AC Energy Corporation (ACEN), the listed energy platform of the Philippine conglomerate Ayala Group, has approved the divestment, through energy transition financing, of all its shares in its wholly-owned subsidiary South Luzon Thermal Energy Corporation (SLTEC).
The 244-megawatt (MW) coal plant located in Calaca in the province of Batangas, is the only coal plant in ACEN’s portfolio. Subject to regulatory approval, the shares will be acquired by ETM Philippines Holdings (EPHI) and The Insular Life Assurance Company for an aggregate value of 3.7 billion pesos (US$66.80 million). ACEN will use the proceeds from the divestment to invest in more renewable energy projects.
EPHI is a special purpose vehicle that allows financial investors to invest in energy transition by accelerating the retirement of coal-fired power plants and to fund the development of new clean energy technologies. ACEN approved the provision of bridge financing to EPHI to facilitate its investment in SLTEC while providing prospective financial investors a vehicle to participate in energy transition.
The transaction, announced by ACEN in a filing with the Philippine Stock Exchange on July 26, will serve as a pioneer energy transition financing in the country. It’s based on the principles of the energy transition mechanism (ETM) piloted by the Asian Development Bank (ADB), which aims to leverage a market-based approach to accelerate the transition from fossil fuels to clean energy.
“This pioneering deal will allow the early retirement and transition of our coal plant to cleaner technology,” says ACEN CEO Eric Francia. “We hope that this generates some momentum for a just energy transition in the region and helps towards the achievement of net zero.”
BPI Capital and CLSA were the joint lead arrangers for this transaction, while BPI Capital and AlphaPrimus Advisors were the joint financial advisers. CLSA Philippines country head Mitzi De Dios says this deal, the first energy transition financing in the Philippines, will play an essential role in allowing countries in Asia-Pacific to realize their climate goals.
Together with Ayala Corporation, ACEN announced in November 2021 its commitment to net-zero greenhouse gas emissions by 2050. Through this energy transition mechanism, SLTEC’s coal power plant will be decommissioned by 2040 – 15 years ahead of the end of its technical life – and transitioned into cleaner technology.
ACEN has about 3,900MW of attributable capacity in the Philippines, Vietnam, Indonesia, India and Australia. The company's renewable share of capacity is 87%, which is among the highest in the region. Its aspiration is to be the largest listed renewables platform in Southeast Asia, with a goal of reaching 5,000MW in renewables capacity by 2025.