CDPQ and Vena Energy to Develop First Green Project Bond in Japan
Vena Energy has partnered with investment group CDPQ to issue the first green project bond that will fund a 35-megawatt solar project in Japan.
The transaction, worth JPY9.3b ($63.8m), is in line with Vena Energy’s Green Financing Framework.
This innovative green project bond marks an expansion of Vena Energy’s debt capital market activities from corporate to project level, further diversifying our financing sources and increasing our flexibility to fund future growth,” Simone Grasso, Chief Investment Officer of Vena Energy, said.
The project, located in the Fukushima Prefecture, is expected to supply 7,000 households with renewable energy annually.
It has the potential to reduce up to 22,283 tonnes of greenhouse gas emissions per year, as well as save some 35 million litres of water.
CDPQ released a press release earlier today announcing the first ever green project bond in Japan:
- The inaugural project bond will finance an operational and fully contracted solar project in Japan, which has a capacity of 35 MW
- Total transaction value of JPY 9.3 billion (approximately CAD 90 million)
- This is CDPQ’s first financing of a renewable energy project in Japan
Vena Energy, a leading renewable energy company in Asia Pacific, and global investment group CDPQ announce today that they have concluded an agreement for a JPY 9.3 billion green project bond (approximately CAD 90 million). The transaction marks Vena Energy’s inaugural foray into the international project bond market and CDPQ’s first financing of a renewable energy project in Japan. The proceeds will be used to finance one of Vena Energy’s operational solar projects in Japan, in line with Vena Energy’s Green Financing Framework.
Located in the Fukushima Prefecture, the 35 MW solar energy project can supply more than 7,000 Japanese households with renewable energy per year. Compared to conventional thermal generation, it has the potential to reduce up to 22,283 tonnes of greenhouse gas emissions yearly, while saving approximately 35,000,000 litres of water.
“As the demand for clean energy is rising globally, this financing is well aligned with our strategy to support high-quality and essential infrastructure assets that contribute to the energy transition,” said Marc Cormier, Executive Vice-President and Head of Fixed Income at CDPQ. “We are pleased to partner with Vena Energy, a major independent power producer in Asia-Pacific, which will accelerate our capacity to diversify our presence in this evolving market.”
“This innovative green project bond marks an expansion of Vena Energy’s debt capital market activities from corporate to project level, further diversifying our financing sources and increasing our flexibility to fund future growth,” said Simone Grasso, Chief Investment Officer of Vena Energy. “We are delighted to collaborate with CDPQ on this transaction, which represents another step towards decarbonizing the real economy and accelerating the energy transition across the Asia Pacific region.”
ABOUT CDPQ
At CDPQ, we invest constructively to generate sustainable returns over the long term. As a global investment group managing funds for public retirement and insurance plans, we work alongside our partners to build enterprises that drive performance and progress. We are active in the major financial markets, private equity, infrastructure, real estate and private debt. As at As at June 30, 2022, CDPQ’s net assets totalled CAD 391.6 billion. For more information, visit cdpq.com, follow us on Twitter or consult our Facebook or LinkedIn pages.
CDPQ is a registered trademark owned by Caisse de dépôt et placement du Québec and licensed for use by its subsidiaries.
ABOUT VENA ENERGY
Headquartered in Singapore, Vena Energy is a leading renewable energy company in the Asia-Pacific region that owns, develops, constructs, operates, manages, and commercialises a renewable energy portfolio totalling 35 GW (1) of solar, onshore wind, offshore wind, battery storage and hybrid renewable energy projects. Vena Energy has a fully integrated business model and an extensive local presence throughout the region with 67 corporate and site offices in Australia, India, Indonesia, Japan, Philippines, Singapore, South Korea, Taiwan, and Thailand. Vena Energy is committed to engaging with local communities throughout the lifecycle of its portfolio projects, as well as incorporating internationally recognized Environmental, Social and Governance (ESG) standards into its strategy and business practices. For more information, please visit www.venaenergy.com.
1 Includes assets in operation, construction, and shovel ready (OCSR) stages, and projects in various stages of development.
This project marks CDPQ’s first financing of a renewable energy project in Japan.
Its partner, Vena Energy, is a leading renewable energy company in the region:
Headquartered in Singapore, Vena Energy is a leading renewable energy company in the Asia Pacific region. We own, develop, construct, operate, manage, and commercialise renewable energy projects in the Asia Pacific region, with an extensive local presence of over 692 employees across 67 corporate and site offices in Japan, North Asia & Australia, Southeast Asia, and India. Our current portfolio includes our core business of solar, onshore wind, and their respective extensions, offshore wind, and energy storage projects.
You can read Vena Energy's press releases here.
