State-run National Electrification Administration and the Development Bank of the Philippines have forged an agreement to co-finance the capital expenditure requirements and renewable energy projects of electric cooperatives.
Under a memorandum of agreement, the DBP may use any of its Official Development Assistance (ODA) funds to support the funding requirements of electric cooperatives.
DBP president and chief executive officer Francisco F. del Rosario Jr. said in a statement that the institution’s move to finance the capital expenditures of electric cooperatives would “translate to system loss reduction and, consequently, lower the cost of electricity for consumers.”
The partnership with NEA, Del Rosario added, would also give the bank an opportunity to pursue rural electrification and renewable energy development through electric cooperatives, while helping the government attain its target under the Philippine Development Plan 2011-2016 of providing power to 90 percent of households throughout the country.
“DBP will always be ready to provide electric cooperatives with long-term funding for their capital requirements so that they can increase their capacity and improve their services, especially those in the countryside,” Del Rosario said.
Electric cooperatives are finding it difficult to borrow from banks due to their perceived lack of credit worthiness.
This is why the Department of Energy (DoE) has sought the establishment of a credit and governance risk rating system for electric cooperatives, to encourage investments in, and improve the credit-worthiness of, these entities.
The DoE plans to use a portion of a grant from the World Bank’s Global Environment Facility to establish the credit and governance risk rating and scoring system, which will serve as a reference for private financial institutions.
This, said the department, will facilitate 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 a 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 had been perceived by lenders to be highly risky and, as a result, too little commercial credit has been flowing into the sector.