12 accredited financial institutions. Advocacy to PFIs was a strategy
implemented to allow LGUGC to piggy back on the PFIs’ branch networks.
LGUGC continued to have the support of the USAID through its co-guarantee agreement with
USAID/DCA. This partnership has been extended five times since the agreement first expired in
September 2004, the final expiry date being September 30, 2008.
LGUGC was likewise the recipient of two types of technical assistance from USAID. The first
was the study on the methodology for pricing its guarantee, and the second, the formulation of a credit
rating framework for WDs. Study results were available in 2008.
The year 2007 saw a major shift in the marketing strategy of LGUGC for the ECPCG Program.
Additional services were made available to ECs such as: assistance in completing the requirements of
lenders, the Energy Regulatory Board (ERC) and other regulatory agencies; grant for feasibility study on
capital expenditures as prescribed by ERC; and grant for tariff rate increase study. The new marketing
strategy paid off with six electric cooperatives signing the Memorandum of Understanding to show their
commitment to avail of the program before full due diligence is initiated.
In 2007, LGUGC established its RPP-LGF program management office (PMO) and worked
closely with the DOE in developing the market base for RPP-LGF. The PMO touched base with a
number of network organizations in the microfinance industry to develop linkages and pave the way for
partnerships with photovoltaic system providers. As of year-end, three MFIs were accredited under the
program. LGUGC management attached the PMO of CBRED-LGF to its Relationship Marketing
Department, actively promoted the program to financial institutions (FIs) and encouraged FIs to integrate
the program in their regular product lines. As of year-end, the CBRED-LGF had 14 accredited FIs and
two approved renewable energy projects.
2008
LGUGC’s marketing efforts were concentrated on WDs and LGUs, specifically for projects
involving the improvement of water quality and supply, and efficiency in the delivery of services in the
countryside. These resulted to the approval of six projects, four for WDs and two for LGUs, aggregating
PhP782.48 million in loan amount. LGUGC booked PhP645 million worth of guarantees against its target
of PhP605 million.
LGUGC management continued to keep an eye on opportunities among the LGUs and other
eligible markets. As of year-end, the guarantee applications of three LGUs, two WDs, one EC and one
Build-Operate-Transfer (BOT) proponent for a public market were being processed. LGUGC likewise
increased its number of PFIs from 12 in 2007 to 15 in 2008. In September 2008, a new five-year co-
guarantee agreement was signed by LGUGC and USAID, specifically for water projects of LGUs, WDs
and private water suppliers.
LGUGC remained an active participant of the PWRF, a collaborative effort of the USAID, Japan
International Cooperation Agency (formerly JBIC), the DOF, Municipal Development Fund Office
(MDFO), the DBP and LGUGC.
LGUGC was invited to the Philippines Development Forum Sub Working Group on Water
Supply and Sanitation, specifically on Financing and Infrastructure Development, in recognition of its
important role in the development of the water sector. The main function of the sub-working group is to
serve as the forum of the Philippine government to apprise all stakeholders in the guiding principles and
policies for the water supply and sanitation sector’s development agenda.
2009
LGUGC achieved its guarantee volume target, booking PhP647 million from approved
guarantees of PhP1.496 billion as of year-end against projection of PhP620 million, making 2009 another
fruitful year. Its guarantee and program management fees alone, excluding the interest income on said
fees, covered total expenses by 151%, much higher than the 130% target. LGUGC maintained its zero
default record, with a Contingent Liability of PhP2.025 billion as of year-end 2009 for a leverage ratio of
10
4.3x against Net Worth.
The company continued its efforts to ensure that private resources are channeled to more local
development projects in 2009 by: 1) maintaining close linkages with PFIs, financial advisors, associations
of target markets, and institutional partners, 2) improving guarantee evaluation and processing system and
timeline, and 3) expanding guarantee coverage to include RETPs and private water service providers.
LGUGC further strengthened the ECPCG program by signing a Memorandum of Agreement
(MOA) with NEA on June 16, 2009 to co-finance EC capital expenditure requirements. With the MOA,
the ECPCG program is expected to finally take off.
The CBRED-LGF program is being marketed aggressively. A new DOE policy directive issued
in November 2009, however, added another eligibility criterion, requiring proponents to be registered
under DOE as RE technology providers before they may qualify for the program.
The RPP-LGF was terminated on June 30, 2009 in accordance with the DOE-WB RPP Project
Agreement. The company was able to deliver the following under the RPP-LGF: 1) accredited 5 MFIs
with PhP1 million Automatic Guarantee Lines each, 2) a total of 188 PV installations guaranteed, and 3)
guaranteed loan portfolio amounting to PhP1.370 million.
The LGUGC Board and Management continued to advocate for policy reforms in support of local
development financing. The company actively participated in conferences, forums and workshops with
public-private partnership opportunities as the private sector representative. It was in 2009 that LGUGC
proposed to BSP and got approval for the reduction of the risk weight of LGUGC-guaranteed LGU loans,
water district loans and bond issuances from 100% to 50%.
2010
LGUGC successfully covered 100% of its total expenses with pure guarantee fee by 113%.
Including interest income on guarantee and program management fees, operating income covered total
expenses by as much as 168%. Nine accounts aggregating PhP748 million were booked against the
PhP612 million target. LGUGC continued to enjoy zero default, ending the year with an outstanding
contingent liability of PhP2.154 billion. It posted leverage ratio of 4.3x against Net Worth, Return on
Equity of 6.7% and increase in Total Assets of 7.9%.
