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Asian Development Bank invests into new climate bond issuance for AC Energy

Darajat III geothermal plant, Indonesia (source: Thorndon Cook)
Alexander Richter Alexander Richter 4 Feb 2019

The Asian Development Bank (ADB) has invested $20 million in AC Energy's $410 million maiden climate bond issuance. AC Energy holds geothermal investments in Indonesia and the Philippines. The proceeds will be used for clean energy project development in Southeast Asia.

In an announcement today, the Asian Development Bank (ADB) reports it has invested $20 million in AC Energy’s maiden climate bond issuance. AC Energy is a wholly-owned subsidiary of Ayala Corporation in the Philippines. This landmark public listing will be the first Climate Bond Initiative (CBI) certified US dollar climate bonds in Southeast Asia listed on the Singapore Stock Exchange.

ADB is an anchor investor in the 10-year tranche, contributing to a total issue volume of $410 million. Proceeds of the bonds will finance renewable energy projects in the Asia and Pacific region, including Viet Nam, the Philippines, and Indonesia. This climate bond will be used to support AC Energy’s plans to establish and expand a regional presence in the development of clean energy projects in accordance with environmental best practice.

Ayala acquired the geothermal assets of Chevron in Indonesia in 2017 as part of a consortium of Star Energy Geothermal (Salak-Darajat) B.V., in which AC Energy has a 19.8% economic stake. AC Energy’s partners in the consortium are Star Energy Group Holdings Pte. Ltd., Star Energy Geothermal Pte. Ltd. and Electricity Generating Public Co. Ltd. In January this year, Ayala took control of Phinma Energy Corp. through a “mutually strategic agreement”. Phinma Energy holds a 25% stake in Maibarara Geothermal, which operates two geothermal units with a capacity of 32 MW in the Philippines. Another relevant geothermal holding is a 50.74% stake in Phinma Petroleum and Geothermal, Inc. (50.74%).

“We believe that this green bond issuance offers investors a compelling alternative to traditional investments and will help promote financing of clean energy projects by the private sector across the region,” said AC Energy President and Chief Executive Officer Mr. Eric Francia. “ADB’s support was invaluable to ensure that the bonds comply with CBI standards and we believe that this will demonstrate our commitment to meeting the highest environmental and safeguard standards.”

“This climate bond will help the Association of Southeast Asian Nations meet its target of drawing 23% of the region’s energy mix from modern, clean, and sustainable renewable sources by 2025,” said Director General of ADB’s Private Sector Operations Department Mr. Michael Barrow. “AC Energy aspires to be a regional leader in renewable energy, and ADB is delighted to support the Ayala Group in this effort by anchoring this investment and crowding in other institutional investors.”

AC Energy, a wholly-owned subsidiary of Ayala Corporation in the Philippines, has over 1.8 gigawatts (GW) of attributable capacity (in operation and under construction) as of the end of 2018. The climate bond proceeds will contribute towards AC Energy’s target of 5 GW of attributable renewable energy capacity by 2025 across the region. In 2018, AC Energy generated 2,800 GW hours of attributable energy, 48% of which was drawn from renewable sources.

This is ADB’s third climate bond project and its first publicly listed climate bond. In December 2018, ADB invested 5 billion Thai baht in B.Grimm Power Public Company Limited’s maiden 5-year and 7-year climate bonds—the country’s first certified climate bond. In 2016, ADB also extended a guarantee to support an issuance for the Tiwi and Makban geothermal power projects in the Philippines—the first climate bond in Asia.

Source: Asian Development Bank