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Philippines Copyright 2008. All Rights Reserved. Jose M. Layug, Jr.

University of the Philippines College of Law Diliman, Quezon City Prof. J. M. Layug, Jr. COURSE OUTLINE IN PROJECT DEVELOPMENT AND FINANCE Second Semester, AY 2011-2012 I. Background A. General Concept of Project Finance An Overview 1. Project Financing Defined Read: 2. Nevitt, Peter K., Project Financing (7th ed), pp. 127 (Handout No. 1)

Typical Structures and Trends Read: The Guide to Financing Power Projects, Baker & Mckenzie, pp. 1-20

B.

Philippine Laws Governing Project Development and Finance in General 1. 1987 Philippine Constitution Read: Article II, secs. 19-201 2. Anti-Dummy Law Issues Read: Read: Commonwealth Act No. 108 Presidential Decree No. 715 Palacios vs. Ramirez, L-27952, Feb. 15, 1982 PBC v. Lui She, 21 SCRA 52 (1967). Soriano v. Ong Hoo, et al., 103 Phil. 829 (1958). Halili v. CA, 287 SCRA 465 (1998). Article XII, secs. 2, 3, 5, 7, 10, 16 Chavez vs. Public Estates Authority and Amari Coastal Bay Development Authority, G.R. 133250, July 9, 2002. Manila Prince Hotel vs. GSIS, et al., G.R. 122156, February 3, 1997. La Bugal Blaan Tribal Association, et al. vs. Ramos, WMC, et al., G.R. 127882, (final decision after motion for reconsideration), December 2004. Chavez vs. NHA, G.R. No. 164527, August 15, 2007.

Read: Read:

3.

Corporation Code of the Philippines Read: Sections 2-6, 10-15, 17(2), 23, 24, 25, 140

4.

Republic Act No. 6957 (An Act Authorizing the Financing, Construction, Operation and Maintenance of Infrastructure Projects by the Private Sector, and for Other Purposes) and Implementing Rules and Regulations (IRR) of R.A. 6957, as amended.

These sections are flagship provisions for the Philippine economy recognizing the role of private initiative and enterprise in a self-reliant and independent national economy effectively controlled by Filipinos.

Philippines Copyright 2008. All Rights Reserved. Jose M. Layug, Jr.

Read:

Tatad vs. Garcia, Jr., 243 SCRA 436-493 (1995). MMDA vs. Jancom, G.R. No. 147465, Jan. 30, 2002. (Original Decision) MMDA vs. Jancom, supra (Resolution on Motion for Reconsideration) Chavez vs. NHA, G.R. No. 164527, August 15, 2007.

5.

Republic Act No. 7718, amending R.A. No. 6957 Read: Sec. 2 (Definitions) and corresponding provisions of IRR Comparative Analysis (Handout No. 3)

6.

Foreign Investments Act of 1991 a. b. What is a Philippine national? Doing Business in the Philippines B. Van Zuiden Bros. vs. GTVL Manufacturing, G.R. No. 147905. May 28, 2007. Agilent Technologies Singapore vs. Integrated Technology Phil. Corp., G.R. No. 154618. April 14, 2004. Hahn vs. Court of Appeals, G.R. No. 113074. January 22, 1997.

7. 8. 9.

Omnibus Investments Code, Executive Order No. 226 Other executive orders, presidential decrees, executive issuances and memoranda Rules and regulations implementing various laws, executive orders, presidential issuances.

II.

Project Finance in the Philippine Context An Overview A. Parties 1. Philippine Government i. Read: Authorized Signatories Book I, Chapter 12, Secs. 47-51, Administrative Code of 1987 (E.O. 262) Book IV, Chapter 5, Sec. 27, supra Book IV, Chapter 13, Secs. 57-65, supra Limitations in Contractual Amounts

ii. 2.

Project Proponent Read: Read: Sec. 2(k), R.A. 7718 and corresponding provision of IRR Philippine Law Governing Joint Ventures, Appendix C, Philippine Corporate Law, Cesar Villanueva. Heirs of Tan Eng Kee vs. Court of Appeals, G.R. No. 126881, October 3, 2000.

Philippines Copyright 2008. All Rights Reserved. Jose M. Layug, Jr. JG Summit Holdings vs. Court of Appeals, G.R. No. 124293, November 20, 2000. 3. Contractors, suppliers and other parties Read: 4. Sec. 2(l), R.A. 7718 and corresponding provision of IRR

Lending Institutions and Security Arrangements Read: Civil Code of the Philippines, articles 2047-2141

B.

Contracts 1. Government Contracts i. Public Bidding Requirement Read: Manila International Airport Authority, et al. vs. Mabunay, G.R. 126151, January 20, 2000. JG Summit Holdings vs. Court of Appeals, G.R. 124293, November 20, 2000. Information Technology Foundation of the Philippines, et al. vs. COMELEC, et al, G.R. No. 159139, January 14, 2004. Oani vs. People of the Philippines, G.R. No. 139984. March 31, 2005. Agan vs. PIATCO, G.R. Nos. 155001, 155547, 155641; May 5, 2003. Sec. 5, R.A. 7718 Rule 3, IRR ii. Unsolicited Proposals and Direct Negotiation Read: Secs. 4-A, 5-A, R.A. 7718 Rules 9 and 10, IRR Government Procurement Read: Republic Act No. 9184, Government Procurement Reform Act Other Contracts to be discussed in Part IV

iii.

iv. C.

