AC Energy, a wholly-owned subsidiary of Ayala Corporation in the Philippines, has attracted multilateral lenders International Finance Corporation (IFC) and the Asian Development Bank (ADB) to anchor its inaugural two-tranche $410 million climate bond.
“We are very encouraged by the strong reception among bond investors within the current volatile environment,” Cora Dizon, AC Energy’s chief financial officer said in a press release.
The first tranche of $225 million five-year notes at 4.75% was increased to $300 million on January 31 after IFC took an additional $75 million.
The second tranche of $110 million 10-year notes at 5.25% was sold via private placement, and the ADB took an anchor role with a $20 million investment.
By comparison, Swire’s $500 million 10-year green offering had a coupon of 3.5% when it was offered to the public in January last year.
“ADB is delighted to support the Ayala Group in this effort by anchoring this investment and crowding in other institutional investors,” said Michael Barrow, director general of ADB’s Private Sector Operations Department.
At least 75% of the ADB’s committed operations support climate change mitigation and adaptation by 2030 under it's new Strategy 2030, Barrow said.
Fernando Zobel de Ayala said: “We are very pleased to see the success of our maiden Green Bond.”
Proceeds of the bonds will finance renewable energy projects in the Asia-Pacific region, including Vietnam, the Philippines, and Indonesia, according to AC Energy.
The issuance will be the first publicly syndicated CBI-certified US$ climate bond in Southeast Asia.
The Bonds received pre-issuance certification as Climate Bonds under the Climate Bonds Standard benchmark set by the Climate Bonds Initiative (CBI) on January 14.
AMBITIOUS TARGETS
The additional funding will let AC Energy scale up its renewable energy investments in the region according to Fernando Zobel de Ayala.
AC Energy has set an ambitious 2025 goal of 5 gigawatts of renewable energy capacity, with renewables contributing at least 50% of total energy output.
In 2018, the company generated 2,800-gigawatt hours of attributable energy, of which 48% came from renewable sources.
In 2015 the Association of Southeast Asian Nations (Asean) set an ambitious collective Renewable Energy Target (RET) for the region. The RET is to increase the share of renewable energy into the region's fuel mix to 23% by 2025.
“This climate bond will help Asean meet its target of drawing 23% of the region’s energy mix from modern, clean, and sustainable renewable sources by 2025,” Barrow said.
This compares to just 9.4% in 2014, according to figures from the International Renewable Energy Agency (IRENA).
To be sure, while the ADB is putting its own funds into renewable energy with a commitment to invest $80 billion over the 2019–2030 period, there is still more that can be done to reach the ambitious 2025 target.
The Asean region needs to invest $27 billion annually, a total of $290 billion by 2025, in renewable energy capacity in order to meet the 23% renewable energy goal, according to IRENA.
And getting the backing of the IFC and ADB as cornerstone investors will certainly help.