To sustain its growth in portfolio while keeping its focus on infrastructure development, LGUGC
extended its guarantee services in the first quarter of 2010 to MLEs that are into local infrastructure and
other developmental projects. Its aggressive marketing in this sector yielded three approved accounts
aggregating PhP170 million in loan amount and 10 accounts in the pipeline with potential investment
requirement of PhP800 million.
The ECPCG Program finally booked two accounts with an aggregate loan amount of PhP228
million. Four approved accounts with loan requirements totaling PhP448.11 million were in various
stages of documentation as of year-end. Through the hard work of LGUGC in moving the ECPCG
program, the WB approved the request of the DOE for the release of the second GEF tranche of USD5
million for the ECPCG guarantee fund which will bring the program to its design level of USD10 million.
To cap a memorable year, LGUGC obtained a second-highest rating of PRS “AA+” (Corp.) from
the Philippine Rating Services Corporation on November 8, 2010. As a result of the rating, LGUGC
received confirmation from the BSP that all LGUGC-guaranteed loans and bonds shall have a risk weight
of only 20% pursuant to BSP Circular No. 538.
2011
LGUGC’s audited financial statements as of December 31, 2011 showed Total Revenues of
P81.301MM and Net Income of P40.641MM. 22% and 23% higher than year 2010 results of operations,
respectively. Total Net Worth rose by 9% to P553.339MM from P509.374MM in 2010. Total Assets
increased by 11% to P590.219MM. LGUGC proved its operating profitability in 2011 by covering total
expenses with operating income by as much as 176%.
Seventeen accounts aggregating P1.319 billion were booked against the P880.600MM target.
11
LGUGC continues to enjoy zero default, ending the year with an outstanding contingent liability of
P2.491 billion. It posted leverage ratio of 4.5x against Net Worth and Return on Equity of 7.6%.
To sustain its growth in portfolio, LGUGC continued to market its guarantee services to LGUs,
WDs and MLEs that are into local infrastructure and other developmental projects. In anticipation of the
phase out of the ECPCG program that LGUGC manages for the World Bank and the Republic of the
Philippines (RoP). Management entered into a MOA with NEA on July 11, 2011 for the co-financing of
ECs’ funding requirements with LGUGC partner financial institutions under the regular LGUGC
guarantee. These moves yielded 18 approved accounts aggregating P1.390B in loan amount and 21
accounts in the pipeline with potential investment requirement of P1.751B.
The ECPCG Program booked 7 accounts with combined principal guarantee coverage of
P707.04MM. Four more accounts aggregating P443.97MM in loan requirements have been approved and
are in documentation stage as of yearend.
On November 7, 2011, the International Bank for Reconstruction and Development granted a
two-year extension to the Electric Cooperative System Loss Reduction Project, including the Partial
Credit Guarantee Program, setting December 31, 2013 as the new closing date for the Grant Agreement.
The RoP thus extended LGUGC’s management of the $10MM EC-PCG program up to December 31,
2013 as a result thereof.
DOE likewise indefinitely extended its agreement with LGUGC to manage the $1.607MM
Capacity Building to Remove Barriers to Renewable Energy Development-Loan Guarantee Fund
program which has expired on May 31, 2011 and has since been turned over by the United Nations
Development Programme to DOE. The program is now called DOE-Loan Guarantee Fund (DOE-LGF).
To cap a memorable year, LGUGC maintained its PRS “Aa+” (corp.) issuer credit rating from the
Philippine Rating Services Corporation for the period November 2011 to November 2012 which enables
LGUGC to maintain the 20% risk weight granted by the BSP to all LGUGC-guaranteed debts.
2012
LGUGC’s audited financial statements as of December 31, 2012 showed Total Revenues of
P91.325MM and Net Income of P46.267MM, 12% and 14% higher than year 2011 results of operations,
respectively. Total Net Worth rose by 8% to P597.651MM from P553.339MM in 2011. Total Assets
increased by 11% to P590.219MM. LGUGC once again showed its operating profitability in 2012 by
covering total expenses with operating income by 176%.
LGUGC booked 11 accounts in 2012 aggregating P911.737MM in loan amount and
P753.077MM in guarantee coverage, consisting of 3 LGUs, 4 MLEs and 4 ECs. Of the 11 accounts, 2
were approved in 2011 and 9 in 2012. Philippine Veterans Bank enrolled 1 additional LGU account
amounting to P34.077MM under the Automatic Guarantee Line Agreement, increasing the total 2012 new
guarantee bookings to P787.154MM. Total contingent liability inclusive of principal and interest as of
end 2012 is at 2.4 billion, 4.10x the LGUGC Net Worth and 8.22x its Capital.
To sustain its growth in portfolio, LGUGC continued to be aggressive in marketing its guarantee
services to LGUs, WDs, ECs and MLEs that are into local infrastructure and other developmental
projects. This strategy established a pipeline of accounts with potential investment requirement of
P500MM.
LGUGC booked 8 accounts under the managed ECPCG program aggregating P1.162 billion in
loan amount and P929.303MM in guarantee coverage. Of the 8 accounts, 3 were approved in 2011 and 5
in 2012. Total contingent liability under ECPCG as of December 31, 2012 is P890.574MM consisting of
13 accounts, for a leverage ratio of 1.4x the ECPCG Guarantee Reserve and Interest Income Accounts.
In anticipation of the phase out of ECPCG by yearend 2013, the World Bank is preparing a
Philippine Clean Technology Fund (CTF) guarantee program that may replace the former. The CTF will
not only cater to ECs but also to private renewable energy developers that have Electricity Sales
Agreements with ECs. As the proposed program manager for the CTF, LGUGC developed guarantee
design, terms and conditions and presented these to its PFIs for feedback during a dialogue on
January 29, 2013. A workshop among LGUGC, DOE, NEA and PFIs was sponsored by the World Bank
12
on February 5, 2013 for further discussions and enhancement of the guidelines and procedures of the CTF
guarantee program.
