Energy officials have been casting the country as a ‘mecca for green energy investments’, but one vital anchor to that is project financing, hence, major local banks are seeking policies that will guide them on the shift of financial flows to clean energy ventures.
In a virtual forum convened by the Institute for Climate and Sustainable Cities (ICSC), domestic bank giants BDO Capital Investment Corporation and the Bank of the Philippine Islands (BPI) sounded off that funneling massive scale of financing to green technology deployments, primarily in renewable energy (RE) installations, will flourish to a higher degree if such will also be underpinned by policies to be enforced for the banking sector.
According to Eduardo V. Francisco, president of BDO Capital, “banks are implementation-ready. We are strictly regulated by the Monetary Board and the Central Bank, so if they issue more guidelines we’ll just follow it.”
He qualified that their bank has been doing a lot of project finance activities, and based on proposals of sponsor-companies, “we analyze all the risks.”
Energy Undersecretary Felix William Fuentebella indicated that project finance remains a ‘tight spot’ for gigantic scale integration of RE into the country’s energy mix because lenders or the banks still require power supply agreements.
Nevertheless, he conveyed that the Department of Energy (DOE) is advancing the implementation this year of the green energy auction program (GEAP) because that will serve as an ‘alternative market’ for capacities to be generated from RE facilities.
Under GEAP, the DOE is targeting to auction up to 2,000 megawatts of RE capacity – and such shall be underpinned with PSAs with pre-determined green energy tariff that shall be based on a green energy auction reserve (GEAR) pricing to be drawn up by the Energy Regulatory Commission.
The GEAP is a key component of the country’s Renewable Portfolio Standards (RPS) policy, which prescribes that the power distribution utilities shall source certain percentage of their supply portfolio from RE capacities – and that shall grow by an increment of 1.0-percent annually until year 2030.
With the RPS, the Philippines is eyeing to increase the share of RE in the energy mix to 35-percent by 2030; then a higher percentage of 50-percent by year 2040 – and this will be the country’s contribution to the 1.5 degree warming limit for Planet Earth.
For BPI, Jo Ann Eala, vice president of the Ayala-led bank, stated that they have been seriously weighing climate change and environmental impacts on risks assessment of their project lending activities.
“We have to make sure that the projects that we support and we fund, are actually making money and profitable,” she said; and on the core of that, the project must also have contribution to the country’s sustainability agenda.
Lyn Javier, assistant governor of the Bangko Sentral ng Pilipinas (BSP), acknowledged that Philippine banks are being called upon to enhance their risk management capacities – and this can be accomplished by assessing the various types of risks on their lending portfolios; and there must also be increased transparency to stakeholders; as well as re-skilling of personnel on the country’s sustainable agenda.
“When we understand risks, we also see the opportunities behind investing in sustainable projects,” the BSP official stressed.