P136-M GEF allotted for rural electricity in Mindanao

business mirror
TUESDAY, 08 FEBRUARY 2011 20:13 CAI U. ORDINARIO / REPORTER

THE World Bank (WB) said that P136 million of the funding it extended through the Global Environment Facility (GEF) will be used for rural electricity projects in Northern Mindanao.

The project, which will benefit 86,000 households, will be undertaken through a financing agreement by the Bank of the Philippine Islands (BPI), LGU Guarantee Corp. (LGUGC), and the Bukidnon Second Electric Cooperative Inc. (Buseco).

The BPI financial support to Buseco is guaranteed by the partial credit guarantee (PCG) program under the Electric Cooperative System Loss Reduction Project (ECSLRP) financed from the $12 million-worth grant extended by the WB through the GEF.

“The ECSLRP aims to bring reliable and affordable electricity services to rural communities as well as reduce carbon-dioxide emissions and other pollutants that harm the environment,” the WB said.

Buseco covers the northern part of Bukidnon consisting of the city of Malaybalay and the nine municipalities of Baungon, Malitbog, Libona, Manolo Fortich, Sumilao, Impasug-ong, Lantapan, Cabanglasan and Talakag.

The electric cooperative will use the P135.901-million financing for the installation of a 10 megavolt ampere (MVA) substation in Kisolon in Bukidnon, construction of a 25-kilometer 69-kilovolt transmission line from Lunocan to Kisolon, and replacement and calibration of installed meters.

WB country director Bert Hofman said that BPI’s support to Buseco is the fourth of such financing arrangements to have been made under ECSLRP’s partial guarantee program and over a dozen more for several electric cooperatives are under preparation.

The  (PCGs) program covers up to 80 percent of the total amount of financing made by commercial lenders such as BPI, one of 11 accredited financial institutions in the program, to electric cooperatives.

This credit enhancement is critical because rural electricity cooperatives have been perceived as “poor credit risks” and, as a result, little commercial credit has flowed to the sector. By guaranteeing a portion of commercial banks’ exposure, the PCG helps lower borrowing cost while enhancing commercial discipline among electric cooperatives.

“This financing is projected to result in a reduction in carbon emissions of over 100,000 tons of carbon dioxide through 2020, by reducing technical losses,” Hofman said. “When losses are reduced, electric cooperatives buy less power, thus avoiding some costs for purchased power that would otherwise be passed on to customers.”

The ECSLRP is managed by the LGUGC, a private corporation that facilitates development financing for projects of local government units, water districts, electric cooperatives, state universities and colleges, and renewable energy technology companies through credit enhancement.

The LGUGC works with the National Electrification Administration, the Department of Energy, the electric cooperative sector, and the private financial institutions in managing the program.