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Manila Bulletin devider Business devider Banking & Finance devider China-backed AIIB joins World Bank's $1-billion Philippine energy reform loan financing

China-backed AIIB joins World Bank's $1-billion Philippine energy reform loan financing

Published Jun 8, 2026 12:00 am  |  Updated Jun 6, 2026 03:32 pm

The China-backed Asian Infrastructure Investment Bank (AIIB) is expected to provide a $200-million loan to co-finance with the World Bank a forthcoming $1-billion policy-based financing package that will support the Philippines’ energy transition, electricity market reforms, and water-sector improvements.

The AIIB disclosed last Friday, June 5, that the proposed financing will form part of the Philippines Energy Transition and Climate Resilience Program, with the Beijing-backed multilateral lender contributing $200 million while the World Bank will provide the remaining $800 million. The financing is targeted for AIIB board approval in November 2026 and is expected to close in December 2027.

Manila Bulletin reported last week that the World Bank is preparing a $1.02-billion financing package for the Philippines Second Energy Transition and Climate Resilience Development Policy Loan (DPL), consisting of a $1-billion loan and a $20-million grant from its Fund for Innovative Global Public Goods (GPG) Solutions. This World Bank financing is scheduled for approval by the lender’s Washington-based board this coming June 25.

Meanwhile, the AIIB’s proposed climate policy-based financing (CPBF) will serve as parallel co-financing for the second phase of the aforementioned programmatic DPL series led by the World Bank. The program seeks to support Philippine government reforms aimed at scaling up adoption of clean energy technologies, increasing the security, flexibility, and competition of electricity markets, and improving water management across competing uses.

A DPL is a fast-disbursing loan that supports policy and institutional reforms rather than financing specific infrastructure projects.

The AIIB said the second phase will build on reforms already initiated under the first World Bank-backed loan, which took effect in June last year, and will further strengthen the policy framework needed to expand renewable energy (RE), improve electricity market efficiency, and enhance water governance and service delivery.

Under the program’s first reform pillar, the government will pursue measures designed to accelerate private-sector investment in RE projects, promote energy efficiency (EE), and support the electrification of transportation. The second pillar focuses on addressing regulatory and market-design constraints that limit RE integration and weaken competition among electricity suppliers. The third pillar aims to strengthen water resources management as well as improve water supply and sanitation services, particularly in poor and vulnerable communities.

The Department of Finance (DOF), through its international finance group (IFG), will serve as the program’s executing agency and overall coordinator. Implementing agencies include the Department of Energy (DOE), the Energy Regulatory Commission (ERC), the Department of Environment and Natural Resources (DENR), the Department of the Interior and Local Government (DILG), and the Department of Economy, Planning, and Development (DEPDev).

The AIIB noted that implementation of the first phase has shown strong progress, particularly in energy-sector reforms. According to the lender, the RE market is now fully operational, preparations for offshore wind auctions are advancing with pre-qualification already opened for 3.3 gigawatts (GW) of offshore wind capacity, and the share of RE in the country’s power mix has increased to 32 percent from 30 percent, moving toward a 42-percent target by 2027. The bank also cited progress in reserve-market reforms, expanded retail competition, and initial steps to encourage electric vehicle (EV) adoption.

Water-sector reforms, meanwhile, are progressing more gradually. The AIIB said efforts are focused on improving local water utility performance, strengthening coordination among government agencies, and enhancing the allocation of public financing. It added that reforms are helping increase the number of financially sustainable local government unit (LGU)-run water service providers while laying the groundwork for broader sector improvements.

The lender expects the program to increase RE capacity, accelerate offshore wind deployment under the DOE’s Green Energy Auction Program (GEAP), expand EV charging infrastructure, improve EE, strengthen ancillary services in the electricity market, and enhance transparency and efficiency in the use of public funds for water supply and sanitation projects.

The AIIB also said the reforms are expected to generate positive social and environmental benefits, including lower pollution, improved public health outcomes, greater climate resilience, and new jobs in RE, EE, and water-service delivery. The program likewise seeks to narrow gender gaps in the water sector by promoting women’s participation in leadership and decision-making roles.

Related Tags

Asian Infrastructure Investment Bank (AIIB) World Bank
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