State-managed Government Service Insurance System (GSIS) has injected P2.2 billion investment for the early retirement of the 246-megawatt South Luzon Thermal Energy Corporation (SLTEC) coal plant via energy transition mechanism (ETM), an innovative market-based approach employed by Ayala-led ACEN Corporation for a funding pool underpinning the transaction.
GSIS has joined the pack of ETM equity investors in the Ayala firm that also included Insular Life Assurance Company, Ltd. (InLife), ETM Philippines Holdings Inc. which turned in aggregate capital infusion of P3.7 billion – and that was done in tandem with the P13.7 billion debt financing extended by the Bank of the Philippine Islands (BPI) of the Ayala group and the Rizal Commercial Banking Corporation (RCBC) of the Yuchengco group, hence, the total capital raised summed up to P17.4 billion.
Of the total financing package, ACEN announced that it “received P7.2 billion from the transaction for reinvestment in the company’s renewable energy projects. The balance of proceeds was used for refinancing debt and transaction fees.”
AlphaPrimus Advisors and BPI Capital hav been tapped as financial advisors and CLSA Philippines as lead arranger for the equity placements, while BPI Capital and RCBC Capital as lead arrangers in the SLTEC debt financing.
On capital pumped into the redeemable preferred shares of ACEN, GSIS President and General Manager Arnulfo “Wick” Veloso stated that “our priority is to find ways to grow and sustain our funds to ensure that we are able to provide our over 2.0 million members and pensioners their benefits.”
He added that the state-run pension fund primarily “supports investments that prioritize optimal environmental, social, and governance (ESG) factors or outcomes consistent with our corporate social responsibility.”
With the conclusion of its ETM-anchored deal, ACEN explained that its SLTEC plant is now fully lined up for earlier-than-life-cycle retirement; hence, its typical 50 years of operating life will be cut in half.
ACEN President and CEO Eric Francia said their company “continues to blaze the trail for energy transition in the Asia Pacific,” adding that with its ditch of the coal tech, “ACEN commits to a just energy transition;” while also addressing stakeholder-interests as the SLTEC plant’s retirement would be concretized in the years ahead.’
The ETM is a concept designed by the Asian Development Bank (ADB), and that is aimed at “leveraging low-cost and long-term funding geared towards early coal retirement and the reinvestment of proceeds to enable renewable energy projects
According to Ahmed Saeed, vice president of ADB, this newly concluded deal for the Ayala coal plant will hopefully “set the tone for others to pursue the just transition of thermal plants to cleaner technologies.”
For InLife, it had earlier announced its P1.0 billion investment in the ETM transaction for the coal generating facility, with company Executive Chairperson Nina D. Aguas noting that such entails “investing in cleaner air and environmental solutions for future generations.”
The retirement of its coal fleet, ACEN noted, will enable it to fully refocus its investment strategies on building up its renewable energy (RE) capacity portfolio at the scale of 20,000 megawatts at the turn of the decade.
Cora Dizon, chief finance officer and treasurer of ACEN, stressed that “finding a win-win solution to balance the needs of multiple stakeholders amidst the goal of transitioning away from coal was admittedly challenging,” yet despite this, she indicated that “debt and equity investors still came together to support the financing of this pioneering energy transition deal, which has become a blueprint for other organizations to emulate.”