The Asian Development Bank has approved an umbrella facility of up to US$100 million which will provide financing support for renewable power projects in Pacific island countries.
The support includes loans, guarantees, and letters of credit aimed to overcome constraints to private sector investment in the renewables sector.
The ADB says the Pacific Renewable Energy Program will support an estimated 5 separate renewable energy projects in its Pacific developing member countries over a 5 year period.
"The program will help to build urgently needed capacity for energy sector expansion and private sector interest in clean energy projects in the region," said the Director General of the ADB's Pacific Department Carmela Locsin
"The objective is to implement more renewable energy projects in the Pacific by working with power utilities to identify transactions at an early stage."
According to the ADB, funding for power utilities in the Pacific is inadequate. Private sector investment is seen as crucial to expand renewable power generation as the region transitions from fossil fuels to clean energy.
However, the bank deems that investment is restricted by a lack of governmental credit support for power utilities.
Further restrictions include a lack of bankable power purchase agreements, inconsistent foreign currency availability and convertibility, as well as political risks.
"This program is designed to work within these constraints and encourage private sector investment through an innovative blend of ADB's direct private sector lending, ADB's guarantees of commercial bank lenders, together with donor funds which provide a backstop to the payment obligations of the power utilities," said Director General of the ADB's Private Sector Operations Department, Michael Barrow.
"It will help remove barriers to investment by enhancing the creditworthiness of power utilities and mitigating perceived political risk for lenders."