The Asian Development Bank (ADB) has approved an umbrella facility of up to US$100 million to provide financing support for letters of credit (L/Cs), loans and guarantees to overcome constraints to private sector investment in renewable power projects in Pacific island countries.

The Pacific Renewable Energy Programme will support an estimated five separate renewable energy projects in ADB's Pacific developing member countries over a five-year period.

Renewable transition

The bank says that funding for power utilities in the Pacific region is inadequate and private sector investment in particular is crucial to expand renewable power generation as the region transitions from fossil fuels to clean energy.

However, investment is restricted by a lack of governmental credit support for the payment obligations of power utilities.

Barriers to development

Development is also hampered by a lack of bankable power purchase agreements, uncertainties over foreign currency availability and convertibility, and perceived political risks.

This programme is designed to ease these constraints and encourage private sector investment through a blend of ADB's direct private sector lending and guarantees for commercial bank lenders, together with donor funds that provide a backstop to the payment obligations of the power utilities.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.