Milbank, Tweed, Hadley & McCloy LLP represented Bank of America Merrill Lynch, HSBC and CLSA as joint arrangers and dealers in connection with the establishment of a US $1 billion medium term note program (“MTN”) issued by Cayman Island-based AC Energy Finance International Limited and guaranteed by Philippines-based AC Energy, Inc. (“AC Energy”), and the issuance of two series of notes totaling US$410 million. This inaugural climate bond issuance by AC Energy marks the first Climate Bonds Initiative (“CBI”) certified US dollar climate bond in Southeast Asia to be listed on the Singapore Stock Exchange.
The notes are a drawdown from the MTN and comprise of one series, and comprise: (i) an initial issuance of $225,000,000 4.75% notes due 2024 (“2024 Notes”), and the issuance of an additional tranche of $75,000,000 in 2024 Notes, and (ii) a second series issuance of $110,000,000 5.25% notes due 2029 (“2029 Notes”).
The net proceeds of the notes issued will be used for AC Energy’s green projects in accordance with its Green Bond Framework. Under the terms of the transaction, the proceeds of the bonds will finance renewable energy projects in Vietnam, the Philippines, Indonesia, and others within the Asia-Pacific region. Under the terms of the CBI certification, AC Energy must use the funds for assets and projects that have low carbon impact and further climate resiliency within the economy. AC Energy is aiming to grow its energy capacity to 5 gigawatts (GW), with 50% of its total energy output backed by renewable energy, by 2025. AC Energy is the energy subsidiary of Ayala Corporation, one of the oldest and largest conglomerates in the Philippines with interests in real estate development, banking, water services, industrials, infrastructure, healthcare and education.
The issuances were also notable for the participation of International Finance Corporation (“IFC”) and Asian Development Bank (“ADB”). IFC invested $75 million in the 2024 Notes in line with its commitment to grow green capital markets, including infrastructure-targeted green bonds, essential for funding the region’s massive infrastructure needs. ADB, on the other hand, invested $20 million in the 2029 Notes. It was the third climate bond project and its first publicly listed climate bond investment.
The Milbank team was led by Capital Markets partner James Grandolfo and Counsel Paul Pery, along with associate Cheyne Cudby. Alternative Investments partner James Warbey and associate Chris Burke provided support from London.
Mr. Grandolfo said, “We are thrilled to have played a significant role in this green bond issuance, which will greatly expand AC Energy’s renewable energy portfolio and further global sustainability measures.” Mr. Pery added, “This landmark transaction marks a first not just for AC Energy, but for Southeast Asia as well. We have built a market-leading reputation as a trusted advisor for clients on their most complex and groundbreaking transactions, and this bond issuance further enforces that reputation.”
The MTN program was establishment on January 16, 2019; the initial drawdown/issuance of 2024 Notes closed on January 29, 2019; and additional issuance/tap of 2024 notes and issuance of 2029 notes closed on February 12, 2019.
