ADB backs first ‘climate bond’ issuance in Asia-Pacific

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ADB backs first ‘climate bond’ issuance in Asia-Pacific
The P10.7B Aboitiz-led bond will be boosted by a direct ADB loan of P1.8B for the development of the Tiwi-MakBan facilities

MANILA, Philippines – The first climate bond issued in Asia-Pacific will be done in the Philippines with the backing of the Asian Development Bank (ADB), the multilateral agency announced on Monday, February 29.

The ADB will provide credit enhancement to the bond issuance of Philippine firm AP Renewables, Incorporated (APRI), a subsidiary of AboitizPower Corporation (AboitizPower), to fund the development of its Tiwi-MakBan geothermal energy facilities.

The P10.7 billion ($225.2 million) local currency bond comes in addition to a direct ADB loan of P1.8 billion ($37.89 million). The ADB’s credit enhancement is in the form of a guarantee of 75% of principal and interest on the bond.

The climate bond, which has been certified by the Climate Bonds Initiative, is the first in Asia-Pacific and the first-ever climate bond for a single project in an emerging market, the ADB said.

In 2015, the ADB committed to double its financing for climate change adaptation and mitigation by 2020.

“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 the ADB’s Private Sector Operations Department.

He added that “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.”

“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.

Cariaso added that “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.”

Tiwi-MakBan plants

APRI acquired the Tiwi-MakBan geothermal plants from the Power Sector Assets and Liabilities Management Corporation (PSALM) in 2009.

Since then, it has invested in the rehabilitation of the facilities in order to improve performance and extend operating life. The geothermal plants have a combined generating capacity of 390 megawatts.

“This transaction validates the successful rehabilitation program of the Tiwi-MakBan facilities. 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,” said Liza Montelibano, first vice president and chief financial officer of AboitizPower.

AboitizPower’s Cleanergy portfolio is composed of 29 hydro and geothermal power generation facilities with a total of 915 megawatts attributable net sellable capacity.

The 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.

The ADB pointed out that 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. –

$1 = P47.43

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