ADB backs first climate bond in Asia

Bank will provide credit-enhancement and loan to bonds issued by Philippine company

By Karnika Bahuguna
Published: Thursday 03 March 2016
Credit: Flickr
Credit: Flickr Credit: Flickr

The Asian Development Bank (ADB) has backed Asia’s first climate bond issuance by Philippine firm AP Renewables, Inc, through provision of credit-enhancement in the form of a guarantee of 75 per cent of principal and interest on the bond.

Credit-enhancement is a third-party guarantee assuring investors of timely debt service payments related to the bond, even in case of a default by the issuer.

ADB will provide credit-enhancement to the climate bonds issued for the Tiwi-MakBan geothermal energy facilities, the lending agency said in a release.

The issue size of the local currency bond is 10.7 billion Philippine Peso (PHP), which is equivalent to $225 million. The credit-enhancement comes in addition to a direct ADB loan of PHP 1.8 billion ($37.7 million equivalent).

 The bond has been certified by Climate Bonds Initiative, an international not-for-profit focusing on mobilising the bond market for climate change solutions.

The issuance is the first in Asia and the Pacific and the first-ever climate bond for a single project in an emerging market, ADB said. The lending agency has committed to double its financing for climate change adaptation and mitigation by 2020.

“The transaction is highly innovative, representing the first project bond ever issued in local currency in the Philippine power sector and the first credit-enhanced project bond in Southeast Asia (excluding Malaysia) since the 1997-98 Asian financial crisis,” said Reginaldo Cariaso, managing director, BPI Capital Corporation, which was the lead arranger and sole underwriter of the bond issuance.

AP Renewables, Inc, is a subsidiary of AboitizPower Corporation which is a major power developer in the Philippines. AboitizPower acquired the Tiwi-MakBan complexes in 2009 from the government. Tiwi and MakBan are the seventh and fourth largest geothermal facilities in the world.

AboitizPower's renewable energy portfolio comprises of 29 hydro and geothermal power generation facilities with a total of 915 megawatts attributable net sellable capacity.

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