RCBC participates in PHL’s first ETF deal

Rizal Commercial Banking Corporation (RCBC) has entered into the first Energy Transition Financing (ETF) agreement in the Philippines to re-invest funds in renewable energy for the rapid liquidation of a coal-fired power plant.

This month, RCBC Corporate Banking Group and RCBC Capital Corporation AC Energy Corp. (ACEN) has signed an ETF financing agreement for South Luzon Thermal Energy Corporation (SLTEC), a subsidiary of Ayla Corporation.

“In 2020, RCBC will stop funding new coal-fired power plants when resources are redirected to renewable energy projects, and our participation in this ETF agreement is part of that commitment,” said Eugene S., RCBC President and CEO. Acevedo says 6

As part of the ETF agreement, ACEN has signed a revised and restored public loan and security agreement with Calaca, Batangas, one of RCBC’s major lenders for SLTEC’s 2 × 135-megawatt (MW) power plant.

In a regulatory filing, ACEN explained that the loan facility of up to P13.7 billion was intended to refinance SLTEC’s outstanding P9.8-billion loan facility, partial redemption of capital in SLTEC held by ACEN and other transaction-related financing. Instead of costs, ACEN will use the proceeds of equity redemption to reinvest in renewable energy projects.

Through this process, ACEN’s power plant will be shut down by 2040 or 15 years before the plant’s technical life.

ACEN explained that the concept of this agreement with RCBC and another bank adopts the principles of the Energy Transition Mechanism (ETM) operated by the Asian Development Bank (ADB) in South and Southeast Asia.

ETM aims to use public, private and public funding to provide low-cost funding to help coal-fired power plants accelerate their retirement and jump-start reliable and affordable clean energy.

RCBC has been implementing its environmental and social management system since 2011 under the direction of the International Finance Corporation (IFC). This collaboration has continued for more than a decade now.

“RCBC has gained access to the Partnership for Carbon Accounting Financials (PCAF) and the 2nd Degree Investing Initiative (2DII) for the use of the Capital Transition Assessment (PACTA) method under the Paris Agreement, as directed by the IFC. The PACTA methods of PCAF and 2DII will enable RCBC to build a portfolio of low-carbon and climate-resilient lending. The recent ETF with ACEN serves this purpose, “said Mr. Acevedo.