The Burgos wind farm is the first wind farm project
financing in the jurisdiction to reach financial close. It is
also the first to be completed under the country’s
feed-in tariff (FiT) regime.
The $315 million non-recourse financing for the 150 megawatt
(MW) project – the largest wind farm developed in the
Philippines to date – involved a combination of US
dollar and Philippine peso-denominated debt by international
and Philippines banks. Danish export credit agency Eksport
Kredit Fonden (EKF) supported the US dollar-denominated
Although the project market in the Philippines has been
active, this deal highlights the potential for renewable energy
projects in the jurisdiction.
This represents the banks and EKF taking an increasingly
sophisticated view on the Philippines market and by extension
Philippines sovereign risk, said Brendan Quinn, partner at
Herbert Smith Freehills in Melbourne, who acted for sponsor
Energy Development Corporation.
"There’s no traditional offtake arrangement
with this deal," he added. "Instead it relies on a feed-in
tariff, which of itself created a number of challenges from a
- The $315 million Burgos Wind Farm Project is the
first wind farm project financing in the Philippines to reach
- It is also the first to be banked under the
jurisdiction’s feed-in tariff;
- The feed-in tariff in the Philippines is
allocated on a first-come, first-served basis so there was no
offtake agreement when financing this project;
- More wind projects will depend on whether the
Philippines government increases the feed-in
The financing agreement was signed on October 20. Both
US dollar and peso-denominated tranches will mature in 15
years. EKF guaranteed part of the US dollar loan
"We haven’t seen non-recourse project finance
in the Philippines in a while, so this transaction was
significant as it showed that international banks are prepared
to take risk in the jurisdiction," said Smith.
Burgos is the largest wind farm to be developed in the
Philippines to date, and is on a 600-hectare site in province
of Ilocos Norte. It is EDC’s first wind power
project; the sponsor is already active in the geothermal
It is expected to provide electricity for two million people
at its completion.
" There’s no
traditional offtake arrangement with this deal "
The end retailer is essentially paying through the state, so
it raises the question of whether the banks and sponsor are
taking credit risk on the government or the Philippines retail
sector, Smith added.
In terms of project finance generally in the
Philippines, there is already a lot of activity in other
sectors, including coal and gas-fired power and airports and
other transport infrastructure, said Philip Sealey, partner at
Clifford Chance in Perth, who acted for Export Kredit
"This deal is still very significant for renewables projects
and particularly those hoping to avail themselves of the FiT,"
The FiT in the Philippines is similar to schemes seen in
Europe and other parts of the world, in which the end user pays
for electricity and the revenue goes through a government
trustee to ensure that it gets to a generator, said Quinn.
It has 200 MW allocated for wind power. But it operates on a
first-come, first-served basis; no wind project actually has a
FIT allocation because they’re still being
As a result there was no traditional offtake agreement when
the deal was financed.
Regardless, deal counsel expected to see more transaction if
the government – particularly the Department of Energy
– increases the allocation for wind power.
"What will drive the next round of renewables is the
extension of FIT," said Quinn, noting that he expects to see
the 200 MW awarded in a very short time.
He added that the importance of Burgos – among
other aspects – is that it shows both equity as well
as international, ECA and local bank support for a deal of this
nature and by extension the FiT mechanism.
Smith added that there have been encouraging signs. The FiT
solar implementation target recently increased from 50 MW to
500 MW. The energy secretary has announced that the government
was thinking about increasing the installation target for wind
projects as well, and the success of this project will
encourage the government along those lines.
The $315 million financing agreement for the 150 MW
Burgos Wind Farm was signed on October 20. According to
local media reports, it’s expected to be
completed in November.
Herbert Smith Freehills represented sponsor Energy
Clifford Chance acted for Eksport Kredit Fonden and the
lenders. The mandated lead arrangers for the US dollar facility
were ANZ, DZ Bank, ING, Malayan Banking Berhad and Norddeutsche
Landesbank Gironzentrale. The peso facility was arranged by PNB
Capital and Investment Corporation and SB Capital Investment
Corp, and the syndicate comprised BDO Unibank, Land Bank of the
Philippines, Philippine National Bank and Security Bank
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