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SINGAPORE : Temasek Holdings has put together a consortium of financial institutions to establish a project finance company (PFC).
This is to assist Singapore-based companies to bid for cross-border, large ticket projects.
The other consortium members are DBS Bank, Standard Chartered and Sumitomo Mitsui Banking Corporation.
In last year's Budget, the government announced that Temasek was in discussions with potential partners to establish a specialised institution.
This is in response to the recommendations of the Economic Strategies Committee (ESC) in 2010 to set-up a commercially-managed institution to address the funding gap faced by Singapore companies in bidding for large cross-border projects.
In a statement, the Ministry of Finance (MOF) said the PFC will provide long-term senior debt for cross-border projects done by Singapore-based companies in emerging markets.
This includes markets such as China, India, ASEAN and the Middle East.
About 80 per cent of its portfolio will comprise projects involving Singapore companies.
It will also target sectors in which Singapore companies have competitive strengths including infrastructure and offshore & marine.
In infrastructure, the projects would include power, waste & water treatment and transport.
The PFC is expected to provide about S$400 million of financing to qualifying projects annually and this will in turn is expected to catalyse another S$2 billion to S$3 billion of projects.
It will be run on a commercial basis and will work with other financial institutions through co-financing deals.
The government said this will support the growth of globally-competitive Singapore-based enterprises.
In other countries, this funding gap is usually served by government-backed export-import banks (EXIMs) and export credit agencies (ECAs).
In Singapore, the government will provide a guarantee on the debt instruments issued by the PFC instead of getting directly involved through capital injections or direct loans.
The guarantee will allow the PFC to raise funds competitively and also offer competitive terms to companies.
In the event of losses on any of the PFC loans, it will be first met by its overall revenues and the consortium's equity.
MOF said this reduces substantially the risk of the guarantee being triggered.
The PFC is expected to be operational by the second half of this year.
- CNA/ms
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