Another milestone of LGUGC in 2012 was the P7.5MM capital infusion of East West Bank
Corporation through subscription of 50,000 common shares from new and unissued shares of LGUGC.
With the proven track record of LGUGC, East West Bank trusted that the bank will be able to actively
participate in funding developmental projects.
LGUGC has proven and continues to prove its strong presence in the industry. In its fourteen
years of operation, it has enhanced 65 projects nationwide amounting to P7.184 billion, consisting of
developmental projects of LGUs, WDs, MLEs and ECs which include, but are not limited to, construction
of water supply system, reduction in non-revenue water, public markets, slaughterhouses, public
terminals, commercial centers, tertiary hospitals and system loss reduction projects of ECs. LGUGC’s
strong affiliation with its PFIs greatly contributed to its continuing volume growth. To date, LGUGC has
12 AFIs consisting of 2 government banks and 10 private financial institutions which have aggressively
referred accounts to LGUGC. LGUGC will definitely further strengthen this effective alliance in years to
come.
Finally, LGUGC maintained its PRS “Aa+” (corp.) issuer credit rating from the Philippine Rating
Services Corporation for the period November 2012 to November 2013 for the third consecutive year.
This allows its PFIs to maintain the 20% risk weight granted by the BSP to all LGUGC-guaranteed debts.
2013
LGUGC’s audited financial statements as of December 31, 2013 showed Total Revenues of
P149.910MM and Net Income of P83.623MM, 64% and 81% higher than year 2012 results of operations,
respectively, due primarily to the sale of investments to realize trading gains. Total Assets increased by
11% to P657.726MM from P590.219MM in 2012 (restated). LGUGC once again showed its operating
profitability in 2013 by covering total expenses with operating income by as much as 189%.
To sustain its portfolio growth, LGUGC continued to be aggressive in marketing its guarantee
services to LGUs, WDs, ECs and MLEs that are into local infrastructure and other developmental
projects. This strategy resulted in the increase in year-end contingent liability to P2.49 billion from P2.44
billion in 2012 despite 5 maturing accounts and 2 accounts taken-out, equivalent to 4.98x the LGUGC
Net Worth and 8.15x its Capital. A pipeline of accounts with potential investment requirement of P1.5
billion was also established.
LGUGC booked 6 accounts under the managed ECPCG program aggregating P917.740MM in
loan amount and P734.192MM in guarantee coverage. Total contingent liability under ECPCG as of
December 31, 2013 is P1.453B consisting of 18 accounts, for a leverage ratio of 2.3x the ECPCG
Guarantee Reserve and Interest Income Accounts fund balances.
The ECPCG program under the World Bank (WB) expired last December 31, 2013. However, the
Republic of the Philippines (RoP), through the Department of Finance, has informed the World Bank of
its intent to utilize the proceeds of the $10MM grant in escrow to continue the implementation of the
ECPCG program, with LGUGC being retained as the Guarantee Program Manager. This is, however, a
transitory arrangement pending RoP approval of the WB-proposed Philippine Renewable Energy
Development Project (PHRED) where an additional U$40MM will be made available by the WB for the
expansion of the ECPCG Program using Clean Technology Funds (CTF), for the financing of electric
power distribution system upgrades, including the purchase of sub-transmission assets and emergency
capital expenditure requirements of electric cooperatives. Also eligible under the PHRED are renewable
energy projects of electric cooperatives (ECs) and renewable energy technology providers with ECs as
joint venture partners or ofttakers.
On December 2, 2013, the Asian Development Bank (ADB) decided to exercise its option to
redeem its LGUGC shares under its Subscription Agreement with LGUGC. ADB believed that its
developmental objective has been met which is to provide funding for a period of time until LGUGC
achieved commercial stability and growth. The redemption price shall be paid by LGUGC to ADB in 14
semi-annual principal installments plus interest equivalent to the “91-day t-bill peso rate” plus 2.5%
13
points in accordance with the terms and conditions set out in the Repayment Agreement. LGUGC Net
Worth declined by 16.4% to P499.377MM from 597.651MM in 2012 as a result of the ADB redemption.
However, the share redemption will not have a significant impact on LGUGC’s credit rating which
remain at PRS Aa plus (corp.) as assessed by the Philippine Ratings Services Corporation (PhilRatings).
LGUGC will also retain its assigned 20% risk-weight on LGUGC-guaranteed loans.
LGUGC welcomed a new member to its family, Robinsons Banking Corporation (Robinsons
Bank), which made a capital infusion of P7.5MM through subscription of 50,000 common shares from
new and unissued shares of LGUGC.
Assisting the national and local governments in economic development through the funding of
local infrastructure projects has been and will be LGUGC’s mission. In its fifteen years of operation, it
has enhanced 86 projects nationwide amounting to P7.687 billion in loan amount, consisting of
developmental projects of LGUs, WDs, MLEs and ECs, which include, but are not limited to,
construction of water supply systems, reduction in non-revenue water, public markets, slaughterhouses,
public terminals, commercial centers, tertiary hospitals, bulk water supply, water sanitation system and
EC system loss reduction projects. LGUGC’s strong affiliation with its PFIs greatly contributed to its
continuing volume growth. To date, LGUGC has 13 PFIs consisting of 2 government and 11 private
financial institutions. LGUGC has likewise maintained its alliance with donor agencies such as USAID
and WB, and national government agencies and the Bangko Sentral ng Pilipinas to smoothen the entry of
its PFIs in unchartered debt markets.
