The Asian Development Bank (ADB) has backed the issuance of the first Climate Bond in Asia and the Pacific.
ADB will provide credit-enhancement to the Philippine firm AP Renewables, Inc. (APRI), a subsidiary of AboitizPower Corporation (AboitizPower), for the Tiwi-MakBan geothermal energy facilities. The PHP10.7 billion ($225 million equivalent) local currency bond comes in addition to a direct ADB loan of PHP1.8 billion ($37.7 million equivalent). ADB’s credit enhancement is in the form of a guarantee of 75% of principal and interest on the bond.
“The successful use of credit enhancement for Tiwi-MakBan reflects our evolving strategy to make creative use of ADB’s expanding balance sheet to support infrastructure investment in Asia and the Pacific,” said Todd Freeland, Director General of ADB’s Private Sector Operations Department. “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 Corporation, which acted as lead arranger and sole underwriter of the bond issuance. “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 is a major power developer in the Philippines and an emerging leader in renewable energy in Southeast Asia. Since acquiring the Tiwi-MakBan complexes in 2009, AboitizPower has invested in the rehabilitation of the facilities to improve performance and extend their operating life. With the refurbishment complete, the project is now undertaking its first-ever debt financing.
“This transaction validates the successful rehabilitation program of the Tiwi-MakBan facilities,” said Liza Montelibano, First Vice President and Chief Financial Officer, AboitizPower. “The deal opens a new avenue for financing and refinancing our various projects, allowing AboitizPower to redeploy capital toward our large pipeline of new power investments that include renewable energy. We are committed to support the energy needs of the country, and in building renewable energy resources through our brand, Cleanergy.”
AboitizPower’s Cleanergy portfolio is composed of 29 hydro and geothermal power generation facilities with a total of 915 megawatts attributable net sellable capacity.
ADB’s credit enhancement will be risk-participated by the Credit Guarantee Investment Facility (CGIF), a multilateral facility established by ASEAN+3 governments and ADB to develop bond markets in the ASEAN+3 region. Tiwi-MakBan is CGIF’s first support for project bonds and illustrates the facility’s growing role in contributing to local debt capital market development.
ADB, based in Manila, is dedicated to reducing poverty in Asia and the Pacific through inclusive economic growth, environmentally sustainable growth, and regional integration. Established in 1966, it is owned by 67 members – 48 from the region.