Guide to Financing Renewable Energy Business in the Philippines

Overview

• The Philippines possesses abundant renewable resources, particularly in hydro, geothermal, and solar power. High upfront costs are a major obstacle to the wider adoption of renewable energy projects.
• The article explores a variety of financing mechanisms, including debt financing, equity financing, grants, project finance, green bonds, and public-private partnerships.
• Rocket Equities provides tailored financial advisory services for the CleanTech and GreenTech sectors.

The transition to renewable energy is critical for addressing climate change and advancing sustainable development. The Philippines, abundant in natural resources, has immense potential for renewable energy, with hydro resources generating 3,752 MW, geothermal contributing 1,928 MW, and solar capacity rapidly expanding to 1,064 MW. 

In 2023, renewable energy sources produced 25.7 terawatt-hours of electricity, mainly from geothermal and biomass. However, high upfront costs remain a significant challenge to broader adoption. Business financing in the Philippines plays a crucial role in closing this investment gap. 

This article outlines key financing options to accelerate renewable energy projects nationwide.

What is  Renewable Energy Financing?

Renewable Energy Financing involves securing funds for projects that generate energy from clean sources like solar, wind, and hydro. Key mechanisms include:

• Debt Financing: Loans providing upfront capital.
• Equity Financing: Selling ownership stakes to investors.
• Grants: Government or philanthropic funding for research and development.
• Public-Private Partnerships: Collaborations between government and private sectors to share risks.

Project Finance secures funding based on future cash flows, while Green Bonds raise capital for environmentally beneficial projects. Tax incentives enhance financial viability, encouraging investment and accelerating the transition to a low-carbon economy, ultimately helping to reduce reliance on fossil fuels and combat climate change.

Types of Renewable Energy Financing in the Philippines

The country has also developed a diverse array of financing options to promote renewable energy projects. These include the following:

Project Financing

Investment banks structure project financing for renewable energy, enabling developers to raise capital effectively. This method is ideal for large infrastructure projects that may be too risky or costly for a single developer. By securing funding based on cash flows and assets rather than the developer's balance sheet, project financing mitigates financial risk and attracts diverse investments, including debt providers and tax equity investors.

Debt Financing

Upfront capital for renewable energy projects is obtained through debt financing, which involves securing loans or issuing bonds. The repayment is typically spread over the project's lifetime using the revenue generated from energy production. To mitigate risk and stabilize income, lenders often require security measures such as Power Purchase Agreements and Renewable Energy Credits.

Equity Financing

In equity financing, investors provide capital in exchange for ownership stakes in renewable energy projects. This is crucial for startups and smaller companies that may lack sufficient capital. Attracting equity investors enables these companies to secure the necessary funds for expanding operations and bringing innovative technologies to market.

Government Incentives and Grants

The Philippine government offers various incentives, including tax breaks and subsidies, to promote renewable energy investment. These incentives reduce overall costs and improve return on investment, enhancing investor confidence and facilitating additional funding.

Green Bonds

Green bonds are financial instruments designated for funding environmentally friendly projects, including renewable energy initiatives. They attract socially responsible investors seeking sustainable investments. Issuing green bonds provides significant capital for renewable energy developments while promoting environmental sustainability.

Public-Private Partnerships (PPPs)

PPPs facilitate collaborations between government entities and private companies, combining public resources with private sector efficiency. This approach funds large-scale renewable energy projects by leveraging public funding and private investment expertise. PPPs also enhance project viability by sharing risks and responsibilities.

These financing mechanisms collectively advance renewable energy projects by providing diverse funding sources, reducing financial risks, and enhancing project feasibility in the Philippines and beyond.

How can Rocket Equities Help Tailor Your Financing Solutions?

Rocket Equities specializes in providing customized financial advisory services for businesses, especially in the CleanTech and GreenTech sectors which are essential as the global economy moves toward sustainability and renewable energy. 

While various financing options, such as government incentives, venture capital, and international grants, can support renewable energy projects, they also come with challenges, including bureaucratic delays and varying effectiveness based on project specifics and local regulations. 

To help startups and established companies navigate these complexities, we offer tailored financing solutions designed to overcome these hurdles.

• Private Equity: We specialize in connecting businesses with private equity investors. A prime example is our advisory role in OnPoint's recent US$50 million Series B funding round led by Seatown Holdings. This investment empowers companies to achieve market dominance while navigating complex regulatory landscapes.

Key Takeaway

As the country aims to increase its renewable energy share in the energy mix, understanding and leveraging business financing in the Philippines will be crucial for stakeholders looking to invest in a sustainable future. 

At Rocket Equities, we are dedicated to driving the growth of renewable energy in the Philippines and beyond. As a leading financial advisory firm, we offer tailored financing solutions to help project developers and investors capitalize on the vast potential of renewable energy. Contact us today to learn how we can accelerate your path to success.