Key Points

  • Exchange may consider waiver of profitability requirement for infrastructure IPOs
  • Rules for petroleum and renewable energy companies serve as framework
  • Hong Kong and Australia are helpful model

Article

In a recent media interview, Hans Sicat, head of the Philippine Stock Exchange, commented that the Exchange may consider exempting infrastructure companies from the listing rules that require a track record of profitability.

This would represent a significant opportunity for companies sponsoring new infrastructure projects in the Philippines as well as for investors looking for liquid investments in this sector.

A framework for this reform would likely be the Exchange’s supplemental listing and disclosure requirements for petroleum and renewable energy companies. These rules relax the operational track record requirements for companies in these sectors while adding certain safeguards, such as governmental certifications and escrow arrangements to ensure that listing applicants have valid service contracts and use listing proceeds as intended.

Beyond its existing rules, the Exchange can look to Hong Kong and Australia as jurisdictions that have tailored their listing rules to accommodate infrastructure companies.

In Hong Kong, the stock exchange may waive the historical profitability requirement for a newly formed infrastructure project company if the company demonstrates: its right to build and operate the project, a long term concession or mandate of a substantial size awarded by a government, the proceeds of the offering will be used to finance the construction of the project, and its substantial shareholders and management have the necessary experience, technical expertise, track record and financial strength to complete and operate the project.

In Australia, the securities regulator has issued extensive regulations relating to infrastructure entities, including guidance designed to improve disclosure for retail investors.

With these and other available resources, the Philippine Stock Exchange will have ample benchmarks for developing regulations that can open the IPO market to newly formed infrastructure project companies.

Access Philippines is an ongoing series of briefings on the latest legal and market developments that may impact our clients investing in the Philippines.