14
Guarantee
LGUGC guarantees the
indebtedness of LGUs,
WDs, ECs, RETPs, SUCs
and MLEs. The guarantee
fee is a function of the
underlying borrower and
project risks. Fees range
from 0.5% to 2% per
annum.
Credit Rating
LGUGC implements an
internal credit rating
system for LGUs, the
LCSRS, in the absence of a
formal stand-alone entity
specializing in risk
evaluation of LGUs. The LCSRS adopts internationally-accepted standards fit for due diligence
requirements of PFIs and individual investors. The system serves as the primary guide for both the
LGUGC and PFIs to identify LGUs that are primed for the commercial credit market. More
importantly, the credit rating system establishes the LGU’s willingness to honor contractual
obligations in addition to its capacity to pay. It is also a tool for LGUs toward better local
governance.
Until such time that an independent and reputable rating agency is established, LGUGC will
continue to disseminate screening and rating information to the public on a regular basis.
LGUGC also implements an internal credit rating system for WDs designed by the Indian-based
firm, CRISIL Ltd. (India), contracted by the USAID-PWRF. The credit rating system serves as a
tool for LGUGC to evaluate the creditworthiness of WDs. This determines LGUGC’s decision to
guarantee loans of water districts.
Program Management
The LGUGC offers program management services. Currently, LGUGC is managing the guarantee
funds for ECPCG and DOE-LGF, both supervised by the Department of Energy.
PRODUCT AND SERVICES
15
16
LGU PROJECTS
Indicative Terms and Conditions
Eligible Borrower : LGUs with a rating of at least “BA” or classified as A, B or C after
credit screening under the LCSRS
Eligible
Project/Purpose
: Any revenue and non-revenue generating infrastructure project
Lender : Any LGUGC PFI
Term : Co-terminus with the PFI loan
Single Guarantee
Limit
: 25% of LGUGC Net Worth
Guarantee
Coverage
:
:
Up to 85% of the debt service, with interest subject to the LGUGC
interest rate cap*.
Guarantee coverage will be determined based on PFI request and
Borrower Risk Rating System results
Guarantee Fee : Risk-based reflecting risks associated with specific borrower,
indicative range is 0.5%-1.25%
Collateral :
:
:
Assignment of IRA
Assignment of Project Revenues and Project Assets
Assignment of Debt Service Fund
*Interest Rate Cap – the guaranteed maximum interest shall not exceed the sum of: (a)
three percentage (3%) points plus (b) average of: (i) the weighted average interest rate for
182-day Treasury bills issued by the Philippine National Treasury during the immediately
preceding twenty-four (24) months and (ii) the average Philippine Interbank Offer Rate
(PHIBOR) during the immediately preceding twenty-four (24) months, p.a.
17
WATER PROJECTS
Indicative Terms and Conditions
Eligible Borrower : WDs with a rating of at least “BBB” under LGUGC’s internal WD
credit rating system
Eligible
Project/Purpose
: Water source development and protection
Treatment and distribution (Level III)
Sanitation
System upgrading and reduction of water losses
Support facilities
Bulk water supply
Rehabilitation and expansion
Lender : Any LGUGC PFI
Term : Co-terminus with PFI loan
Single Guarantee
Limit
: 25% of LGUGC Net Worth
Guarantee
Coverage
:
:
Up to 85% of the debt service, with interest subject to the LGUGC
interest rate cap
Actual guarantee coverage will be determined based on PFI request
and Borrower Risk Rating System results.
Guarantee Fee : Risk-based reflecting risks associated with specific borrower,
indicative range is 0.75%-1.50% p.a.
Collateral :
:
:
Assignment of Debt Service Fund
Assignment of Proceeds of Water Billings
Assignment of Project Assets
18
MEDIUM AND LARGE ENTERPRISES
(MLEs) PROJECTS
Indicative Terms and Conditions
Eligible Borrower : MLEs excluding the top 1,000 corporations
Eligible
Project/Purpose
: Short Term Loan
Working Capital Loan
Term Loan
Fixed Asset Loan
Permanent Working Capital Loan
Lender : Any LGUGC PFI
Term : Co-terminus with the PFI loan
Single Guarantee
Limit
: 25% of LGUGC Net Worth
Guarantee
Coverage
:
:
Up to 85% of the debt service with interest subject to the LGUGC
interest rate cap.
