bpi green financing products - sec.gov.ph€¦ · (albay) and makban (makiling, banahaw) geothermal...

CONFIDENTIAL

BPI GREEN FINANCING PRODUCTS

SEC Corporate Governance and Green Finance Conference

February 6, 2017

Disclaimer

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This document is being issued solely for information purposes. The data and information presented andincluded in this document do not purport to be complete and exhaustive. They have not been independentlyverified as to their veracity and timeliness. BPI Capital, including their respective allied entities, as well as theirrespective agents, advisers, directors, officers, employees or representatives make no warranty orrepresentation, express or implied as to the accuracy or completeness of the contents of the document.

This disclaimer extends to any statements, opinions or conclusions contained in, or any omissions from, thepresentation or in respect or in respect of written or oral communications transmitted, and no representation orwarranty is made in respect of any such statements, opinions or conclusions.

The contents of this document are strictly private and confidential. Accordingly, except with the prior writtenconsent of BPI Capital, the information contained herein must be held in complete confidence.

Further, the information contained in this document is for discussion purposes only and does not constitute afirm offer, commitment or undertaking on the part of the BPI Capital and its proposed investors at this time.Nothing in this document shall create or shall be construed so as to create any obligation on the part of the BPICapital and its proposed investors to take any credit exposure on, or to provide any credit to the Company. Anycommitment of the BPI Capital and its proposed funders shall be subject to among others, the favorable duediligence findings, the execution of a mandate letter, satisfactory documentation and obtaining the requisitecorporate and regulatory approvals.

Discussion Points

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I. Sustainable Energy Finance ProgramII. Green Financing Case Studies

BPI Sustainable Energy Finance Program


2008

BPI Sustainable Energy Finance (SEF) Program won the G20 SME Finance Challenge in 2012 besting over 100 entries from different countries.

First and largest Sustainable Energy Financing (SEF)

Dedicated SEF team with Renewable Energy and

Energy Efficiency Projects in the Philippines

BPI Sustainable Energy Finance – Project Types

• Energy Efficiency

– Improve efficiency of operations

– Lower costs by reducing power consumption

• Renewable Energy

– Produce clean, sustainable, and reliable power

– Lower power costs

• Climate Resilience

– Adapt to Climate Change while improving efficiency and lowering costs


Technical Assistance Program

PROBLEM:

- Client experience

- Technology vendor capability

- Technical Feasibility

- Need for more successful Philippine examples

SOLUTION:

FREE Renewable Energy (RE) and Energy Efficiency (EE) consultations

- At conceptualization stage

- Evaluation of project proposals and feasibility studies

- Post project implementation and monitoring


BPI-IFC Risk Sharing Program

PROBLEM:

- Financial and Qualitative requirements of banks

- Lack of collateral

- Need for guarantees

- Need for green project incentives (green project owners and users)

SOLUTION:

BPI-IFC RSF provides 50% guaranty cover for loans up to P200M


ENERGY EFFICIENCY

148 Projects

BPI Sustainable Energy Finance Projects by Geographic Location (Total: 260)

19 Projects2 Projects38 Projects2 Projects7 Projects

CLIMATE RESILIENCE

44 Projects

Green Financing Case Studies


Case Study: AP Renewables Inc. – Tiwi-Makban ProjectCredit-Enhanced Climate Bond and ADB Loan

TERMS AND CONDITIONS

Borrower AP Renewables, Inc. (APRI)

Sponsor Aboitiz Power Corporation (APC)

Facility PHP12.5 Billion- Guaranteed Tranche: PHP10.7 billion- ADB Direct Loan: PHP1.8 billion

Tenor - Guaranteed Tranche: 10 years- ADB Direct Loan: 5 years

Guarantee Up to 75% of the Guaranteed Tranche (PHP8.03 Billion)

Guarantors Asian Development Bank (ADB) and the Credit Guarantee and Investment Facility (CGIF) (through a back-to-back arrangement with ADB)

BPI Capital Role Mandated Lead Arranger and Sole Bookrunner

PROJECT BACKGROUND

• APC through APRI won the privatization for the 390 MW (net) Tiwi(Albay) and MakBan (Makiling, Banahaw) geothermal power plants in 2009 for US$435 million in equity capital

• APC subsequently injected an additional US$150 million in equity capital to improve the reliability and extend the operating life of the power assets

• APRI has since then performed very well and is one of the most profitable businesses of APC

• APC’s objective is to unlock its investment by re-leveraging its assets and re-investing its profits for upcoming projects

Issuer Guarantor

Bond holder trustee(on behalf of Bond

holders)

Receivesfunds

Provides full wrap for the Bond

Bonds trustee becomes beneficiary of the guarantee

Pays guarantee fee

Indemnity Agreement

Guarantee Agreement

Issues bonds and make coupon andprincipal payments as they fall due

KEY ADVANTAGES OF GUARANTEE STRUCTURE

• Credit enhancement – credit risk significantly transferred to high-quality guarantors

• Can allow beneficial pricing for stakeholders and provide flexibility on tenors

• Non-SBL impacting and zero risk weighted for guaranteed portion

TRANSACTION HIGHLIGHTS

• Innovative structure paves the way for financing of large infra projects despite regulatory constraints and enhances the bankability of projects allowing for broader market participation

• Landmark transaction being the first Climate Bond in Asia Pacific and first ever climate bond for a single project in Emerging Markets as certified by the Climate Bonds Initiative

• Also the first project finance notes issued in Philippine peso in the power sector specifically for the on-shore market

