There was a healthy deal flow in infrastructure financing in Asia-Pacific in 2022, particularly in the renewable energy, telecommunications and transport sectors. Hybrid renewable energy projects are increasingly being bid out in markets such as Australia, India and Taiwan as they provide longer-duration energy generation or even round-the-clock (RTC) solutions.
Indeed, while solar and wind, both onshore and offshore, are ramping up the share of renewable energy in the energy mix across the region, the issue of intermittency is creeping up with the battery energy storage system (BESS) proving to be critical in reconciling the renewable energy supply and demand.
“We see hybrid projects and battery storage as the future of renewables,” says a senior project finance banker. “We are also increasingly seeing stand-alone battery storage as the next big thing and intermittency will be managed more at the grid level.”
One of the deals that defined this trend is the US$985 million hybrid RTC battery-enabled project financing for ReNew Surya Roshini Private Limited. The innovative project in India comprises of wind capacity (900 megawatts), solar photovoltaic (PV) capacity (400MW), and battery storage capacity (100 megawatt-hours), which directly addresses the intermittency issue of renewable energy by providing a stable base load.
The project has been designed to meet the high-capacity utilization factor requirement by oversizing the project capacity and incorporating a BESS component to meet the RTC project specification. Excess power generation to the extent not taken up by the offtaker will be sold to the merchant market. The financing structure has been designed to address such features of the project.
This is regarded as a game-changer for the Indian market as its successful implementation would improve the adoption of RTC/peak power projects in India and is key to achieving the government’s ambitious renewables objectives and supporting the country’s energy transition. India is targeting to have 500 gigawatts of installed renewable energy by 2030, which includes the installation of 280GW of solar power and 140GW of wind power.
A global first
In Japan, the 112MW Ishikari integrated offshore wind and battery project, located in the Ishikari Bay in Hokkaido, is a global first for the energy industry. This is a key milestone in Japan’s energy transition, into which offshore wind plays a critical role.
Adani Solar Energy Jaisalmer One Private Limited secured a US$288 million green loan facility to finance the construction of a 450MW solar-wind hybrid power project in the state of Rajasthan, also in India. The power generated from the project will be sold to the Solar Energy Corporation of India (SECI) under a 25-year power purchase agreement.
Over in Australia, the Singapore-headquartered Vena Energy is developing its first combined solar and BESS project – the Tailem Bend II hybrid power plant. It is the company’s first operational system to aggregate solar generation and battery storage, and will bring it online in 2023. Upon completion, the project will have a capacity of 128.5MW derived from the 87MW solar project and the 41.5MW BESS. The solar project is capable of supplying clean energy to about 35,000 homes annually, reducing more than 207,000 tonnes of carbon dioxide greenhouse gas emissions, or the equivalent of planting more than 3.4 million trees.
In Taiwan, Iontree Company signed a NT$1.4 billion (US$45.70 million) debt facility to finance a BESS project – a landmark transaction to assist in Taiwan’s energy transition towards a low-carbon economy. BESS is an important emerging renewable energy sector in Taiwan, which aims to install 1GW of battery-based energy storage system, of which 840MW will be developed by the private sector.
The increasing importance of BESS and the heightened interest in the technology come as solar and wind farm projects continue to dominate the renewable energy space across the Asia-Pacific region. South Korea saw its first project financing for an offshore wind with the development of a greenfield 99MW project by sponsors SK E&S and Copenhagen Infrastructure Partners. The landmark project is also the first Korean project financing funded by local and international banks.
Bankers are optimistic about the prospects of the Korean offshore wind sector as the government is looking to achieve carbon neutrality by 2050 and reduce its reliance on energy imports by expanding its renewable energy sources. “There will be huge opportunities in South Korea where we see a big demand and a robust pipeline of offshore wind projects,” says another banker. “They want to scale up on renewables.”
Fishery solar project
In another landmark renewable energy transaction in Taiwan, SunnyRich Multifunction Solar Power secured a loan of NT$8.88 billion for the first fishery solar project financed by Taiwanese banks under the project finance structure. This is the first large-scale loan syndication for a fishery solar farm led by local banks and the financing fully complied with the Equator Principles. The project is scheduled to reach commercial operation in late 2023.
In another notable deal out of Taiwan, one of the world’s largest asset managers BlackRock through Zhao Young Company, executed the first non-recourse holding company portfolio refinancing for renewables in this market amounting to NT$9.4 billion. The deal involved a fully operational portfolio with a total capacity of 188MW and representing 42 individual projects spanning ground-mounted, floating and rooftop commercial and industrial (C&I) solar PV assets across Taiwan. The portfolio generates a total of 270 million kWh of clean electricity annually and will provide power to 80,000 households for over 20 years.
But all is not well in Taiwan’s offshore wind market. The 640MW Yunlin offshore wind farm, for example, is facing cost overruns. “It has been significantly delayed. It’s still under construction and it’s supposed to be finished in 2022,” says a banker involved in the deal. “But we’re working on it with the export credit agencies and the other banks, and hopefully we’ll find a solution.”
