By Sheldeen Joy Talavera, Reporter
DESPITE the nascent stage of offshore wind projects in the Philippines, local banks are stepping up to finance these ventures that are aiming to deliver the first kilowatt-hour by 2028.
“We are keen on supporting offshore wind projects as there appears to be a good business case for their adoption in the Philippines. Our sense is that probably all the major local banks are seriously looking at financing this type of renewable energy technology,” Juan Paolo E. Colet, managing director of China Bank Capital Corp., told BusinessWorld.
He said that there is a sufficient appetite and ample domestic liquidity for financing renewable projects.
While interest rates remain relatively high in the Philippines, Mr. Colet said that government initiatives have made the energy market attractive for offshore wind developers. These include the Green Energy Auction Program (GEAP), the Green Lane for Strategic Investments, and the Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy Act.
“Foreign investors never fail to mention to us that the Philippines is a promising destination for offshore wind energy investments,” he said.
Other major banks such as the Bank of the Philippine Islands (BPI) also expressed support in financing offshore wind projects.
“BPI is keen to support offshore wind projects by providing the required financing. Although relatively new to the Philippines, there are numerous successful applications globally, so the technology is not untested, and therefore there should be good appetite for such projects,” said Eric Roberto M. Luchangco, chief sustainability officer and chief finance officer of BPI.
“Appetite will be important given the large scale of projects.”
Meanwhile, John Cary L. Ong, executive vice-president and wholesale banking segment head of Security Bank Corp., said that the company is “cautiously optimistic” about financing offshore wind projects.
“We recognize the long-term potential of offshore wind as a critical component in the clean energy transition. However, we also acknowledge the high early-stage risks,” he said.
Mr. Ong said that the company focuses on supporting “well-capitalized developers” as well as ensuring “robust project fundamentals” and utilizing de-risked structures to mitigate potential challenges.
Offshore wind farms generate electricity from turbines positioned in bodies of water, usually at sea.
According to the World Bank’s 2022 Offshore Wind Roadmap for the Philippines, the country’s offshore wind resources have a potential of generating over 178 gigawatts (GW).
The Philippines is now tapping into this potential as the Department of Energy (DoE) assists 16 offshore wind proponents that are estimated to deliver a total of more than 16 GW of capacity.
BDO Capital and Investment Corp. President Eduardo V. Francisco said that the company is currently assisting Danish renewable energy investor Copenhagen Infrastructure Partners (CIP).
CIP, through its affiliate Copenhagen Infrastructure New Market Fund Philippines Corp., is developing a 1,000-megawatt (MW) San Miguel Bay Offshore Wind Power Project located in the provinces of Camarines Norte and Camarines Sur.
The company is the first 100% foreign-owned company to be awarded a wind energy service contract by the DoE in 2023, granting it the exclusive right to explore and develop an area in San Miguel Bay for an offshore wind project.
“I think BDO has a responsibility to understand it (offshore wind) because being one of the larger banks, so we have to be at the forefront. So, we’re trying to understand it and then we’re trying to invite other smaller banks to participate also to get a better understanding of it [so] we can help the other projects,” Mr. Francisco said via phone call.
To date, a total of 92 offshore wind service contracts have been awarded with a potential capacity of around 69 GW.
The DoE is planning to launch the fifth round of green energy auction (GEA-5) by the third quarter, which will focus on offshore wind power projects.
GEA-5 is expected to facilitate market access for offshore wind developers, ensuring long-term demand for their generation capacities and keep them on track for power generation by 2028.
The DoE sees offshore wind to play a transformative role in the Philippines’ target of increasing the renewable energy share in the power mix to 35% by 2030 and 50% by 2040.
Energy Undersecretary Giovanni Carlo J. Bacordo earlier told BusinessWorld that the DoE is working with the World Bank Group for expert guidance and support in the upcoming auction.
“This collaborative approach ensures a well-structured and investor-friendly auction,” he said.
While local banks are seeing support from the government by working on the mechanisms and infrastructure needed, further mobilization is needed to assist developers.
Chinabank’s Mr. Colet said the government has been “very helpful.”
“To further boost offshore wind development, the government needs to mobilize investment in essential infrastructure, such as ports and roads; effectively assist in permitting issues; and expedite value-added tax refunds for renewable energy developers,” he said.
BDO’s Mr. Francisco said that GEAP is important for proponents as it secures winning bidders of off-take contracts for their projects.
He said, however, that local government units could help make the permitting process easier, as well as assist in resolving right-of-way and land leasing issues.
“Government support would be necessary in the form of longer-term contracts to allow project certainty over a longer period, ports to accommodate the massive parts (which they are working on) and perhaps relief to sponsors for grid issues not under their control,” BPI’s Mr. Luchangco said.
Security Bank’s Mr. Ong said that to make offshore wind investments more attractive, the government should take steps to de-risk the market, ensure regulatory stability, and streamline the development process.
“Implementing a comprehensive Grid Integration Plan, offering substantial financial and fiscal incentives, and committing to stable and long-term policies will signal confidence to investors and encourage substantial investment in this promising sector,” he said.