Banks expect to keep lending to coal-fired power projects

 Banks expect to keep lending to coal-fired power projects

Banks expect to continue lending to coal-fired power projects as the Philippines shifts to cleaner and renewable energy sources by 2040, pending developments in an Asian Development Bank (ADB) program funding the energy transition, a senior banker said.

“There’s a current initiative from the (ADB) for the energy transition. That’s something that the banks haven’t really appreciated yet, but we will talk to the ADB,” BDO Capital & Investment Corp. President Eduardo V. Francisco said during the Energy investment Forum Friday.

“We want any way for the transition of coal to happen smoothly also, so there will be no stranded assets for the original coal investors,” Mr. Francisco said.

He also said that if the Department of Energy (DoE) allows nuclear energy, BDO Capital & Investment is willing to explore financing whatever companies decide to venture into nuclear.

During the United Nations Climate Change Conference (COP26) in November, Finance Secretary Carlos G. Dominguez III, head of the Philippine delegation, said the country has partnered with the ADB to establish the Energy Transition Mechanism (ETM) in the Philippines.

ETM is ADB’s initiative to “shorten the life of coal-fired power plants and unlock new investments in sustainable and renewable energy.”

Through partnerships, public and private investment will support and finance country-specific ETM funds to retire coal-fired power plants earlier than scheduled.

“In parallel, proceeds from the assets or other investments will be mobilized onward renewable energy plants and enabling infrastructure such as grids and storage to provide clean energy,” the ADB said on its website.

In Oct. 2020, the DoE announced a moratorium on new coal-fired power plant projects.

Prior to the suspension, there were 3,436 megawatts (MW) worth of approved coal-fired power plants in Luzon including projects from Meralco Powergen Corp. and GNPower Dinginin Ltd. Co.

The equivalent capacities are 135 MW and 420 MW for the Visayas and Mindanao, respectively.

To hit its target of 50% renewable energy (RE) capacity outlined in the Philippine Energy Plan by 2040, Energy Undersecretary Felix William B. Fuentebella said in his presentation during the forum on Friday that the Philippines needs an additional 92,320 MW of installed capacity by 2040 under what it calls the Clean Energy Scenario (CES). — Marielle C. Lucenio