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Pentagreen, Citicore Renewables sign solar deal
US$30 million transaction bridges funding gap for 490MW Philippine energy portfolio
Patricia Chiu 10 Sep 2023

Pentagreen Capital, the Temasek and HSBC joint venture focused on accelerating the development of Asian sustainable infrastructure launched last year, has completed its maiden transaction – a US$30 million commitment towards solar projects in the Philippines with Citicore Solar Energy Corporation (CSEC), the solar development vehicle of Citicore Renewable Energy Corporation (Citicore Renewables).

Under the agreement, Pentagreen will provide subordinated financing for six of Citicore Renewables’ solar projects. The deal will bridge the funding gap for a 490-megawatt (MW) initial portfolio of renewable energy assets, with the potential to finance expansion of the Philippines-based integrated renewable energy platform’s portfolio to over 1 gigawatt (GW).

The deal structure will see Pentagreen act as exclusive mandated lead arranger for the US$100 million mezzanine construction green loan facility. In addition, it has also committed an initial tranche of US$30 million for the aforementioned portfolio of six solar power projects across Luzon, the biggest island group in the Philippines.Pentagreen’s initial commitment also comes with a greenshoe option to increase the committed amount to $100 million to fund additional greenfield solar projects.

The partnership with Pentagreen will hopefully help the company achieve scale, says Oliver Tan, Citicore Renewables’ CEO, and “unlock the development of our renewable energy capacity pipeline in an accelerated manner”. In addition to Citicore Renewables’ plans to roll out at least 1GW in solar projects this year, it also hopes to roll out 5GW in a span of five years.

The commitment by Pentagreen is also Citicore Renewables’ first international institutional investment, and the two companies say they hope it will eventually enable the mobilization of additional debt funding to support the construction of the company’s ready-to-build projects.

The six projects being funded, the companies say, are expected to add some 691GW-hours of renewable electricity supply to the Luzon grid annually, which will cut about 430,000 tonnes of carbon dioxide and greenhouse gas emissions a year, based on estimates in accordance with the methodology established by the International Financial Institutions Technical Working Group on Greenhouse Gas Accounting.

Citicore Renewables plans to sell green electricity to a combination of long-term and spot market customers in support of the Philippines’ goal of generating 35% of the country’s energy needs from renewable sources by 2030 and 50% by 2040.

“The accelerated development of renewable energy is vital for Asia to meet its net-zero ambitions and decarbonize in a rapid and inclusive manner,” notes Connie Chan, head, financial services at Temasek and a board director at Pentagreen. “Pentagreen is demonstrating that a specialized lender can effectively remove the barriers to bankability and unlock the implementation of projects in the region.”

Blended finance solutions, such as the Pentagreen deal, Chan adds, will be “critical” to enabling similar transactions to be done at scale.

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