Last year, Vena Energy completed the construction of a 37-MW solar PV park in Japan's Nagano Prefecture:
Singapore-based independent power producer (IPP) Vena Energy has completed the construction and started commercial operation of a 37-MW solar PV park in Japan's Nagano prefecture, it said.
Named Kawakami Solar Project, the plant consists of more than 89,000 bifacial PV solar panels covering a 49.87-hectares (123.23 acres) area in Kawakami village.
The solar farm will be able to generate enough clean electricity to power over 10,000 local homes for a year.
With Kawakami Solar, the Singaporean IPP expands its Japanese operational portfolio to 26 wind and solar power facilities with a combined capacity of 516 MW across the country, the firm added.
As far as this latest project with CDPQ, located in the Fukushima Prefecture, the 35 MW solar energy project is expected to supply more than 7,000 Japanese households with renewable energy per year.
Moreover, it has the potential to reduce up to 22,283 tonnes of greenhouse gas emissions yearly, on top of saving approximately 35,000,000 liters of water.
Marc Cormier, Executive Vice-President and Head of Fixed Income at CDPQ states:
“As the demand for clean energy is rising globally, this financing is well aligned with our strategy to support high-quality and essential infrastructure assets that contribute to the energy transition.We are pleased to partner with Vena Energy, a major independent power producer in Asia-Pacific, which will accelerate our capacity to diversify our presence in this evolving market.”
For Vena Energy, this new debt financing allows it to diversify its financing sources and increase its flexibility to finance future growth, which is what Simone Grasso, its Chief Investment Officer notes in the press release, adding:
“We are delighted to collaborate with CDPQ on this transaction, which represents another step towards decarbonizing the real economy and accelerating the energy transition across the Asia Pacific region.”
Debt financing of green projects in Asia Pacific has taken off over the last five years.
In fact, the green bond market in APAC has overtaken the North American market but the market can only consolidate properly if ESG disclosure is standardized.
China is APAC’s top green bond issuer, but its neighbors are catching up.
In May, Japan laid out a plan to issue US$157 billion in 'green transition' bonds:
Japanese Prime Minister Fumio Kishida on Thursday laid out a plan to issue an estimated 20 trillion yen ($157 billion) worth of "green transition" bonds to help finance investment to achieve a carbon-neutral society.
The move highlights Tokyo's efforts to seek alternative sources of energy as Russia's invasion of Ukraine illustrated the risks the country faces from its heavy reliance on fuel imports.
"The energy security environment surrounding Japan has changed dramatically with Russia's invasion of Ukraine," Kishida said in a meeting with experts to discuss Japan's clean energy strategy, calling for the need to shift to a carbon-neutral society from one dependent on fossil fuel.
In the meeting, Kishida said Japan would need at least 150 trillion yen in combined private- and public-investment in the next decade to achieve a carbon-neutral society.
Of that amount, the government must raise an estimated 20 trillion yen through issuance of green transition bonds, he said.
The government will also create a 10-year road map to promote green investment that would include financial aid and infrastructure building, Kishida said.
Details of the green transition bonds, including the specific amount to be issued, will be discussed at a panel to be set up later this year, a government official said.
I am providing you with a background to understand why this project with Vena Energy could be the beginning of many other renewable energy projects in Japan for CDPQ and other large Canadian pension funds looking to expand their investments in the region.
The Japanese government welcomes private-public partnerships and needs them to achieve its goal of carbon neutrality over the next decade.
In short, while CAD $90 million doesn't sound like a lot in terms of financing a project for CDPQ, it is its first financing of a renewable energy project in Japan and it can lead to many more projects over the next decade.
This is a huge growth area for CDPQ and well in line with its climate strategy which it announced last year.
Private debt has grown considerably at CDPQ over the last few years and is part of the Fixed Income portfolios.
Jérôme Marquis is responsible for all corporate credit activities at CDPQ and Marie-Noël Ouellet is responsible for leading the global financing strategy in the infrastructure and energy sectors.
I'm not sure who worked on this deal but it's a good one and with fixed income markets reeling this year, I expect more deals like this at CDPQ and other large Canadian pension funds looking to bolster their fixed income returns through private debt.
In related news, a month ago, CDPQ took part in Fundamental Renewable's $400 million credit facility:
Fundamental Renewables, an established provider of financing for solar and other renewable energy projects, today announced that it has secured a $400 million credit facility. Delaware Life Insurance Company (“Delaware Life”), a Group 1001 company, acted as the arranger of the facility and is a lead lender. Other lenders include CDPQ American Fixed Income V Inc., a wholly-owned subsidiary of CDPQ, and East West Bank. Fundamental Renewables is the clean energy investment arm of Fundamental Advisors (“Fundamental”).
