The Asian Development Bank has approved an umbrella facility of up to $100 million which will provide financing support for renewable power projects in Pacific island countries. The support includes loans, guarantees, and letters of credit aimed to overcome constraints to private sector investment in the renewables sector.
The ADB said the Pacific Renewable Energy Programme will support an estimated five separate renewable energy projects in its Pacific developing member countries over a five-year period.
Carmela Locsin, Director General of the ADB’s Pacific Department, said: “The programme 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.”
According to the ADB, funding for power utilities in the Pacific is inadequate. Private sector investment is seen as crucial to expand renewable power generation as the region transitions from fossil fuels to clean energy. However, the ADB said that currently investment is restricted by a lack of governmental credit support for power utilities. Further restrictions include a lack of bankable power purchase agreements, inconsistent foreign currency availability and convertibility, as well as political risks.
Michael Barrow, Director General of the ADB’s Private Sector Operations Department, said: “This programme is designed to work within these constraints and encourage private sector investment 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. It will help remove barriers to investment by enhancing the creditworthiness of power utilities and mitigating perceived political risk for lenders.”