AP Renewables' PHP10.7 billion ($225 million) green bond to finance a geothermal project was significant for being the first from the Philippines, and in its use of credit enhancements from the Asian Development Bank (ADB).
AP Renewables, a subsidiary of Manila-based energy company Aboitiz Power, issued the bond to refinance a 676.9MW geothermal project in the Philippines which it had bought from the government in 2009.
The bond was a private placement to BPI, which was also its lead arranger and sole underwriter. The bank is currently holding the bond while negotiating a sale to numerous insurance companies.
Issuer: AP Renewables
Deal format: Private placement
Issuer rating: N/A Private Placement
Governing law: Philippines law for security, English law for guarantee
Lead managers: BPI
Tenor: 10 years
Spread: Benchmark is the Philippines PDSF R2
Date of issue: 29 Feb 2016
External assessment: Climate Bonds Initiative certification from DNV GL
Highlights: First green bond from Philippines, use of Asian Development Bank to guarantee 75% of the loan.
This type of issue, with a multilateral bank guarantee - in this case for 75% of the bond's total value - could become increasingly common, particularly in emerging markets, says Bonifacio Banzon, director and head of project finance at BPI.
Banzon argues this is because it is a structure that can be easily replicated and issuers will look for ways to finance large projects but have a limit to how much they can borrow. In the Philippines the limit is 25% of the bank or corporation's net worth, with the exception of oil companies.
The use of the credit enhancement by ADB drove pricing of the bond down a few basis points, due to the bank's AAA rating, says Banzon.
"For emerging markets, the assistance of the multilaterals is significant in terms of political, governmental offtake cover," adds Clarice Marucut, assistant vice president at Aboitiz Equity Ventures.
BPI's Banzon is optimistic about green bonds in the region and in particular the Philippines, as it can grow its share of renewables, from solar and wind as well as geothermal, in the energy mix to 50% in the next few years, from its current base of 40%.