The facility provides Fundamental Renewables with additional resources to support long-term growth and build on the momentum across the business as it continues to invest in premier renewable and clean energy assets and provide flexible financing solutions to leading clean energy developers. Fundamental Renewables is well positioned to capitalize on the growing shift toward renewable energy and to support the needs of renewable energy developers throughout the United States.
“We are pleased to build on our longstanding relationships with our institutional financing partners to create new partnerships that will allow us to invest more in solar energy assets, while supporting the businesses that are spearheading the energy transition to a lower carbon economy,” said Ryan Keane, Managing Director at Fundamental. “This financing will help provide creative and flexible capital solutions as we continue to differentiate our platform as the partner of choice for innovative, industry-leading renewable energy developers across the country.”
“We are pleased to continue our partnership with Fundamental and look forward to playing an important role in their continued growth as they create innovative clean energy financial solutions,” said Andrew Kenney, Chief Investment Officer of Delaware Life. “This credit facility represents our fourth financing for Fundamental, and will provide additional capital to enhance their ability to offer more efficient and flexible financing solutions across a broad array of renewable energy assets. This project continues Delaware Life and Group 1001’s commitment to ESG initiatives around the country.”
“Fundamental Renewables has adapted to the evolving needs of clean energy developers by offering tailored financing solutions for solar power projects. Supporting an industry partner who plays a leading role in enhancing the availability of renewable energy for communities helps meet CDPQ’s ambition to accelerate the transition to a lower carbon economy,” added Marc Cormier, Executive Vice-President and Head of Fixed Income at CDPQ.
“More than ever, innovative solutions are needed to ensure our society makes a smooth transition to a lower carbon economy,” said Joseph Weingarten, Senior Vice President-Relationship Manager of Structured Finance at East West Bank. “It is why East West Bank is proud to be a part of this partnership with Fundamental Renewables as they take their clean energy investments to the next level to help drive change in the sector.”
Fundamental has extensive experience investing in public purpose and community assets, including renewable energy, and provides the expertise and added flexibility to offer new and complementary financing solutions. Since commencing its renewable energy strategy in 2015, Fundamental has closed on over $5 billion of renewable energy development and construction loans.
About Fundamental Advisors
Fundamental is a leading alternative asset manager dedicated to municipal, public purpose and community assets. Founded in 2007, the firm is focused on targeting control-oriented investments in stressed and distressed assets or securities, financing the development or revitalization of public purpose or community assets, and acquiring undervalued securities in the secondary market. Fundamental Renewables is the renewable and clean energy investment arm of Fundamental and an established provider of debt financing for renewable energy projects. For more information, please visit www.Fundamental.com.
About Delaware Life Insurance Company and Group 1001
Founded in 2013, Delaware Life is an affiliate of Group 1001 Insurance Holdings, LLC (“Group 1001”) and currently provides over 315,000 active annuity and life insurance policies. Delaware Life’s investment activities span the corporate, asset-backed (securitizations, lender finance and asset-based lending facilities) and real estate sectors, with an emphasis on private, direct origination. Learn more about Delaware Life at www.delawarelife.com.
Group 1001, with assets under management of $57.5 billion as of June 30, 2022, is a financial services enterprise powering the next generation of insurance businesses with solutions that are useful, intuitive, and accessible to everyone. Learn more about Group 1001 at www.group1001.com.
About CDPQ
At CDPQ, we invest constructively to generate sustainable returns over the long term. As a global investment group managing funds for public retirement and insurance plans, we work alongside our partners to build enterprises that drive performance and progress. We are active in the major financial markets, private equity, infrastructure, real estate and private debt. As at As at June 30, 2022, CDPQ’s net assets totalled CAD 392 billion. For more information, visit cdpq.com, follow us on Twitter or consult our Facebook or LinkedIn pages.
CDPQ is a registered trademark owned by Caisse de dépôt et placement du Québec and licensed for use by its subsidiaries.
About East West
East West Bank, the largest independent bank headquartered in Southern California, provides financial services that help customers reach further and connect to new opportunities. East West operates over 120 locations in the United States and abroad. In the United States, East West has locations in California, Georgia, Illinois, Massachusetts, Nevada, New York, Texas, and Washington. In China, East West’s presence includes full-service branches in Hong Kong, Shanghai, Shantou, and Shenzhen, and representative offices in Beijing, Chongqing, Guangzhou, and Xiamen. For more information on East West, visit the Company’s website at www.eastwestbank.com.
Lastly, Paul Verney of Responsible Investor reports that CDPQ is working on an emerging markets blended finance platform with MUFG:
Canadian pension fund Caisse de dépôt et placement du Québec (CDPQ), is working with Japanese financial giant MUFG on a blended finance lending platform aiming to provide $1.2 billion to low and low-middle income countries for adaptation infrastructure projects.
