In his new column for Climate & Capital, New Energy Nexus CEO Danny Kennedy shines a light on inspiring companies Solar Philippines and Navajo Power.
With the dust settling on COP26, we’re seeing what we already knew. That the climate problem won’t be solved from on high with lofty words and commitments, but by the deeds of many. What matters is boots on the roof installing solar photovoltaics and even more so, the funds flowing from fossil fuels into clean energy right now.
Government has turned itself into a climate caboose. It is hitched to a train driven by the dual locomotives of the climate movement and markets making the energy transition happen. This historic phenomenon will occur one step at a time.
We will switch out coal plants for wind farms. Solar arrays and battery banks for coal, oil and gas peakers and diesel generators, internal combustion engine cars for EVs, gas cookers with induction stoves and so on. The good news is this is happening globally and apace.
A couple of big deals in the week since COP come from places you, dear reader, may not expect: the Philippines and the Navajo Nation.
I will try henceforward to bring you such success stories monthly to give you a sense of the global momentum.
Solar Philippines
Take note of a new bond offering from a subsidiary of Solar Philippines* of PHP4 billion (just under U.S. $79 million) to refinance loans on an existing 100MW solar plant and expand it to 150MW. These “green bonds” were given a double-A plus credit rating from the local debt watchdog, the Philippine Rating Service Corporation.
Why do I call out this one deal of many solar financings announced in the last month? Because it is being led by a 28-year-old entrepreneur, Leandro L. Leviste, who just a few years ago was questioned as to whether he could ever make his startup succeed.
Now, with a 20-year take or pay contract with Manila electric company Meralco, and the backing of billionaire Enrique “Ricky” Razon he can issue debt with a Double-A plus rating!
If this initial public offering goes well in December, it will be a coup for an insurgent in a land of incumbent power companies.
The company also announced this week that it will be floating another subsidiary, Solar Philippines Nueva Ecija, to raise funds to begin a new solar project that will be the largest in Southeast Asia. If this initial public offering goes well in December, it will be a coup for an insurgent in a land of incumbent power companies.
I’m betting on this insurgent.
To say this is one for the books is an understatement. When Leandro first started this company, age 21, I remember him saying he would take coal and gas out in this enormous country. At that time the Philippines was fully dependent on fossil fuels. Any integrated resource plan for this nation of 100 million people had little renewables in the mix for decades. The most enlightened view included a gas bridge out of coal in the 2030s.
Leandro persisted. He built a 1MW rooftop project on the biggest shopping mall in Manila. He started making his own solar PV modules and, impressively, had Philippine President Duterte do the ribbon cutting at the factory. He built some big solar projects, selling them to the likes of KepCo. He partnered with some of the biggest economic players in the country.
It’s [solar power] the cheapest form of power they can get. And gas futures are looking as risky there as they are everywhere.
Now, there is a government moratorium on new coal in the Philippines, which has seen the writing on the wall. Meralco, which once poo-pooed clean energy options forever, is signing up to solar in a big way. It’s the cheapest form of power they can get. And gas futures are looking as risky there as they are everywhere.
See our previous Beers with Blair interview with Danny Kennedy.
It is not the success of this one startup founder that has made all this happen but a struggle over decades. People in the Philippines, as elsewhere, fought the abuses of fossil power, air pollution and corruption. Meanwhile small solar, wind and geothermal companies broke ground and got the market growing.
A couple of years before Covid, I remember Leandro being pilloried for taking a position against gas imports to the country as a speaker at the Asia Development Bank’s annual meeting. Let’s see how long it will be before that august institution and Filipino politicians say the same thing about gas imports. I’m betting on this insurgent.
Navajo Power
Half a world away, this news made me happy. Kellogg Foundation rounded out a $10m investment into Navajo Power* with a “program-related investment”. They join a list of notable impact investors to back this Native-led and owned company bringing utility-scale solar to reservations across America.
What’s especially notable are the terms of the facility that they’ve created. Kellogg explained they’re effectively taking “on equity risk but structure this as flexible debt for Navajo Power to retain Native ownership of the company for the long-term.”
This creative approach was achieved through certain requirements in the loan agreements. For example, there is a commitment to reinvest surplus capital into new projects. 80% of profits must be put back into new projects, or other things that have community benefit, and cannot be distributed to owners. This is what program-related investments by philanthropies should look like!
This is what program-related investments by philanthropies should look like!
Navajo Power is on a mission to create an economic upgrade for Navajo people
There is also a mission-investment commitment associated with the project’s interest payments. The rate on the Impact Loan Facility is 12% but “In partnership with lenders, Navajo Power is dedicating approximately 10% of its interest to support community benefit projects in Native communities such as off-grid solar systems for households and other community economic development projects.”
All this finance could not have happened unless, per the terms of the investment, it was majority native-owned. Conditions like this and a limited pay differential between the lowest paid worker and company leadership earns them trust in their community.
The company’s leadership, local community members Brett Isaac and Clara Pratt, know that trust is what is needed for them to fulfill their vision. A history of abuse by “big energy” in decades past in a nation riven by uranium and coal interests makes community trust essential.
Navajo Power is on a mission to create an economic upgrade for the Navajo people by developing gigawatts of solar energy and storage as the imminent closure of local coal plants accelerates. It’s a revolutionary approach and I applaud Kellogg Foundation’s investment in such a trustworthy and capable team.
Shine on!
