IFC eyes $300-million investments in renewable energy projects

MANILA, Philippines - The International Finance Corp. (IFC), the World Bank’s private sector investment arm, is eyeing to invest more than $300 million in the Philippine power sector mainly for projects in renewable energy (RE).

IFC resident representative to the Philippines Jesse Ang told a press conference yesterday that for the past three years, the institution had poured in about $900 million in the Philippines, of which up to $700 million went to power.

“If you talk about power in the last three years, we probably put anywhere from $600 million to $700 million in the power sector. I mentioned earlier projects like Masinloc, Ambuklao-Binga, Magat and EDC, for instance. The key is to have the opportunity,” he said.

For the fiscal year ending June 2009, IFC’s new portfolio investments totaled $14.5 billion, most of which were channeled to developing countries during the financial crisis.

Ang said they are particularly looking at RE projects like biomass, wind and mini-hydroelectric power plants.

“Renewable energy is one area we’re focused. Now in the Philippines , when you say renewable energy, it’s solar, biomass and wind. Hydros, there are mini-hydros, but the big hydros are not part of renewable energy,” he said.

He said they may continue to look at smaller hydro projects. “We think hydros are good for the country, because if we have the resource we should use it. Though there is higher capital expenditure, the operating cost of the hydro is much less. And we find them good deliverers of power and they’re quite flexible as you can switch it on and off. So if there are opportunities to do more hydros, why not. Of course, with hydros, particularly the big ones, the issue on relocation is important so that we need to tackle. When we’re talking about hydros, most of it are mini-hydros or run-of-river types,” he added.

But he admitted that pursuing discussions with potential clients remain a challenge.

“Doing business is like a dance so we have to keep inviting so we can finally dance. For projects to happen we need the parties to agree. It’s quite a lot, we’ve been here for a while,” Ang said.

He said IFC is currently holding talks with various RE developers which he declined to identify. “There are companies that we’re talking focusing on mini-hydro, biomass, wind and solar. There’s a lot of interest in the Philippines right now for renewable energy,” he said.

The IFC official also suggested to the Aquino administration to continue to strive for an investor-friendly business climate in the Philippines.

“In terms of investment, the Philippines has one of the lowest in this region. We really need to improve on increasing investments. And the challenge on the investment side, if you ask any survey, is the corruption image. That’s the number one reason people don’t come here, along with policy instability, which are related, actually,” he said.

Greg Radford, IFC director for environment and social development department, said they are currently working on the new rules which will make the projects that they are supporting more sustainable.

The revised standards, which may be a little bit stringent than the existing ones, would be presented to the IFC board adopted next year.

IFC manager Patricia Miller said companies are increasingly required to take care of the environmental and social impact of their projects.

In line with this, IFC is also updating its Equator Principles, a voluntary set of standards for determining, assessing, and managing social and environmental risks in project financing in emerging markets

IFC’s performance standards – also referred to as the sustainability framework – cover climate change, human rights, gender, labor, indigenous people’s rights, community engagement, transparency, and other issues.  

Radford noted that more and more financial institutions have adopted the Equator Principles, from 45 in 2006 to 70 in 2010. In addition, 16 European development finance institutions and 32 export credit agencies of the OECD countries benchmark private sector projects against IFC’s Performance Standards.

IFC aims to foster sustainable economic growth in developing countries by financing private sector investment, mobilizing capital in the international financial markets, and providing advisory services to businesses and governments.