By Alena Mae S. Flores
ACEN Corp,., the energy platform of the Ayala Group, announced Monday its full divestment from South Luzon Thermal Energy Corp.’s coal plant using the energy transition mechanism touted as the first deal in the world.
ACEN said the landmark transaction would enable the early retirement of the 246-megawatt coal plant in Batangas province.
The coal plant’s operating life of 50 years would be cut in half as part of the ETM structure, as ACEN commits to retire and transition the plant to a cleaner technology by 2040. This will help avoid or reduce up to 50 million metric tons of carbon emissions.
“ACEN continues to blaze the trail for 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,” ACEN president and chief executive Eric Francia said.
ETM is a concept developed by the Asian Development Bank to leverage low-cost and long-term funding geared towards early coal retirement and the reinvestment of proceeds to enable renewable energy projects.
“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,” ADB vice president Ahmed Saeed said.
The ETM for the SLTEC plant involved P13.7 billion in debt financing provided by the Bank of the Philippine Islands and Rizal Commercial Banking Corp. and P3.7 billion in equity investments from the Government Service Insurance System, The Insular Life Assurance Company Ltd. and ETM Philippines Holdings Inc., for a total deal value of P17.4 billion.
ACEN received P7.2 billion from the transaction for reinvestment in the company’s renewable energy projects. The balance would be used to refinance debt and transaction fees.
GSIS invested P2.2 billion in redeemable preferred shares issued by SLTEC. “Our priority is to find ways to grow and sustain our funds to ensure that we are able to provide our over two million members and pensioners their benefits. We also fully support investments that prioritize optimal environmental, social and governance factors or outcomes consistent with our corporate social responsibility,”GSIS president and general manager Wick Veloso said.
InLife executive chairperson Nina Aguas said the company invested P1-billion which, “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,” Aguas said.
She said the ETM is a groundbreaking solution to a rising global concern.
ACEN moves closer toward its commitment to 100 percent renewables generation by 2025 and its goal of reaching 20 GW of renewables capacity by 2030, with the transaction.
“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 organizations to emulate,” ACEN chief finance officer Cora Dizon said.
AlphaPrimus Advisors and BPI Capital served as financial advisors to the transaction. CLSA Philippines was the lead arranger for the equity placements, while BPI Capital and RCBC Capital acted in the same capacity for the SLTEC debt financing.