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. for the Tiwi-MakBan geothermal energy facilities. The US$225 million local currency bond comes in addition to a direct ADB loan of US$37.7 million.
“The issuance of notes to fund Tiwi and MakBan on a limited recourse basis demonstrates the potential for project bonds in financing Philippine power projects,” Frederic Thomas, Senior Investment Specialist, Private Sector Operations Department, ADB, told Development Finance. “If deployed at scale, project bonds could help reduce dependency on bank loans for infrastructure financing, both in the Philippines and the Asia-Pacific region. Credit enhancements from multilateral institutions, like ADB, are a structural innovation to improve the risk profile for investors.”
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, the Asian Development Bank 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.
AP Renewables, Inc. is a subsidiary of AboitizPower Corporation, 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 programme 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.”
ADB’s credit enhancement will be risk-participated by the Credit Guarantee Investment Facility (CGIF), a multilateral facility established by ASEAN+3 (Association of Southeast Asian Nations) governments and ADB to develop bond markets in the 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.