BII and ADB aim to de-risk Southeast Asia renewables

The UK DFI seeks to increase the pipeline of renewable equipment to Southeast Asia in its partnership with the ADB.

British International Investment and the Asian Development Bank have partnered in a bid to unlock more climate-related investment in South and Southeast Asia by tackling the risks involved in early-stage projects.

The partnership between ADB and BII, the UK’s development finance institution, seeks to finance up to $100 million in green trade transactions through ADB’s Trade and Supply Chain Finance Programme.

The agreement will facilitate the import of goods like solar panels, wind turbines and electric vehicles to support Southeast Asia’s clean energy transition.

BII managing director and head of Asia Srini Nagarajan told Infrastructure Investor that there is no shortage of capital available for operational renewable projects.

“There is no dearth of funding, both on the debt and the equity side, for projects that are cashflow-generative.”

However, he said getting projects off the ground in Southeast Asia could prove more difficult, with investors viewing the market as riskier when measured against the strong pipeline of projects in places like India – where the country is well on the way to its target of 500GW renewable energy capacity by 2030.

“The issue in Southeast Asia is around creating more and more bankable projects. There isn’t enough appetite among most banks in these countries – and also among international investors – to take on those early-stage risks.”

Nagarajan said blended finance will play an important role in fostering the growth of the region’s renewable energy sector.

The BII-ADB partnership will support banks to take on more of the risks associated with renewable projects, with four banks in Vietnam already identified.

BII head of trade and supply chain finance Admir Imami said without trade finance assistance, renewable projects may never see the light of day.

“There won’t be any renewable projects if the parts are missing or delayed, so in every single project, all stages of the project need to have finance available.”

Local and smaller regional banks require longer-tenor trade finance support from international confirming banks to support imports of renewable equipment and machinery.

Imami said the BII-ADB partnership will provide confirming banks additional capacity to support this demand of longer-tenor finance from issuing banks.

“We have increased the width of the pipeline through which the Vietnam banks can now issue letters of credit. Where without the BII-ADB partnership, their limit may have been up to $10 million, now, that has increased as high as $30 million or $40 million.”

In a statement, ADB director general for private sector operations Suzanne Gaboury said the partnership with BII underscores ADB’s focus as a climate-focused bank.

“This collaboration with BII will strengthen ADB TSCFP’s capacity to further grow green supply chains in the Asia-Pacific region, with a focus on energy transition goods that are essential for tackling climate change.”

BII aims to invest £500 million ($635 million; €586 million) in climate finance across Southeast Asia by 2026.

This week, BII committed $13.5 million to Singapore-based Clime Capital’s Southeast Asia Clean Energy Fund II, a fund that supports early-stage, high-risk capital allocation to businesses in renewable energy generation, energy efficiency, electric mobility and electrical grid sectors.

Last year – marking the end of a hiatus from Southeast Asian investments – BII committed $15 million to Switzerland-based SUSI PartnersSUSI Asia Energy Transition Fund.

BII now has an office in Singapore and plans to add more regional offices as investment in the region grows.