First Climate Bond issued in Asia and the Pacific will fund renewables, hydroelectric facilities

With its headquarters in Manila, the capital city of the Philippines, the Asian Development Bank (ADB) announced this month it has backed the issuance of the first Climate Bond in Asia and the Pacific (excluding Malaysia), and the funding — in part — will have an affect on hydroelectric facilities.

ADB said the PHP$10.7 billion (US$225 million) local currency bond comes in addition to a direct ADB loan of PHP$1.8 billion ($37.7 million). ADB’s credit enhancement is in the form of a guarantee of 75% of principal and interest on the bond.

ADB said it will provide credit-enhancement to the Philippine firm AP Renewables Inc., a subsidiary of AboitizPower Corp. (AboitizPower) for company holdings that include: the 390-MW Tiwi-MakBan geothermal energy facilities in Laguna and Batangas; the 68-MW Manolo Fortich hydroelectric facility in Bukidnon; and the 8.5-MW Maris Canal hydropower plant in Isabela, co-owned by SN AboitizPower and the National Irrigation Administration.

The projects are expected to produce renewable power by 2017.

In speaking about transaction and the types of financing available, Todd Freeland, director general of ADB’s Private Sector Operations Department, said, “Credit-enhanced project bonds offer an attractive alternative to bank financing, and by mobilizing cost-effective, long-term capital can help close the region’s infrastructure gap.”

The Climate Bond, which has been certified by the Climate Bonds Initiative, is the first in Asia and the Pacific and the first ever Climate Bond for a single project in an emerging market. In 2015, ADB committed to double its financing for climate change adaptation and mitigation by 2020, including playing a catalytic role to crowd-in private sector climate finance.

“This is a landmark transaction for the Bank of the Philippine IsIands (BPI), the Philippines, and the Asia-Pacific region in terms of both capital markets development and climate finance,” said Reginaldo Cariaso, managing director of BPI Capital Corp., which acted as lead arranger and sole underwriter of the bond issuance.

He said, “The transaction is highly innovative, representing the first project bond ever issued in local currency in the power sector in the Philippines and the first credit-enhanced project bond in Southeast Asia (excluding Malaysia) since the 1997-98 Asian financial crisis.”

AboitizPower’s clean energy portfolio is composed of 29 hydroelectric and geothermal power generation facilities that combined have a total installed capacity of 915 MW.
 

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Gregory B. Poindexter formerly was an associate editor for HydroWorld.com.

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