The Philippines’ renewable energy sector has received a boost in funding after the International Finance Corporation (IFC) issued its first peso-denominated green bond, worth up to US$90 million, last week.
Called a “Mabuhay bond” after the Filipino greeting, the proceeds of the 15-year bond will be used to mobilise climate finance, said the IFC, which is the private development arm of the World Bank Group.
IFC country manager for the Philippines, Yuan Xu, said the new bond shows the organisation’s commitment to support the Philippines’ efforts to address climate change. “Deepening domestic capital market is critical for the long-term sustainability of the country’s economy,” she said in a statement, highlighting the importance of growing green bonds as an asset class in emerging economies which are more prone to climate risks.
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The money raised will be used to repair local renewable energy developer Energy Development Corporation (EDC)’s geothermal power plant in Kananga city in the province of Leyte. The Malitbog Geothermal Power station was damaged in a magnitude 6.5 earthquake last year and consequently shut down.
Deepening domestic capital market is critical for the long-term sustainability of the country’s economy.
Yuan Xu, country manager for the Philippines, International Finance Corporation
Funding will also be used to boost the plant’s resilience against such natural disasters by improving its energy efficiency, reducing the occurence of blackouts, tackling health, safety & environment (HSE) risks. EDC is the country’s largest geothermal energy producer, contributing up to 9 per cent to the Philippines’ total electricity supply, and also the second largest geothermal energy producer in the world after the United States.
The issuance of the first peso-denominated green bond is welcome relief to the country’s renewable energy sector which is struggling to get financing.
A report by the Asian Development Bank (ADB) published in April said that while policies exist to push for renewable energy development in the country, finance for these projects through peso-denominated green bonds is still low.
“There is large unmet demand for corporate bonds among domestic institutional investors, so issuers have little interest in incurring the additional costs for green issues when they will be able to place non-green issues without difficulty,” the ADB said.