ACEN Concludes World's First Energy Transition Mechanism Transaction for the 246-MW SLTEC Coal Plant

Published on: 08 November 2022
by KnowESG
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ACEN, the energy platform of the Ayala Group, said that the South Luzon Thermal Energy Corporation (SLTEC) coal plant has been completely sold off using the energy transition mechanism (ETM). This is the first ETM deal ever made.

The coal plant's operating life of up to 50 years will be cut in half as part of the ETM structure as ACEN commits to retiring and transitioning the plant to a cleaner technology by 2040. This will help avoid or reduce up to 50 million metric tonnes of carbon emissions.

The Asian Development Bank (ADB) came up with the ETM idea to help get low-cost, long-term funding for projects that get rid of coal early and put the money back into renewable energy projects.

Ahmed Saeed, ADB vice president, said:

“We commend the Ayala Group and ACEN for the successful closing of this pioneering ETM transaction. We hope that this sets the tone for others to pursue the just transition of thermal plants to cleaner technologies.”

The ETM for the SLTEC plant involved ₱13.7 billion in debt financing provided by the Bank of the Philippine Islands and Rizal Commercial Banking Corporation, as well as ₱3.7 billion in equity investments from the Philippine Government Service Insurance System, The Insular Life Assurance Company, Ltd., and ETM Philippines Holdings, Inc., for a total deal value of ₱17.4 billion.

ACEN received ₱7.2 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.

Wick Veloso, GSIS president and general manager, said:

“Our priority is to find ways to grow and sustain our funds to ensure that we can provide our over two million members and pensioners their benefits. We also fully support investments that prioritise optimal environmental, social, and governance (ESG) factors or outcomes consistent with our corporate social responsibility.”

Nina D. Aguas, InLife executive chairperson, said:

“To deliver a lifetime for good, for us at InLife, also means investing in cleaner air and environmental solutions for future generations. The proceeds of our investment will be used to develop renewable energy and eventually allow decommissioning of the coal plants. We join the call for the development of more renewable energy sources through this pioneering transition mechanism.” She added that the ETM is a groundbreaking solution to a rising global concern.

"Through this transaction, ACEN moves closer to its commitment to 100% renewables generation by 2025, as well as its ambitious goal of reaching 20 GW of renewables capacity by 2030."

Cora Dizon, ACEN CFO 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.”

Eric Francia, ACEN president and CEO, said:

“ACEN continues to blaze the trail for the energy transition in the Asia Pacific. As the company has successfully divested its coal asset, ACEN commits to a just energy transition. We have established mechanisms to ensure that stakeholder interests, especially those of the people and communities of SLTEC, are effectively addressed.”

AlphaPrimus Advisors and BPI Capital served as financial advisors to the transaction. For the equity placements, CLSA Philippines was the lead arranger, while BPI Capital and RCBC Capital did the same for the SLTEC debt financing.

Source: ACEN

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