ADB approves financial support for renewable energy projects in Pacific island countries

MANILA: To overcome the constraints faced by private sector investing in renewable power projects in Pacific island countries and support them, the Asian Development Bank (ADB) has approved an umbrella facility of up to $100 million which will provide financial support including loans, guarantees, and letters of credit.

ADB’s Pacific Department (PARD) and Private Sector Operations Department (PSOD) will work together to implement the Pacific Renewable Energy Programme. The programme will support an estimated 5 separate renewable energy projects in ADB’s Pacific developing member countries over a 5-year period.

Carmela Locsin, PARD Director General, said, “The program will help to build urgently needed capacity for energy sector expansion and private sector interest in clean energy projects in the region.” “The objective is to implement more renewable energy projects in the Pacific by working with power utilities to identify transactions at an early stage.”

Funds for power utilities in the pacific is inadequate to bring a transition from fossil fuels to clean energy, private sector investment is crucial to expand renewable power generation in the region. Development is also hampered due to a lack of bankable power purchase agreements, uncertainties over foreign currency availability and convertibility, and perceived political risks.

Michael Barrow, PSOD Director General said, “The program is designed to work within these constraints and encourage private sector investments through an innovative blend of ADB’s direct private sector lending, ADB’s guarantee of commercial bank lenders, together with donor funds which provide a backstop to the payment obligations of the power utilities.”

The first project proposed for approval under the programme has been identified and a budgetary plan for the same is under discussion. Altogether, the program aims to spur self-sustaining private sector development and, over time, reduce reliance by power utilities on grants and subsidies.