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Bank injects $264 million into Pacific Renewable Energy Scheme

The Asian Development Bank (A.D.B.) has put US$100 million (T$264 million) toward a new Pacific Renewable Energy scheme specifically designed for the private sector to sustainably grow the sector across the region.

The bank’s Private Sector Operations Department (P.S.O.D.) devised the programme to help the private sector invest in renewable energy, despite considerable existing barriers.

Michael Barrow, the P.S.O.D. Director General said financial support will include loans, guarantees and letters of credit, which tick several boxes - it will lower the cost of financing, attract new investors and lenders to Pacific nations where the risk was too high previously, and generate financing for the P.S.O.D. itself.

The $100 million is divided between $50 million (T132.5 million) in guarantees and $50 million in loans, according to the programme documents.

The programme will span 14 nations in the Pacific including Samoa. 

Already, Mr Barrow said he anticipates projects in Tonga and Fiji will be announced under the programme soon.

“We are providing money, mobilising money from some of our donors, some liquidity or letters of credit to support the payment obligations of some of the Pacific electricity companies, the state-owned companies to allow the investors to have confidence that they can enter into long term power agreements in the Pacific with Pacific Island power companies for long-term power purchase agreements,” he said.

One of the biggest barriers to investment in the Pacific is a lack of “track record” of government’s entering long-term power purchase agreements with private sector companies. For an investor or financier, that suggests a big risk.

“What the facility guarantee we put together does is help give comfort to investors and financiers that those payments under the power purchase agreements will be made in the long term, because we are providing support and a backstop for them,” said Mr Barrow.

So, if the government or state-owned power purchaser fails to pay the investor, the A.D.B. steps in, either as the guarantor or with the ready-to-go cash flow in the form of liquidity, he explained.

“Come what may, there is recourse. We hope to be processing the first project under this program, potentially (subject to negotiations) in Tonga very soon, and in Fiji coming up.”

Mr Barrow said lately, renewable energy has become significantly cheaper than in the past, and it is competitive with traditional energy sources.

“Renewable makes a lot of economic sense, because you don’t have to import diesel or rely on a fuel source, and the costs of renewable implementation have come down,” he said.

A massive drop in cost has shifted renewable energies from a "nice to have luxury" to a genuinely accessible energy source that does not have to be either subsidised or increase costs to the consumer.

The next stages of development now need to be in battery storage so that solar or hydro generated energy can be stored when the sun is shining, and power homes during the night.

“We are seeing those developments happen, and we are seeing more and more interest in this,” Mr Barrow said.

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