SINGAPORE - Local companies are poised to bid for large cross-border projects that require considerable investments, after the Government unveiled plans to establish a specialised project finance company (PFC).

Analysts have applauded the move - which was unveiled in the Singapore Budget last week - saying that this expands local companies' opportunities in international markets.

Mr Harsha Basnayake, managing partner for Transaction Advisory System at Ernst & Young, said: "In order to ensure there is a level playing field when these companies go out to participate in greenfield projects overseas, having such a funding opportunity actually bridges the gap they currently face with the Chinese, Korean or Japanese counterparts."

The PFC will be formed by a consortium led by Temasek Holdings and will include DBS, Standard Chartered and Sumitomo Mitsui Banking Corp.

The new firm is expected to provide S$400 million of financing annually, Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam said last week. It will operate like government-backed export-import banks and export credit agencies currently in other countries.

Expected to be operational by the second half, the firm will also enjoy Government guarantees on its debt instruments.

Mr Philippe Touati, head of origination and client coverage at Standard Chartered Bank, said: "It will enable companies to reduce some of the risks they face when they want to venture overseas, (as well as) some of the liquidity issues they may face if they want to execute projects in places which are not as straightforward as Singapore."

Experts said the project financing is targeted at medium- to large-sized projects worth more than US$500 million (S$628.3 million) with longer completion periods. This could include infrastructure, water treatment or offshore marine projects.

Singapore-listed Sembcorp, Keppel, Hyflux and United Engineers are potential candidates that may use such project financing, analysts said. With Agencies