Sources of Financing 1. Equity, Loans, Debt and Capital Markets Read: The Guide to Financing Oil and Gas Projects, Milbank, Tweed, Hadley & McCloy, pp. 11-22. Multilateral Lending and Export Credit Agencies Read: The Guide to Financing Oil and Gas Projects, Milbank, Tweed, Hadley & McCloy, pp. 11-22. The World Bank Group Read: Philippe Benoit, Project Finance at the World Bank, pp. 19-35, 59-67, 69-78.

2.

3.

IV.

Project Finance in the Philippine Context Industry Specific Power and Energy A. Upstream Energy Industry Exploration, Development and Utilization of Resources 1. Petroleum Oil and Gas

Philippines Copyright 2008. All Rights Reserved. Jose M. Layug, Jr. Read: 2. 3. Coal Energy Read: Presidential Decree No. 972 Presidential Decree No. 1174 4. 5. Alternative and Renewable Energy Read: Republic Act No. 7156 Executive Order No. 462 Executive Order No. 232 Mining Please see IV.E below. Geothermal Read: Article XII, Section 2, 1987 Constitution Presidential Decree No. 1442 Case Study: Tiwi-Makban Power Plant Article XII, Section 2, 1987 Constitution Presidential Decree No. 87 (1972) Proclamation No. 72 The Guide to Financing International Oil and Gas Projects, Milbank, Tweed, Hadley & McCloy, pp. 59-81. Executive Order No. 66 (designating DOE as lead agency for development of Philippine natural gas industry) Case Study: The Malampaya Deep Water Gas to Power Project

B.

Midstream Energy Industry Power Generation and Distribution 1. Power Generation Sector i. Independent Power Producers Read: The Guide to Financing Power Projects, Baker & Mckenzie, pp. 21-37. Administrative Order No. 10, May 26, 2001, Office of the President R.A. No. 8975, Prohibiting Injunctions and TROs ii. Project Documentation Read: The Guide to Financing Power Projects, Baker & Mckenzie, pp. 37-65. iii. Philippine Power Industry Read: Republic Act No. 9136, Electric Power Industry Reform Act of 2001 iv. Case Study

Quezon Power Plant IMPSA

2.

Distribution Sector

Philippines Copyright 2008. All Rights Reserved. Jose M. Layug, Jr. 3. 4. C. Transmission Sector Supply Sector

Downstream Energy Industry 1. Oil Read: Republic Act No. 8479 Garcia vs. Corona, G.R. No. 132451. December 17, 1999. 2. 3. Compressed Natural Gas Biofuels - Republic Act No. 9367 (Biofuels Act of 2006) Transportation

D.

Transportation 1. 2. 3. Secs. 2-3, Article XII, 1987 Philippine Constitution Revisit: Concept of Public Utility in Tatad case Case Study i. Metro Rail Transit Corporation Land Registration Authority Consulta ii. Light Rail Transit 1 Cavite Extension Project Read: Request for Opinion of Department of Justice (DOJ) re: Sec. 4-A, R.A. No. 7718 DOJ Opinion No. 075, September 4, 2002 Mining Resources

E.

The Mining Industry a. General Background Read: R.A. No. 7942, Philippine Mining Act of 1995 La Bugal Blaan Tribal Association, et al. vs. Ramos, WMC, et al., G.R. 127882, (final decision after motion for reconsideration), December 2004. Southeast Mindanao Gold Mining Corp. vs. Balite Mining Corp., G.R. 135190, April 3, 2002. Isagani Cruz, et al. vs. DENR Secretary, et al., G.R. No. 135395, December 6, 2000. Republic vs. Marcopper Mining, G.R. No. 137174, July 10, 2000. b. Case Study i. ii. Western Mining Corporation Anglo American Exploration (Philippines), Inc.

IV.

Selected Legal Issues in Project Financing A. B. Choice of Law Procedural and Substantive Law Dispute Resolution

Philippines Copyright 2008. All Rights Reserved. Jose M. Layug, Jr.

Read: C.

Project Finance: Selected Issues in Choice of Law, Skadden, Arps, Slate, Meagher & Flom, pp. 63-70

Environmental Concerns i. ii. Philippine Environmental Impact Statement System Environmental Compliance Certificate Read: Presidential Decree No. 1586 Philippine EIS System Guide: Policies and Procedures, EMB-DENR, pp. 1-29 R.A. No. 8749, Philippine Clean Air Act of 1999

V.

Privatization in the Philippines A. B. Introduction Regulatory Framework Read: Proclamation No. 50; R.A. Nos. 7661, 7886 and 8758; Executive Order Nos. 298 (1996), 12 (1998), 323 (2000)

C.

Privatization Council and Privatization Management Office