IMPACT Awards 2022

Impact project/investment of the year - climate: Energy Transition Mechanism for ACEN Corporation

The Energy Transition Mechanism (ETM) is a concept developed by the Asian Development Bank (ADB), which aims to leverage low-cost and long-term funding for early coal retirement and the reinvestment of proceeds to enable renewable energy projects.

In November 2022, ACEN Corporation – the energy platform of the Ayala Group, completed the full divestment of the South Luzon Thermal Energy Corporation (SLTEC) coal plant in Batangas, Philippines, via the energy transition mechanism (ETM), making it the first ETM deal in the world.

This award reflects the way debt and equity investors will help this coal plant to transition towards net zero.

The ETM for the SLTEC plant involved ₱13.7 billion ($245 million) in debt financing provided by the Bank of the Philippine Islands and Rizal Commercial Banking Corporation, as well as ₱17.4 billion in equity investments from the Philippine Government Service Insurance System (GSIS), The Insular Life Assurance Company, and ETM Philippines Holdings.

ACEN received ₱7.2 billion from the transaction for reinvestment in the company's renewable energy projects.

Judges called this project a great impact initiative with "great potential". Another said: "Replicable model with significant potential to accelerate the early retirement of coal-fired power plants. Further, the effort is in a critical region for climate action. This is an exciting and consequential effort."

As part of the ETM structure, the coal plant's operating life of up to 50 years will be cut in half, as ACEN commits to retire and transition the plant to a cleaner technology by 2040. This will help avoid or reduce up to 50 million metric tons of carbon emissions, according to ACEN.

Cora Dizon, ACEN chief financial officer and treasurer, said: "Finding a win-win solution to balance the needs of multiple stakeholders amidst the goal of transitioning away from coal was admittedly challenging.

"Despite this, debt and equity investors still came together to support the financing of this pioneering energy transition deal, which has become a blueprint for other organisations to emulate."

Asia is home to 90% of the world's newer coal plants – and, in the Philippines, 57% of the country's power generation currently comes from burning coal.