Actual guarantee coverage will be determined based on PFI request
and internal Borrower Risk Rating System results
Guarantee Fee : Based on the borrower credit rating or risk classification, transaction
size and cost, security, project risk and term risk, and applied on the
principal and interest coverage; indicative range is 1% to 1.5% per
annum
Processing Fee : 1/8 of 1% of guaranteed amount; P50,000 to be paid upfront;
negotiable
Collateral :
:
:
:
Assignment of Project Revenues/Receivables
Assignment of Contract with Suppliers
Assignment of Debt Reserve Fund
Other assets that may be required by LGUGC
19
ECPCG
Indicative Terms and Conditions
Eligible Borrower : Creditworthy Electric Cooperatives (ECs)
Duly registered with the NEA or the Cooperative Development
Authority
Has ERC-approved capital investment proposal
Must meet the minimum projected Debt Service Coverage Ratio of
1:1 based on the forecasted cash flow
Eligible
Project/Purpose
: Upgrade of EC power distribution systems to realize energy and
emission savings
Lender : Any LGUGC PFI
Term : Co-terminus with the PFI loan but not to exceed 15 years
Single Guarantee
Limit
: 25% of ECPCG Guarantee Reserve and Interest Income Escrow
Accounts
Guarantee
Coverage
:
:
Up to 80% of the debt service with interest and subject to LGUGC
interest rate cap
Actual guarantee coverage will be determined based on PFI request
and internal Borrower Risk Rating System results
Guarantee Fee : 0.25% per annum
Processing Fee : One-time fee of up to 1.5% of the guaranteed portion of the principal
amount of the loan, exclusive of taxes and collected upfront
Collateral :
:
:
Assignment of Proceeds of Power Billings
Assignment of Debt Reserve Fund
Other assets acceptable to the Lender and LGUGC
20
DOE-LGF
Indicative Terms and Conditions
Eligible Borrower : Renewable energy technology
proponents/developers/providers/suppliers
Eligible
Project/Purpose
: Hydropower (pico, micro, mini)
Biomass-based (biogas, power and non-power)
Wind (power and non-power)
Solar (photovoltaic systems and solar water heaters)
Term : Up to 10 years with maximum 2 years grace period, but not to exceed
the PFI loan term
Single Guarantee
Limit
: PhP50 Million
Guarantee Fee : 0.25% per annum
Processing Fee : PhP1,000
Collateral :
:
:
Assignment of Project Assets
Assignment of Reserve Fund
Assignment of Proceeds of Power Billings/Receivables
21
CREDIT EVALUATION PROCESS
Submission of Requirements
Pre-Evaluation of Project
Credit rating
Full due-diligence including project site visit
Management credit decision
Preparation of credit memorandum
Board credit decision
22
TENDENCY FOR DEBT REPAYMENT
DEVELOPMENT AND ENDOWMENT RISK
Credit Groups
1
Economic and Political Endowment Risk
B Development
Risk
A
C
D
2
Risk of Unilateral Restriction
of Debt Payments
Credit Screening
1.A
1.B
1.C
1.D
2.A
2.B
2.C
2.D
OPERATING AND FINANCIAL CONDITION
RISK
MANAGEMENT RISK
Preliminary Credit Rating
Final Credit Rating
Operating
Financial
Management Ba
Aaa
Aa
A
B
C
Credit Rating
LGU CREDIT SCREENING AND RATING SYSTEM
LCSRS RATING METHODOLOGY
23
CREDIT RATING FOR WATER DISTRICTS (CRWD)
24
ELECTRIC COOPERATIVE – PARTIAL CREDIT
GUARANTEE PROGRAM
25
DEPARTMENT OF ENERGY-LOAN GUARANTEE FUND
PROGRAM
26
BORROWER PROJECT LOAN
AMOUNT
(P MM)
TERM PARTICIPATING
FINANCIAL
INSTITUTIONS
LOCAL GOVERNMENT UNITS
1. Agoo, La Union Public Market 110.00 10 BPI
Agoo Hypermarket Ph. II 49.00 10 BPI
2. Binalonan, Pangasinan University of Eastern Pangasinan
Building
45.00 BPI
Refinancing of Outstanding Loan with
LBP
25.00 BPI
3. Rosario, La Union Ph. II of New Public Market and
Slaughterhouse
70.00 10 BPI
35.50 10
4. Province of Aklan Renovation of Caticlan Passenger
Terminal, Enhancement of old Caticlan
Coastline; Reclamation of Foreshore
portion
260.00 10 PNB
5. Alfonso Lista, Ifugao Water Supply and Distribution System 72.50 10 PNB
6. Infanta, Pangasinan Water Supply and Distribution System 50.00 10 DBP
7. Anda, Pangasinan Two-Storey New Anda Wet Market
Building
30.00 7 PNB
8. Bongabon, Nueva Ecija New Slaughterhouse Building 21.53 10 East West Bank
9. Roxas, Palawan Public Market and Integrated Public
Terminal
101.00 10 PNB
10. San Francisco, Quezon Acquisition of Heavy Equipment 44.74 7 East West Bank
Subtotal 914.27
MEDIUM AND LARGE ENTERPRISES
1. AM Gatbonton Bulk Water Supply Facilities under
TCWD and CFSWD
13.50 5 Allied Bank
36.25 5 Allied Bank
2. Amertech Industrial
Ventures, Inc.
2 Steam Boiler plants for Coca-Cola
Bottlers Phils,Inc.
70.00 7 BPI
35.00 7 BPI
3. Healthserv Los Banos,
Inc.
Completion of 4-storey, 80-bed tertiary
hospital
50.00 10 BPI
Working Capital 30.00 1(RPN) BPI
Purchase of a CT Scan 20.00 5 BPI
4. Twin Rivers Corporation. BWS Project with DWD 120.00 10 Allied Bank
5. PAPISSS, Inc. Slaughterhouse for Lemery, Batangas 20.00 7 BPI
Working Capital for continues supply
aggregates to DMCI
50.00 5 East West Bank
6. Worldchem Envirotech ,
Inc.
