The Asian Development Bank (ADB) has backed the issuance of the first Climate Bond in Asia and the Pacific through the credit-enhancement to the Philippine firm AP Renewables, a subsidiary of AboitizPower Corporation, for the Tiwi-MakBan geothermal energy facilities.
The PHP10.7 billion (US$225 million) bond comes in addition to a direct ADB loan of PHP1.8 billion (US$37.7 million). ADB’s credit enhancement is through a guarantee of 75% of principal and interest on the bond. The Bank of the Philippine IsIands (BPI) has acted as lead arranger and sole underwriter of the bond issuance.
The bond has been certified by the Climate Bonds Initiative that try to mobilize debt capital markets for climate change solutions, is the first in Asia and the Pacific and the first ever Climate Bond for a single project in an emerging market.
AboitizPower acquired the Tiwi-MakBan complexes in 2009 for US$446.888 million. 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.
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.
Todd Freeland, Director General of ADB’s Private Sector Operations Department, said:
“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. 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.”
Liza Montelibano, First Vice President and Chief Financial Officer at AboitizPower, said:
“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. We are committed to support the energy needs of the country, and in building renewable energy resources through our brand, Cleanergy.”
Reginaldo Cariaso, Managing Director of BPI Capital Corporation, said:
“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. 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.”