AC Energy secures climate bond offering
Offerings were backed up by sizeable investments by the IFC and ADB, and bond proceeds will promote clean energy projects across the region to support a low carbon economy
AC Energy, the energy platform of one of the largest conglomerates located in the Philippines, Ayala Corporation, raised a total of US$410 million in green bonds. The deal represents the first Climate Bond Initiative (CBI)-certified US dollar climate bonds in Southeast Asia listed on the Singapore Exchange.
The company initially priced on January 22 a green bond offering amounting to US$225 million. The five-year issue was priced at 99.451% with a coupon of 4.75% to offer a yield of 4.875%. The International Finance Corporation (IFC), a member of the World Bank Group, provided an anchor investment of US$75 million to complete the public placement of the bonds, bringing the total issue size to US$300 million.
AC Energy also completed a private placement of US$110 million in climate bonds for 10 years. The Asian Development Bank (ADB) on February 4 announced that it invested US$20 million in the transaction, which is paying a coupon of 5.25%.
Proceeds from the bond offering will be used to finance AC Energy's renewable energy projects in Asia-Pacific, including Vietnam, the Philippines and Indonesia. The climate bond will support the company's plans to establish and expand a regional presence in the development of clean energy projects in accordance with environmental best practice.
The bonds have received pre-issuance certification as climate bonds under the Climate Bonds Standard (CBS), which provides assurance that proceeds from any issuance of bonds will be used to finance projects and assets that are consistent with delivering a low-carbon and climate resilient economy.
AC Energy president and CEO Eric Francia says the 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.
The ADB investment is in line with the bank's new Strategy 2030, which mandates that at least 75% of the number of ADB's committed operations support climate change mitigation and adaptation by 2030, with climate finance from its own resources reaching US$80 billion over 2019-2030.
According to Michael Barrow, director-general of ADB's private sector operations department, the climate bonds will help Asean meet its target of drawing 23% of the region's energy mix from modern, clean and sustainable renewable sources by 2025.
The bonds will also contribute towards AC Energy's target of 5 GW of attributable renewable energy capacity by 2025 across the region. In 2018, the company generated 2,800 GW hours of attributable energy, 48% of which was drawn from renewable sources. As of end-2018, AC Energy has over 1.8 GW of attributable capacity – both in operation and under construction.
The green bond framework of AC Energy sets out well-defined guidelines for use of proceeds for renewable energy projects, with comprehensive monitoring and reporting commitments.
ADB's investment in AC Energy was its third climate bond project and its first publicly-listed climate bonds. In December 2018, ADB invested 5 billion baht (US$159.90 million) in the maiden five-year and seven-year climate bonds for B.Grimm Power Public Company Limited, representing Thailand's first certified climate bonds.
In 2016, ADB granted a guarantee to support an issuance for the Tiwi and MakBan geothermal power projects in the Philippines – the first climate bonds in Asia – amounting to 10.7 billion pesos (US$204.67 million). ADB's credit enhancement was in the form of a guarantee for 75% of the principal and interest on the bond.
For the US$225 million five-year offering, which was drawn from AC Energy's US$1 billion medium-term note programme, HSBC was the sole global coordinator, while Bank of America Merrill Lynch (BAML) was the sole green structuring agent. BAML and HSBC also acted as joint bookrunners and lead managers for the transaction, along with CLSA, while BDO Capital and Investment Corporation, BPI Capital Corporation and China Bank Capital Corporation were the domestic lead managers.
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