Bahay Toro Sewage Treatment Plant 65.00 1 BPI
Subtotal 509.75
WATER DISTRICTS (WDs)
1. Cabanatuan City WD Rehabilitation and Expansion of Water
System
250.00 10 BPI/MBTC
2. Indang WD Expansion of Water System 15.00 10 BPI
16.00 10 BPI
Mabalacat WD Ground Reservoir and Existing Water
System upgrade
135.00 10 Allied Bank
Water Filtration System Facilities 50.00 10 Allied Bank
3. Norzagaray WD Bulk Water Supply 70.00 7 MBTC
4. Puerto Princesa City WD Expansion and rehabilitation of water
system
120.66 10 BPI
OUTSTANDING GUARANTEED - REGULAR ACCOUNTS
(As of December 31, 2013)
27
5. City of San Fernando
WD
Rehabilitation and expansion of water
system
226.00 10 BPI/Allied Bank
6. San Pedro WD Office Building and water facilities and
acquisition of a lot
150.00 10 BPI
7. Tarlac City WD Expansion of water system 116.00 10 BPI
Subtotal 1,148.66
AUTOMATIC GUARANTEE LINE
1. City of Angeles,
Pampanga
Construction of Angeles City Sports
Coliseum
250.00 12 PVB-Assignor
BPI-Assignee
2. City of Toledo, Cebu Construction and site development of
Toledo City Hotel
58.44 7 PVB-Assignor
BPI-Assignee
3. Caraga, Davao Oriental Caraga Public
Market//Terminal/Commercial Complex
88.81 4 PVB
4. San Miguel, Bulacan Purchase of various heavy equipment 40.09 7 PVB
5. San Pedro, Laguna New Municipal Hall Building and
renovation of Jose L. Amante Hospital
149.94 12 PVB
6. Trece Martirez, Cavite Slaughterhouse and 13-Towers Bldg. 72.66 7 PVB
7. Province of Palawan Refinancing of outstanding loan with
LBP and financing various priority
projects
144.10 T 1: 8
T 2:10
PVB
8. Province of Zamboanga
Sibugay
Medical equipment and rehabilitation of
Satellite Center
50.00 9 PVB
Subtotal 854.04
ELECTRIC COOPERATIVES
1. Camiguin Electric
Cooperative, Inc.
(CAMELCO)
System loss reduction and enhance power
distribution operation
80.00 10 BPI
2. Davao del Norte Electric
Cooperative, Inc.
(DANECO)
System loss reduction and enhance power
distribution operation
153.48 10 UCPB
3. La Union Electric
Cooperative, Inc.
(LUELCO)
Capital expenditure projects 82.36 10 Allied Bank
4. Misamis Oriental II Rural
Electric Services
Cooperative, Inc.
(MORESCO II)
System loss reduction and enhance power
distribution operation
80.00 10 BPI
5. Bukidnon Second Electric
Cooperative, Inc.
(BUSECO)
Installation of substation, line
rehabilitation and relocation of
transformers
170.39 10 PNB
Subtotal 566.23
TOTAL 3,992.95
28
BORROWER PROJECT LOAN
AMOUNT
(P MM)
TERM PARTICIPATING
FINANCIAL
INSTITUTIONS
LOCAL GOVERNMENT UNITS
1. Boracay-Aklan Jetty Port and Terminal Building 40.00 7 LBP-Trustee
RCBC Cap-Underwriter
2. Bayambang, Pangasinan Public market 42.00 7 PNB-Trustee
MIB-Underwriter
3. Caloocan City Public market 185.00 7 PNB-Trustee
RCBC Cap-Underwriter
PCI Cap-Underwriter Commercial area with toll parking 225.00 7
General hospital 210.00 7
4. Carmona, Cavite Housing 150.00 7 DBP-Trustee
ICCP-Underwriter
PCI Cap-Underwriter
5. Daraga, Albay Public market 75.00 7 PNB-Trustee
RCBC Cap-Underwriter
6. Iloilo City Employees housing 130.00 3 PNB-Trustee
RCBC Cap-Underwriter
7. Imus, Cavite Slaughterhouse 47.00 7 DBP-Trustee
Unicapital-Underwriter
8. Leyte Academic Center 205.00 7 RCBC Cap-Underwriter
PCI Cap-Underwriter
9. City of Pasay Public market and commercial center 500.00 7 PNB-Trustee
PCI Cap-Underwriter
PNB Cap-Underwriter
10. Puerto Princesa City Low-cost housing 320.00 7 PNB-Trustee
RCBC Cap-Underwriter
11. San Juan City Multipurpose gym, commercial building
and toll parking
390.00 7 PNB-Trustee
Allied Bank-Underwriter
PCI Cap-Underwriter
12. Tagaytay City Convention center with lodging facility 220.00 7 PNB-Trustee
RCBC Cap-Underwriter
13. Urdaneta City Slaughterhouse 25.00 5 PNB-Trustee
SolidBank-Underwriter
14. Baliwag, Bulacan Integrated Solid Waste Management Sys. 50.00 7 PNB-Trustee
PNB Cap - Underwriter
15. Imus, Cavite Multi-purpose Cadastral Survey 23.00 5 BPI
Subtotal 2,837.00
WATER DISTRICTS (WDs)
1. Calamba WD Repair and rehabilitation of water lines
and distribution system
40.00 5 BPI
1. Laguna WD Expansion of water system and
refinancing of LWUA loans
99.49 10 BPI
2. Silang WD Repair and expansion of water system 189.00 10 PNB
3. Legazpi City WD Bulk Water Supply 105.00 7 BPI
4. Metro Iloilo WD Rehabilitation of Water System and
Refinancing of LWUA loans
38.13 7 PNB
5. Zamboanga City WD Rehabilitation and expansion of water system 200.00 10 Security Bank
Subtotal 671.62 MEDIUM AND LARGE ENTERPRISE
1. Worldchem EnviroTech,
Inc.
Pinagsama Sewage Treatment Plant 50.00 2 BPI
Bahay Toro Sewage Treatment Plant 115.00 10 Allied Bank
Subtotal 165.00
REDEEMED ACCOUNTS
(As of December 31, 2013)
29
ELECTRIC COOPERATIVE
1. Isabela I Electric
Cooperative, Inc.
