PENTAGREEN Capital, a Temasek-backed and Singapore-headquartered sustainable infrastructure debt financing platform, on Friday (Sep 8) inked its first landmark transaction to bridge a US$30 million funding gap for 490 MW worth of solar power projects in the Philippines.

The deal, with the Philippines-based Citicore Renewable Energy Corporation, carries a greenshoe option to raise the committed amount to US$100 million to fund additional greenfield solar projects and the expansion of Citicore’s portfolio to over 1 GW. 

Pentagreen – a joint venture between HSBC and Temasek – structured the US$100 million Mezzanine Construction Green Loan Facility as the exclusive mandated lead arranger, it said in a joint statement with its partner Citicore on Friday.

They specified that Pentagreen’s commitment essentially marks the first international institutional investment, and is designed to enable mobilisation of additional debt funding to support the construction of ready-to build projects.

Citicore is a Philippines-based renewable energy player which has plans to roll out 1 GW of solar capacity a year over the next five years. Projects tied to the deal are developed by Citicore to sell green electricity to a combination of long-term and spot market customers.

Its efforts are meant to support the Philippine government’s goal of generating 35 per cent of the country’s energy needs from renewable sources by 2030 and 50 per cent by 2040.

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Pentagreen said the deal demonstrates the debt structuring platform’s ability to bring capital where it is most needed, and catalyse sustainable infrastructure development in Asean.

Its chief executive officer Marat Zapparov said: “As a dedicated financing vehicle for sustainable infrastructure, Pentagreen identifies opportunities where our capital and structuring capabilities can serve to unlock the barriers to infrastructure development.”

“We believe vehicles like ours will play a crucial role in financing Asia’s progress towards net zero,” he added.

Elaborating on the landmark transaction, the partners said Pentagreen’s initial US$30 million commitment is meant to provide funding for four greenfield projects and two more that have been recently completed. 

The portfolio of six solar power projects has a gross capacity of 490 MW across the island of Luzon. Collectively, they are expected to add around 691 GWh of renewable electricity supply into the Luzon grid annually and result in avoided carbon dioxide emissions of 430,000 tonnes a year, they noted.

Citicore’s chief executive officer Oliver Tan said Pentagreen’s partnership with his company is a “vote of confidence” in its ability to scale up, enabling it to achieve our planned 1 GW project roll out this year, in line with its roadmap to hit 5 GW in five years.

Commenting on the deal, Pentagreen board director Connie Chan, who is Temasek’s head of financial services, said the accelerated development of renewable energy is vital for Asia to meet its net-zero ambitions and decarbonise in a “rapid and inclusive” manner. 

With the deal, Pentagreen demonstrated that a specialised lender can “effectively remove the barriers to bankability and unlock the implementation of projects in the region”, she added.

Blended finance solutions will be critical to enable such transactions to be done at scale, she also said.

The facility was structured as a green loan under Citicore’s green financing framework. The framework was developed according to ICMA Green Bond Principles 2021, Asean Green Bond Standards and LMA Green Loan Principles, and has received a second party opinion from Sustainalytics, the partners noted.