Philippine banks’ investments in coal reach almost US$900 million despite moratorium

Metrobank is the country’s biggest financier of coal projects, found a new report by Withdraw from Coal. BDO and BPI scored for “weak coal divestment policy”, even if their gas portfolio exceeds coal as they pivot from the fossil fuel.

Metropolitan Bank and Trust Company (Metrobank)
Metropolitan Bank and Trust Company (Metrobank), the country’s fourth biggest bank in terms of assets, has made the biggest investment post-2020 with US$273 million in coal facilities. Image: Choice Market Ortigas

The Philippines’ largest banks have bankrolled up to US$867 million in coal projects despite a government policy to stop approving applications to build coal-fired power plants, according to a report released on Tuesday by green energy coalition Withdraw from Coal.

The moratorium was laid down in 2020 after the government sought a “resilient and flexible” power mix amid the Covid-19 pandemic.

Metropolitan Bank and Trust Company (Metrobank), the country’s fourth biggest bank in terms of assets, has made the biggest investment post-2020 with US$273 million in coal facilities, the bulk of which includes a loan issued this year to Aboitiz Power for refinancing its Therma Luzon, Inc coal-fired plant in Quezon province.

BDO Unibank and the Bank of the Philippine Islands (BPI), the country’s largest and third largest lenders respectively, have invested in ongoing coal projects during the period of April 2022 to March 2023 despite being two of the first local lenders declaring timelines for reducing coal exposure.

BDO put in US$143 million, which included the funding of three bonds of SMC Global Power (SMCGP), the power arm of San Miguel Corporation, partly allocated for its Mariveles Power Generation Corporation (MPGC) coal-fired power plant in Bataan.

BPI sank US$15 million into coal projects and is the lead arranger for the Atimonan One Energy (A1E) loan deal, which has been running the risk of delays due to rising costs

“BDO’s coal divestment policy shares BPI’s weakness in that it is limited only to new coal-fired power plants and does not clearly divest from financing other parts of the coal value chain nor from coal companies that meet a set threshold,” said Gerry Arances, executive director of research institute Center for Energy, Ecology, and Development, and convenor of Withdraw from Coal.

Metrobank, BDO and BPI have yet to reply to Eco-Business’ request for comment.

Security Bank has invested US$63 million in coal, while its subsidiary SB Capital Investment Corporation, is also a joint lead underwriter and bookrunner of SMCGP’s bonds despite the firm’s commitment last year to no longer fund coal projects. China Bank is also exposed to the SMCGP deal and has underwritten US$143 million in coal financing for the given period.

BDO leads pivot to fossil gas expansion

Philippine banks’ investments in fossil gas have reached US$930 million as they do an about-face from coal after the moratorium was enacted.

When the government suspended new coal construction in 2020, there arose a narrative from the global gas industry that the country needed a “bridge fuel” in order to transition to clean energy, which led to plans and resources diverted from renewable energy and towards liquified natural gas (LNG).

There are currently six operating fossil gas plants in the country, most of which rely on the Malampaya gas field for their fuel needs. However, since its reserves are expected to run out by 2027, investment in LNG projects has ramped up in a bid to stave-off risks of power shortages.

BDO has contributed the most to fossil gas expansion in the country with US$184 million in investment in gas development. It was also the top underwriter of the SMC Global Power bond that funded Excellent Energy Resources Inc’s gas project and arranged the loans for FirstGen’s gas-fired power plant in San Lorenzo.

China Bank is the second biggest gas funder, pouring in US$166 million, followed by BPI at US$158 million.

“We are grappling with the fossil gas boom enabled by banks who continue to finance these projects despite their pledge to divest and climate imperatives that point towards the urgent need to retire fossil fuels,” said Arances. “Every time a bank commits to finance fossil gas, and fossil fuels as a whole, they must know that they are financing a catastrophic future for all of us, including their shareholders and depositors.”

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