BDO explores financing option for coal plants' phaseout

Published December 3, 2021, 2:24 PM

by Myrna M. Velasco

The Sy-led BDO Capital & Investment Corporation is opening its doors to financing scheme that will align its project funding portfolio with the proposed energy transition mechanism (ETM) towards the phaseout of coal-fired power plants in the country within a specified timeframe.

In an Energy Investment Forum convened by the Department of Energy, BDO Capital President Eduardo V. Francisco said they will hold discussions with the Asian Development Bank (ADB) so they can be properly apprised how the private banks could participate in financing the ETM towards the phaseout of coal plants in the Philippine power mix.

“That’s something that the banks have not really appreciated yet, but we will talk to the ADB because we want anyway the transition of coal to happen soon also — so there will be no stranded assets for the coal investors, the original owners,” the BDO executive said.

The initial financing strategies being explored, he noted, could include “lengthening the tenors so they can get financing or there could be some subsidy from the ADB or IFC (International Finance Corporation).”

Francisco added “We will always be there to try to study that and help those who are into coal and in line with the transition, shift it into renewables.” He further emphasized that “renewable energy projects are something that we’d love to do.”

Coal-fired power generating facilities, if properly operated, maintained and built on superior technology, could outlive life cycle of up to 50 years. But under the ETM, there are proposals to enforce gradual phaseout of coal plants in the next 10-15 years, so countries could pitch in major solutions to the world’s climate change mayhem.

Coal plants are typically tagged as major carbon dioxide (CO2) emitters. If their phaseout from power generation mix won’t be accelerated, the world’s target to limit global warming to 1.5 degrees C may not be attained within targeted mid-century timeframe.

The ETM-underpinned ditch of coal facilities is spearheaded by multilateral financing agencies, primarily the ADB – and it has been targeting countries in the Asia Pacific region so they can concretize their carbon footprints reduction goals.

Under that propounded financing scheme, the ADB as well as partner-banks and investors will have to bankroll country-specific ETM funds, so they can move headway in the earlier retirement of their coal-fired power fleets.

Then from the funds funneled through the ETM, the project developers can mobilize or re-channel capital spending to renewable energy (RE) installations, as well as other enabling infrastructure projects, such as in the reinforcement of power grids for RE integration as well as the deployment of battery storage to support clean energy ventures.

As emphasized, the exact structure and the corresponding transactions under the ETM in a particular country shall be determined based on the regional and local needs of power markets.

 
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