BEST PRACTICES AND POLICIES SHARING OF GREEN ENERGY FINANCE IN THE PHILIPPINES Conference on APEC Green Energy FinanceTaipei, Chinese Taipei/ August 18-19, 2016PAUL D. LAZAROFirst Vice PresidentDevelopment Bank of the Philippines

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1. Our Profile2. Philippine Laws (RE and Bio-fuels)3. Financing Assistance4. Best Practices5. Challenges6. Summary

Presentation Outline

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1. Our Profile A premier development financial

institution dedicated to support the national government’s thrusts

7th Largest Bank: Total Asset as of 2015 – US$10.8 Billion or P508 Billion (BSP)

Committed to triple bottom line -Social, Environment and Economics

1st Local Bank to be ISO 14001 Certified

Recipient of national and international awards (ADFIAP, Karlsruhe Awards, etc.)

Strength is on medium and long-term financing

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Priority Thrusts

Infrastructure and Logistics

Environment Initiatives

Social Services & Community Devt.

Micro, Small and Medium Enterprises

1. Our Profile

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Contribution in RE Development (operational & under construction)

LUZON - 578.03 MW

VISAYAS - 179.66 MW

MINDANAO - 32.35 MW

. . . total capacity of 790.04 MW

1. Our Profile

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Funded Renewable Energy Projects

Beneficiary Luzon GridKWHGenerated

73,687,000 KWH

CO2 avoided

33,465.81 Tons

Fuel oil equivalent

139,007.18 barrels

FOREX Savings

US$ 8.81 Million

50 MW Solar Power PlantTarlac City, Tarlac

1. Our Profile

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Beneficiaries 3 MunicipalitiesSan Fernando, Magdiwang& Cajidiocan

Consumers Savings USD 0.029/KWHSavings in UCME (Est.) USD 306,180.00Service reliability 24 hoursKWH Generated 5,438,860 KWHCO2 avoided (Est.) 4,350 TonsFuel oil equivalent 10,264 BarrelsFOREX Savings US$1.32 Million

900 KW Cantingas Mini-hydro PlantSibuyan Island, Romblon

Funded Renewable Energy Projects

1. Our Profile

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8 MW Bio-ethanol Cogeneration PlantSan Carlos, Negros Occidental

Beneficiary Negros IslandKWHGenerated

3,251,576 KWH

Production Capacity

100,000 liters per day

CO2 avoided

1,476 Tons

Fuel oil equivalent

6,136 barrels

FOREX Savings

US$ 0.662 Million

Funded Renewable Energy Projects

1. Our Profile

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54 MW San Lorenzo Wind FarmGuimaras Island

Beneficiary Visayas GridKWHGenerated

120,790,000 KWH

CO2 avoided

62,206 tons

Fuel oil equivalent

227,948 barrels

FOREX Savings

US$25.9 Million

Funded Renewable Energy Projects

1. Our Profile

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Funded RE Contributions

ENVIRONMENT

Avoided 1,252,630 tons of CO2 emissions

ECONOMICAvoided annual importation of 1.947 Million barrels of fuel;

FOREX Savings of US$ 111.32 Million; Savings on

Govt. Subsidy of US$ 7.431 Million per annum

SOCIALProvided employment to

6,600 workers. Implemented strict

compliance to relevant social and environmental laws (NCIP, ECC, etc.)

1. Our Profile

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2. Philippine Laws

Biofuels Act of 2006 (Republic Act No. 9367)Provides fiscal incentives and mandates the use of biofuel-blended gasoline (10% bio-ethanol) and diesel fuels (2% biodiesel)

Renewable Energy Act of 2008 (Republic Act No. 9513)Provides fiscal and non-fiscal incentives to private sector developers and manufacturers

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2. Philippine Laws

INCENTIVES UNDER RENEWABLE ENERGY LAW

Fiscal Incentives Non-Fiscal Incentives7-Year Income Tax Holiday Renewable Portfolio StandardsDuty-free Importation Feed-In Tariff on Emerging TechnologiesVAT-free Importation Renewable Energy Market & CertificatesSpecial Realty Tax Rate = 1.5 % Green Energy OptionsNet Operating Loss Carryover Net Metering10% Corporate Tax Rate after Income Tax Holiday

Government waives share of proceeds on RE micro-scale Projects <= 100 kW

Accelerated Depreciation Exemption from Universal ChargeZero Percent VAT on RE Sales & Purchases Tax Rebate for RE Components

Cash Incentive = 50% of UC for Missionary Electrification

Financial Assistance Program

Tax Exemption on Carbon Credits Incentives for Host CommunitiesTax Credit on Domestic Capital Equipment & Services 12

DBP’s Policy Based Financing Programs

1. Financing Utilities for Sustainable Energy Development (FUSED) Program

2. Green Financing Program (GFP)

3. Financing Assistance

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1. Program Features Eligible purposes : capital expenditures, working capital,

interest during construction and consultancy services Term : based on cash flows, maximum of 15 years inclusive of

up to 5 years grace period on principal Interest rate : prevailing market rate, fixed or variable

2. Products and services Project Financing with technical assistance on environmental

projects Project Preparation for small scale renewable energy projects

(up to 10 MW) Loan Syndication Transaction and Financial Advisory

3. Financing Assistance

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4. Best Practices

1. Enactment of laws

2. Provision of long-term financing/project preparation assistance

3. Need for lender’s engineer

4. Higher project success rate under an EPC Contract than construction by administration

5. Development of renewable energy in off-grid areas is more inclusive

6. Technical, environment and social safeguards due diligence to ensure community acceptance and sustainability

7. Capacity building on the different green energy technologies15

5. Challenges

1. Renewable Energy project is site specific and capital intensive

2. Limited long-term funds to support green energy projects

3. Technical constraints (e.g. transmission lines, ancillary services, ROW)

4. Market constraints in an island grid due to limited off-takers

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Government policy directions and laws are key drivers Financing plays a major role in the sustainable development

of green energy projects As a bank, due diligence should not only focus on the

borrower’s capacity but more so on the project

Long-term financing is necessary in the development of green energy projects

Programs and project impacts and outcomes should be aligned with the country’s development goals (e.g. PDP, SDG)

6. Summary

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Thank you.

For more information, please contact:

Development SectorDBP Head Office, Makati City, Philippines

(632) 818-9511 to 20pdlazaro@dbp.ph

www.dbp.ph

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