Meanwhile, a number of countries in Asia-Pacific have witnessed a growing interest in C&I rooftop solar projects. “More companies want to procure renewable energy directly – that is what’s driving the demand in the C&I space,” a banker explains. In Thailand, Chow Shining Energy Public Company Limited secured a 970 million baht (US$28.25 million) green loan to finance the construction and operations of a portfolio of C&I and residential rooftop solar PV power projects with a combined capacity of 48MWp across various provinces in the country. The loan was one of the first limited recourse facility to recapitalize residential rooftop solar PV power projects.
Apart from the plethora of renewable energy deals, APAC also saw a stream of telecom deals involving the sale of telecom towers and the construction of build-to-suit (BTS) towers. In Australia, Australia Tower Network signed a A$3.58 billion (US$2.39 billion) financing to acquire Axicom to create the largest independent tower infrastructure company in the country. In New Zealand, Samco Holding secured a NZ$500 million (US$314.45 million) syndicated debt facility to fund the acquisition of a 70% stake valued at NZ$900 million in Spark TowerCo, the mobile tower business of Spark New Zealand, as well as support the ongoing growth capital expenditures requirement.
There was also heightened activity in the telecom sector in the Philippines as the country’s leading telco and mobile companies Globe Telecom and PLDT decided to sell their towers. In the largest telecom tower sale and leaseback transaction closed in 2022 in the Philippines, the country’s biggest bank BDO Unibank provided 50 billion pesos (US$898.50 million) in secured debt facilities to leading global investment firm KKR through its Philippine entity Frontier Towers Associates Philippines to support the acquisition of certain tower assets from Globe Telecom and to fund capital expenditures for the construction of BTS towers.
Foreign companies are attracted to the opportunities in the Philippine tower sector in view of the national effort to hasten tower roll-out in the country in order to address the increasing demand for mobile services. It was pointed out that the Philippines currently lags behind its major Asean neighbours in terms of tower penetration.
Communication and Renewable Energy Infrastructure (CREI) Philippines is constructing BTS towers in various locations in the Philippines supported by a US$70 million loan package arranged by the International Finance Corporation (IFC). CREI Philippines is a wholly-owned subsidiary of the Two Thirty Three Holdings, a global provider of telecom infrastructure services in emerging markets. The financing is IFC’s first direct investment in the tower market in the Philippines, which IFC says has seen marked underinvestment in the telecom space.
In Sri Lanka, Dialog Axiata Telecom secured a US$150 million loan facility to fund the expansion and improvement of its network through the upgrade of existing sites and the construction of new 4G sites. The company is also increasing its fibre optic network footprint and implementing upgrades to increase both capacities and efficiencies in core network operations.
The transport sector in the Asia-Pacific saw the emergence of electric mobility type of projects in 2022 with the strong backing from the Asian Development Bank (ADB). The bank supported the nascent electric mobility sector in India through a US$40 million financing to GreenCell Express Private Limited. The project involved the procurement and operation of 255 electric battery-powered buses and allied infrastructure, serving more than five million commuters a year on 56 inter-city routes in India. The Asian Infrastructure Investment Bank (AIIB) provided an additional parallel loan of US$20.5 million. The project is also expected to directly contribute to addressing the safety gap for women. Another unique feature is the decarbonization component of the project as it is expected to result in the reduction of 6,355 tonnes of carbon dioxide a year.
Over in Thailand, ADB granted a 160 million baht loan and administered a US$3.6 million loan from the Clean Technology Fund to E-Smart Transport Company to support the development and operation of 27 electric ferries (e-ferries) for mass rapid transit (MTR) along the Chao Phraya River in Bangkok. This is the first commercial-scale use of e-ferries for MRT in Southeast Asia and will help reduce air and noise pollution.
An electric mobility project in Vietnam also received financing support from the ADB and other lenders. VinFast Trading and Production Joint Stock Company secured a US$20 million loan each from the ADB and from the Australian Climate Finance Partnership, US$5 million loan from the Clean Technology Fund, and a US$3 million grant from the Climate Innovation and Development Fund to finance the production of the company’s fully electric buses (e-bus) to be used for the first public transport e-bus fleet in Vietnam and the country’s first national electric vehicle (EV) charging network. The financing is a certified climate loan under the Climate Bonds Initiative (CBI).
There are other standout deals in the Asia-Pacific project finance market in 2022. Reliance Railway Pty Ltd issued a A$1.8 billion green sustainability-linked loan (SLL), which is one of the first of its kind in the region. It is certified as a green loan by CBI under its low-carbon transport criteria as well as being a SLL. The structure incentivizes Reliance Rail with reduced debt margins if the sustainability performance targets are met. Any margin savings are to be used exclusively to fund sustainability improvements rather than to reduce the cost of funds.
Also out of Australia, Voltaire Australia Pty Ltd and Voltaire Australia No 2 Pty Ltd secured a A$3.3 billion financing for the acquisition of a controlling interest in a concession to operate the registration and licensing, and custom plates businesses of the Victorian State Department of Roads (VicRoads). The state of Victoria has maintained a minority joint venture stake in the business and the consortium will undertake a programme to modernize and upgrade VicRoads’ services and systems. The groundbreaking transaction is believed to the first-ever private sector financing for a motor vehicles registry globally.
These are among the winners of the Asset Triple A Sustainable Infrastructure Awards 2023.
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