(ISELCO I)
Additional working capital 20.00 1 MBTC
Subtotal 20.00
TOTAL 3,693.62
TOTAL OUTSTANDING AND REDEEMED ACCOUNTS 7,686.57
30
BORROWER PROJECT LOAN
AMOUNT
(P MM)
TERM PARTICIPATING
FINANCIAL
INSTITUTIONS
1. Bohol I Electric Cooperative, Inc.
(BOHECO I)
System loss reduction and
enhancement of power
distribution operation
109.62 15 DBP
2. Bukidnon Second Electric
Cooperative, Inc. (BUSECO)
Capital expenditures 135.90 10 BPI
3. Camiguin Electric Cooperative, Inc.
(CAMELCO)
System loss reduction and
enhancement of power
distribution operation
220.00 10 BPI
4. Camarines Norte Electric
Cooperative, Inc. (CANORECO)
System loss reduction and
enhancement of power
distribution operation
133.25 10 BPI
5. Davao Electric Cooperative, Inc.
(DANECO)
System loss reduction and
enhancement of power
distribution operation
325.85 10 UCPB
6. First Bukidnon Electric Cooperative,
Inc. (FIBECO)
Capital expenditures 143.00 10 Allied Bank
7. La Union Electric Cooperative, Inc.
(LUELCO)
Capital expenditures 173.13 10 Allied Bank
8. Misamis Occidental I Electric
Cooperative, Inc. (MOELCI I)
System loss reduction and
enhancement of power
distribution operation
167.73 10 UCPB
9. Misamis Oriental I Rural Services
Electric Cooperative, Inc.
(MORESCO I)
Capital expenditures 115.00 10 Security Bank
10. Misamis Oriental II Rural Services
Electric Cooperative, Inc.
(MORESCO II)
System loss reduction and
enhancement of power
distribution system
215.49 10 BPI
11. Pangasinan I Electric Cooperative,
Inc. (PANELCO I)
Capital expenditures 113.00 7 BPI
12. South Cotabato I Electric
Cooperative, Inc. (SOCOTECO I)
Capital expenditures 102.42 10 BPI
13. Surigao del Norte Electric
Cooperative, Inc. (SURNECO)
Capital expenditures 85.00 10 UCPB
14. Benguet Electric Cooperative, Inc.
(BENECO)
Capital Expenditures 163.50 10 BPI
15. First Catanduanes Electric
Cooperative, Inc. (FICELCO)
Capital Expenditures 106.10 10 Security Bank
16. Nueva Ecija I Electric Cooperative,
Inc. (NEECO I)
Capital Expenditures 173.54 10 Allied Bank
TOTAL 2,482.53
BORROWER PROJECT LOAN
AMOUNT
(P MM)
TERM PARTICIPATING
FINANCIAL
INSTITUTIONS
1. Gerphil Renewable Energy, Inc. Panoon Falls Mini-Hydro
Power Plant
9.20 10 Allied Bank
OUTSTANDING DOE-LGF ACCOUNT
(As of December 31, 2013)
OUTSTANDING GUARANTEED - ECPCG
(As of December 31, 2013)
31
USAID CO-GUARANTEE
LGUGC has a co-guarantee agreement with USAID which effectively expands
LGUGC’s capacity to cover water projects of LGUs, WDs and private water service
providers in the Philippines. The USAID reinsurance of up to 50% of LGUGC’s
enrolled portfolio is intended to strengthen LGUGC’s ability to mobilize private
capital lending for water supply and sanitation facilities.
USAID Technical Assistance
USAID support of LGUGC’s mission is evident through its provision of a number of
technical assistance to LGUGC, as follows:
2000 - final review of the LGUGC internal LCSRS after the pilot testing of the first
six LGUs;
2001- expansion of the LCSRS database from 120 to 500 LGUs;
2002- support from legal specialists on policy issues pertinent to bond market
development and review of LGUGC’s capital adequacy with regard to leverage;
2003- portfolio risk management and determination of actuarially-sound leveraging
ratio for LGUGC; and
2008- guarantee pricing methodology and WD Credit Rating System.
AusAid-PAGF Activity Agreement
LGUGC was the first private sector recipient of a technical assistance from the
PAGF of AusAid. The activity agreement between LGUGC and PAGF in 2001
involved the computerization of the LCSRS and Portfolio Management System to
enhance its credit evaluation and account monitoring processes.
World Bank-Global Environment Facility
LGUGC had a project agreement with the World Bank-Global Environment Facility
(WB-GEF) until December 31, 2013 to manage the USD10 million WB-GEF partial
credit guarantee facility for eligible system loss reduction projects of rural electric
cooperatives.
UNDP – Global Environment Facility
LGUGC was the Guarantee Program Manager (GPM) of the USD1.606 Million
CBRED-LGF program, funded by the GEF through the United Nations Development
Programme, up to May 31, 2011. The project was intended to provide partial credit
guarantee to proponents of renewable energy projects on a credit risk or collateral
short basis.
