Asian geothermal development could see increasing investment by insurance companies
Insurance companies could play an increasingly important role in financing infrastructure and geothermal power projects in Asia. With taking some of the risk through multilateral donors and banks, this could help fund geothermal development.
A recent article by Nikkei in Asia reports on an interesting angle for infrastructure financing in Asia, based on an example of the recent refurbishment of the Tiwi-MakBan geothermal power plants in the Philippines.
This $150 million project was paid for by bonds issued for this purpose, which were backed by the Asian Development Bank – a first after the Asian banking crisis in 1997. Generally, infrastructure projects are risky and take a long time to be finished. Multilateral lenders, so Nikkei, are though enhancing these credits, helping reduce risk of default and thereby encouraging investments by e.g. insurance companies and pension funds.
These companies are looking for long-term investment opportunities with little risk and a guaranteed return. Utility projects with guaranteed cash flow through electricity sales are therefore quite attractive. In the United States and other developed countries, these kind of investors have been financing projects and this could now happen in Asia as well.
“This could be a role model for infrastructure financing in Asia by insurance companies,” said Kiyoshi Nishimura, chief executive of Credit Guarantee and Investment Facility, a credit guarantor set up by the Association of Southeast Asian Nations governments plus Japan, South Korea and China.
The Philippines-based CGIF has been backing the Tiwi-MakBan geothermal power green bonds. Initially purchased by the Bank of the Philippine Islands, some of the debt could now be sold to insurance companies – mostly to “multinational insurance with experience of investing in project bonds in Western markets.”, so Nikkei.
With the emerging economies in Asia facing strong power demand, financing for power plants and other infrastructure projects is crucial and insurance companies with long investment horizons could play a crucial role.
For further details see link to article below.