Details of the project, which is still under discussion and not yet confirmed, were revealed last week by the C$392 billion (€292 billion; $283 billion) fund’s global head of sustainability, Marc-André Blanchard.
Speaking on an online panel convened by the Net Zero Asset Owner Alliance (NZAOA) on scaling blended finance climate solutions in emerging markets, Blanchard said: “One example of what we’re doing at the moment at CDPQ is working with MUFG Mitsubishi, the Japanese financial institution, and the Green Climate Fund (GCF) and many other partners such as FinDev Canada to create a lending platform in adaptation infrastructure.”
GCF is the South Korea-based climate fund established in 2010 under the UN Framework Convention on Climate Change to take donations from wealthier nations to finance initiatives in less developed countries.
FinDev Canada is a financial group created to catalyse private-sector investment in developing markets. The Montreal-based firm is a wholly owned subsidiary of Export Development Canada, Canada’s government-owned export credit agency.
The project was described by Blanchard as a “humongous task”, one that is “almost impossible” for any institutional investor to do alone.
“It’s unthinkable,” he said. “Just 10 years ago we were buying stocks on the public market and buying bonds and now we’re into developing projects like this.”
When asked for more details about the platform, a spokesperson for CDPQ told Responsible Investor that the fund only comments on specific investments once they have been completed.
But according to a document put out by MUFG in June, the “fundamental objective” of the platform – referred to as GAIA – is to “deploy its public-private financing capacity into meaningful low-carbon, climate adaptation and mitigation assets, across a range of vulnerable countries, at a scale and scope far beyond the conventional appetite of its constituent financing partners”.
The “innovative” platform will include “a de-risking mechanism through a junior concessional debt tranche, partial credit guarantees and foreign exchange hedging, that will serve as a blueprint to scale climate finance from institutional investors in emerging markets”, the document revealed.
Blended finance push
Last month, the NZAOA – of which CDPQ is a member – called on policymakers to do more to facilitate the scaling of blended finance structures and laid out five recommendations urgently needed to “incentivise and utilise blended finance structures at scale”. These are necessary, the initiative argued, if the world is to achieve international climate and sustainable development goals.
Blanchard stated on the panel that one of the biggest issues CDPQ had faced when it comes to investing in emerging markets was finding “de-risking instruments for foreign exchange” and identifying “bankable projects”. This was partly the driver for the need to create the fund’s own platform, he said.
“We are institutional investors; we’re not in that business. We know very little about that, and we need the knowledge of the [multilateral development banks] and all of those involved in this to develop bankable projects,” he told attendees.
According to MUFG’s document, the Japanese firm would act as the project’s accredited entity and key executing entity alongside CDPQ and FinDev Canada, with the three entities “exercising control of GAIA through contractual and supervisory relationships”.
The GCF describes accredited entities as those that partner with it to implement projects, including carrying out “a range of activities that usually include the development of funding proposals and the management and monitoring of projects and programmes”.
Earlier in the NZAOA discussion, Blanchard stressed the need to do things differently “if we want to move from billions to trillions” when it comes to climate finance in emerging markets.
“If you look at the last five years, we’ve gone backwards, not forwards in many ways in terms of investment flows and movement of capital,” he said.
As to why blended finance vehicles have not taken off at scale, Blanchard raised the often-cited issue of unsuitable risk-return profiles, but he also highlighted the lack of trust between the private sector, governments and multilaterals.
“We need to change that,” he said. “We have no time to quarrel. Let’s assume the good faith of everyone. Of course, the private sector will want to be paid for the risk it’s taking. But we’re also there because we believe that it’s necessary to better align capital with sustainable development.
“It’s about working differently and thinking that partnerships that were unthinkable a few years ago are now thinkable.”
I agree with Marc-André Blanchard, Executive Vice-President and Head of CDPQ Global and Global Head of Sustainability, it is critically important to find ways to make these blended finance vehicles take off in scale if we are to address climate adaptation in emerging markets.
The Net Zero Asset Owner Alliance put out a press release last month:
Closing the climate investment gap in emerging markets and developing economies (EMDEs) will take political will.
The Net-Zero Asset Owner Alliance is calling on policymakers to support scaling blended finance, an instrument that can help address structural deterrence to investments in EMDEs (where the risk level is normally too high for institutional investors). By leveraging public and philanthropic capital to improve the risk profiles of investment opportunities, blended finance can mobilise significant of much-needed private capital.
In the Call to Action, the Alliance outlines 5 solutions that would bring about systemic change and create an investment environment where capital can flow to where it is most needed.
You can download the document, Scaling Blended Finance, by clicking here.
Below, learn more about Vena Energy and why it's a great partner for CDPQ to have as it expands its renewable asset investments in the APAC region (first clip is 4 years old, second one is newer).
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