MANILA, Philippines—The Department of Energy (DoE) is planning to establish a credit and governance risk rating system for electric cooperatives, to encourage investments in and improve the credit-worthiness of these entities.
According to the DoE, the project is aimed at achieving significant and sustained energy efficiency improvements, which will help provide current and prospective electric cooperative customers with reliable and least-cost power supply over the long term.
The DoE plans to use a portion of a grant from the World Bank’s Global Environment Facility (GEF) for the establishment of a credit and governance risk rating and scoring system, which will serve as a reference for private financial institutions.
This, said the department, is aimed at having an assessment standard for electric cooperatives.
“This, in a way, will also rationalize the allocation of available government and private sector resources. The corresponding credit rating is envisioned to be acceptable as a conclusive measure of the status of the cooperative as a viable commercial borrower,” the DoE added.
World Bank country director Bert Hofman earlier stressed the need for credit enhancement because rural electric cooperatives have been perceived by lenders to be highly risky and, as a result, little commercial credit has flowed into the sector.
Since last year, the DoE has been urging electric cooperatives, particular those that are debt-ridden, to significantly improve their operations and become more financially viable in view of the changing landscape of the Philippine power industry.
Although electric cooperatives are mostly non-profit groups, Energy Secretary Jose Rene D. Almendras has stressed the need to equip them with a “different perspective.”
“That’s why I’m saying electric cooperatives will be challenged in a different context. They need to be brought into a more strategic framework of thinking and behaving,” he said.