• First credit-enhanced project notes in SEA (excluding Malaysia) since ‘97-98 Asian crisis

• Inaugural transaction of CGIF in the Philippine market

GUARANTEE STRUCTURE

Important NoticeThis Announcement is for information purposes only and does not constitute an offer or invitation to sell or issue, or any solicitation to purchase or subscribe for, or an offer to underwrite or acquire shares in the companies named herein or any other securities, and is not to be considered as a recommendation or invitation to participate in the transaction nor be relied on or used as basis in connection with any contract, commitment, trading in the securities or loans of the companies mentioned or for any other investment decision. The foregoing is based upon publicly available information believed to be reliable but no representation, express or implied, is made with respect to the accuracy or completeness of such information. BPI Capital, its affiliates and/or employees may hold a position in the instrument or act as market maker, underwriter, agent, advisor or lender to the companies named herein. The financial products of BPI Capital Corporation are not insured by the Philippine Deposit Insurance Corporation and are not guaranteed by the Bank of the Philippine Islands

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Case Study: Hedcor Bukidnon Run-of-River Project Finance


Borrower Hedcor Bukidnon, Inc. (“HBI”)

Sponsor Hedcor, Inc. and Aboitiz Power Corp. (“APC”)

Facility PHP10 Billion

Tenor 15 years

Availability 42months, staggered release

Interest Rate Tranche A: 15 years fixed 8 years based on interpolated 8Y PDST-R2 + margin, with repricing after the 8th year, based on 7Y PDST-R2+ marginTranche B: Straight 15 years based on 15YPDST-R2 + margin

Mandate Lead Arranger and Bookrunner

PROJECT BACKGROUND

• The project is the largest run-of-river project of Hedcor, Inc. inMindanao with total capacity of 69 MW to be located in ManoloFortich, Bukidnon

• Harnesses the hydro energy from the Tanaon, Amusig and GuiheanRivers split into two components: 43.4 MW MF Hydro 1 and 25.4MW MF Hydro 2


• The transaction highlights several first for the Philippine projectfinance market especially for renewables:

(1) The first syndicated 15-year project financing facility for a run-of-river facility of this scale, and

(2) The first commercial bank-financed run-of-river facility to applyunder the Philippine government’s Feed-in Tariff (“FIT”)regime.

• Previously, deals for similar mid-sized renewable energy projectswere funded mostly by equity as borrowing cost proved to be tooprohibitive

• The change in the regulatory framework with increased incentivesto renewable energy generation addressed market risk andsignificantly enhanced overall project bankability.

• The transaction’s innovative structure paves the way for othersimilar small to mid-sized renewable energy projects requiringfinancing.

• BPI Capital led the syndicate of local banks to engage in the fledglingrenewable energy space.

Planned Power House for HBI


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Case Study: Angat Hydropower Corporation


Borrower Angat Hydropower Corporation

Sponsor PowerOne Ventures Energy Inc (a subsidiary of SMC Global Power) and Korea Water Resources Corporation

Facility Up to PHP12.6 Billion

Tenor 15-years

Interest Rate Tranche A: 15 years fixed; repriceable on the 8th

yearTranche B: 15 years fixedTranche C: 15 years float

Sole Mandated Lead Arranger

BPI Capital Corporation

BACKGROUND

• Angat Hydropower Corporation (“AHC” or the “Borrower”) is aspecial purpose vehicle that owns Angat Hydroelectric PowerPlant (the “Project”), an operating hydroelectric power plantlocated at the Angat reservoir in San Lorenzo, Norzagaray,Bulacan approximately 58km northeast of Metro Manila,Republic of Philippines.

• The Project has a total electricity generating capacity of 218MW,comprising of four main units of 50MW capacity each and threeauxiliary units of 6MW capacity each.

• The Project was refinanced with non-recourse long term projectfinancing.


• The transaction is notable for the strength of its syndication which resulted in:

• The first large scale merchant plant being refinanced primarily from the proceeds of local debt indicating strong appetite and support from the domestic market; and

• Widely distributed with a broad investor base of banks and institutional lenders ultimately freeing up SMC’s credit lines with its other primary lenders

• Supported the National Government’s goal of not only rehabilitating and strengthening the power and non-power components of the plant but also securing the long-term water supply and irrigation requirements of Metro Manila and Bulacan


AngatHydroelectric

Plant

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Thank You.

BPI and IFC Partnership – SEF Program Benefits

Our team helps big and small companies:

Calculate potential energy cost savings through BPI’s free walkthrough audit

Evaluation of project studies through BPI’s free initial assessment of R.E. proposed projects

Link up with technology vendors, suppliers and consultants

Access financing for working capital, capital expenditure and lease arrangements

Partial guaranty cover from IFC


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Project Financing Lifecycle

Utilization of Bank Lines to fund Project

Construction

Project Completion and Commercial Operations Date

Project generates cashflow with proven

operational track record

Project debt is refinanced with Project Bonds

Bank Lines are freed up for deployment

Project Bonds allow a company

to free up its bank lines and

maximize the use of its credit

towards new projects

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Project Financing Lifecycle

Pre-Development Phase

Construction Phase Operating Phase

Sponsors conduct feasibility studies and begin pre-development work on the Project.

Costs incurred in this phase are funded by equity contributions from Sponsors.

Sponsors invite Lenders to participate in the Project.

Banks are generally able to absorb partial construction risk of the Project and provide the necessary funding to bring the Project to completion.

Project begins commercial operations and achieves positive net cashflow.

Contractual arrangements provide regular cashflows and project debt is easily refinanced.

Ideal candidate for Project Bonds

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