INSTITUTIONAL LINKAGES
32
Regular Guarantee Program
Financial Institution Contact Person/s
Bank of the Philippine Islands 6768 Ayala Avenue cor Pase de Roxas, Makati City
Contact No: 845-5374/845-5360
Jo Ann B. Eala VP, Specialized Lending Unit
Julius R. Respicio Manager, Specialized Lending Unit
Banco de Oro Universal Bank BDO South Tower
Makati Ave., cor. H.V. Dela Costa St.,
Makati City Contact No.: 878-4572/840-7914
Vivian De Chavez Senior Manager, Wholesale Funding
Development Bank of the Philippines DBP Bldg. Makati Ave., Cor. Sen. Gil Puyat Ave.,
Makati City
Contact No.: 818-9511/840-3435
Paul D. Lazaro Vice President, Program Development
Rustico Noli D. Cruz Manager, Program Development
East West Banking Corporation
3/F, Beaufort Tower, 5th
Avenue corner 23rd
Street
Bonifacio Global City
Contact No.: 813-9772
Ferdinand E. Yap Vice President
Corporate Banking Group II
PARTNER FINANCIAL INSTITUTIONS
33
Metropolitan Bank and Trust Company Metrobank Plaza, Sen. Gil J. Puyat Ave.,
Makati City
Contact No.: 898-9049/818-5673/818-6228
Marilen Trinidad AVP-Relationship Manager
Large Corporate Division, Corporate
Banking Group
Philippine National Bank PNB Financial Center, Pres. Diosdado Macapagal Blvd., 1300
Pasay City
Contact No.: 891-6040 to 70/526-3131 to 70/526-3245
Erwin Rommel S. Nonato First Vice President
GBD-GOCCs/NGAs
Philippine Veterans Bank PVB Bldg., 101 V.A. Rufino cor. Dela Rosa Sts., Legaspi
Village, Makati City
Contact No.: 902-1600/857-3800
Plato C. Tirol
Asst. Vice President/OIC
Investment Banking Division
Rizal Commercial Banking Corp. 11/F RCBC Head Office, Yuchengco Tower, RCBC Plaza,
6819 Ayala Ave., Makati City
Contact No.: 894-9553/894-9821
Ma. Angela V. Tinio First Vice President
Commercial and SME Banking Division
Corporate Banking Group
Robinsons Banking Corporation
17/F Galleria Corporate Center
EDSA cor. Ortigas Ave., Quezon City
Contact No.: 702-9514/702-9500
Chepps C. Marcelo
Vice President
Head- Commercial Lending II
34
Security Bank Security Bank Centre, 6776 Ayala Ave.,
Makati City
Contact No.: 867-6788
Zenaida L. Tan Vice President/Team Head
Sylda T. Teves
Relationship Manager
Product Development Group
Union Bank 22/F UnionBank Plaza, Meralco Ave. cor. Onyx & Sapphire Roads,
Ortigas Center,
PasigCity
Contact no.: 638-0139/667-6388
Efrenilo L. Cayanga, Jr.
Group Head – Commercial Banking
Center
United Coconut Planters Bank (UCPB) UCPB Executive Bldg., Makati Ave.,
Makati City
Contact No.: 810-2842/811-9421
Higinio O. Macadaeg, Jr. Executive Vice President
Head-Corporate & Commercial Banking
Group
Managed Programs
Financial Institution Contact Person/s
Bank of the Philippine Islands 6768 Ayala Avenue cor Pase de Roxas, Makati City
Contact No: 845-5374/845-5360
Jo Ann B. Eala VP, Specialized Lending Unit
Julius R. Respicio Manager, Specialized Lending Unit
Banco de Oro Universal Bank BDO South Tower
Makati Ave., cor. H.V. Dela Costa St.,
Makati City Contact No.: 878-4572/840-7914
Vivian De Chavez Senior Manager, Wholesale Funding
35
Development Bank of the Philippines DBP Bldg. Makati Ave., Cor. Sen. Gil Puyat Ave.,
Makati City
Contact No.: 818-9511/840-3435
Paul D. Lazaro Vice President, Program Development
Rustico Noli D. Cruz Manager, Program Development
East West Banking Corporation 3/F, Beaufort Tower, 5
th Avenue corner 23
rd Street
Bonifacio Global City
Contact No.: 813-9772
Ferdinand E. Yap Vice President
Corporate Banking Group II
Land Bank of the Philippines
Land Bank Plaza, 1598 M.H. del Pilar cor. Dr. J. Quintos
Streets, Malate, 1004 Manila
Contact No.: 522-0000/551-2200/4507-001
Cressida M. Alday-Mendoza ADM, PMD
Melinda C. Cruz Department Manager, PMD
Metropolitan Bank and Trust Company Metrobank Plaza, Sen. Gil J. Puyat Ave.,
Makati City
Contact No.: 898-9049/818-5673/818-6228
Marilen Trinidad AVP-Relationship Manager
Large Corporate Division, Corporate
Banking Group
Philippine National Bank PNB Financial Center, Pres. Diosdado Macapagal Blvd., 1300
Pasay City
Contact No.: 891-6040 to 70/526-3131 to 70/526-3245
Erwin Rommel S. Nonato First Vice President
GBD-GOCCs/NGAs
36
Philippine Veterans Bank PVB Bldg., 101 V.A. Rufino cor. Dela Rosa Sts., Legaspi
Village, Makati City
Contact No.: 902-1600/857-3800
Plato C. Tirol Asst. Vice President/OIC
Investment Banking Division
Rizal Commercial Banking Corp. 11/F RCBC Head Office, Yuchengco Tower, RCBC Plaza,
6819 Ayala Ave., Makati City
Contact No.: 894-9553/894-9821
Ma. Angela V. Tinio First Vice President
Commercial and SME Banking Division
Corporate Banking Group
Robinsons Banking Corporation
17/F Galleria Corporate Center
EDSA cor. Ortigas Ave., Quezon City
Contact No.: 702-9514/702-9500
Chepps C. Marcelo
Vice President
Head- Commercial Lending II
Security Bank Security Bank Centre, 6776 Ayala Ave.,
Makati City
Contact No.: 867-6788
Zenaida L. Tan Vice President/Team Head
Sylda T. Teves
Relationship Manager
Product Development Group
Union Bank 22/F UnionBank Plaza, Meralco Ave. cor. Onyx & Sapphire
Roads, Ortigas Center,
PasigCity
Contact no.: 638-0139/667-6388
Efrenilo L. Cayanga, Jr.
Group Head – Commercial Banking
Center
37
United Coconut Planters Bank (UCPB) UCPB Executive Bldg., Makati Ave.,
Makati City
Contact No.: 810-2842/811-9421
Higinio O. Macadaeg, Jr. Executive Vice President
Head-Corporate & Commercial Banking
Group