The Asian Development Bank (ADB) has backed the issuance of the first Climate Bond in Asia and the Pacific, amounting P10.7 billion or $225 million, for a power firm in the Philippines.
In a statement, the ADB said it would provide credit enhancement to AP Renewables, Inc. (APRI), a subsidiary of AboitizPower Corp. (AboitizPower), for the Tiwi-MakBan geothermal facility.
The P10.7 billion local currency bond is in addition to a direct ADB loan of P1.8 billion or $37.7 million.
The credit enhancement will be in the form of a guarantee of 75 percent of the principal and interest on the bond, the Manila-based multilateral 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,” said Todd Freeland, director general of the ADB’s Private Sector Operations Department.
Freeland said the credit-enhanced project bonds offered an attractive alternative to bank financing and by mobilizing cost-effective long-term capital could help close the region’s infrastructure gap.
“This is a landmark transaction for the Bank of the Philippine Islands (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 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,” he said.
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 of AboitizPower.
ADB said its credit enhancement would be supported by the Credit Guarantee Investment Facility, a multilateral facility established by Asean+3 governments and the multilateral to develop bond markets in the Asean+3 region.