ADB scales up corporate finance lending in Asia

The Asian Development Bank (ADB) is ramping up its lending to the private sector and financial institutions across the continent via its Private Sector Operations Department, or PSOD.

“ADB traditionally has been an infrastructure bank with the majority of our assets in long-dated project finance. We are of course still a project finance lender,” PSOD director general Suzanne Gaboury said at a business conference held alongside ADB’s annual meeting in South Korea’s Incheon earlier this May.

ADB’s rise of corporate finance is a result of the dynamic situation facing its member countries resulting from the ongoing Ukraine conflict and rising inflation and interest rates, Gaboury said.

“We are very conscious of these developments. We want ADB to help address these issues and provide a stable source of financing solutions to our member countries,” she explained.

“We have good clients we are working with and provide a much more flexible solution and allow them to deploy financing to meet their needs.”

Her department, PSOD, is also supporting agribusiness to address food security among its member countries. At the ADB annual meeting a year ago, the bank launched a $14 billion food security program with the private sector.

PSOD is also looking at smaller transactions in which it provides finance directly to smaller companies, such as in the fishing or milk production sectors, Gaboury told the business conference.

At the ADB annual meeting in Incheon this May, Gaboury and CEO Philippe Valahu of the Private Infrastructure Development Group (PIDG) signed a memorandum of understanding for cooperation on early-stage, private sector infrastructure investments in Asia and the Pacific.

Early-stage projects are characterized by significant risks, upfront costs, and time on project preparation to advance them to a stage to attract commercial sponsors and financing. ADB and PIDG will explore possible partnerships in developing and financing sustainable infrastructure projects that address climate change and contribute to sustainable development and poverty reduction in ADB’s developing member countries.

It is estimated the region needs around $1.7 trillion a year, from 2016 to 2030, to meet infrastructure demand while maintaining its growth momentum, eradicating poverty, and addressing climate change. The public sector cannot meet the rising demand for financing, ADB said.

The bank last week signed a $25 million equity investment in private equity fund Exacta Asia Investment III LP managed by Singapore-headquartered investment firm Exacta to provide capital to companies engaged in healthcare, financial services, education, manufacturing, business services, and consumer sectors in Southeast Asia.

“The fund will invest in companies that look to provide quality products and services in the region’s underpenetrated markets, which will help drive business growth,” Gaboury said in a May 18 release.

“ADB’s investments in the private equity sphere not only mobilize private capital but also contribute to the adoption of environmental, social, and governance best practices,” she said.

This is ADB’s second commitment to Exacta. In 2018, ADB invested $25 million in Exacta Asia Investment II LP which provided investments for small and medium-sized enterprises in Southeast Asia, particularly those in Vietnam, Indonesia, Malaysia, Philippines, Singapore, and Thailand.

In electric mobility, the Australian government, in partnership with the ADB, announced on May 16 that it is awarding a technical assistance package worth $500,000 to VinES Energy Solutions JSC of Vietnam’s largest conglomerate Vingroup.

Administered by the Australian Climate Finance Partnership (ACFP), the package is aimed at bolstering the development and sustainable production of lithium-ion battery technology for electric vehicles (EVs) in Vietnam, where Vingroup’s EV maker VinFast has been ramping up production over the past two years. VinFast is also expanding its business in the U.S., Canada, and European markets.

With the grant, VinES will conduct a comprehensive study in collaboration with ADB and the Australian government. The study’s primary objectives include the development of sustainable and diverse supply chains for battery production in Vietnam, the exploration of best practices for the environmentally responsible repurposing and recycling of used EV batteries, and the identification of potential areas for job creation and worker upskilling within the EV supply chain.

ADB announced last October that it had mobilized a $135 million climate financing package for VinFast to manufacture the country’s first fully-electric public transport bus fleet and first national electric vehicle charging network. The ADB assistance aims to support Vietnam’s efforts to achieve its net-zero greenhouse gas emissions by 2050 and expand high-tech manufacturing industries.

The package comprises 7-year tenor financing, including a $20 million loan funded by ADB, parallel loans of $87 million facilitated by ADB as the mandated lead arranger, and concessional financing of $28 million.

Gaboury said at that time: “This project delivers a high-impact, sustainable transport solution for Vietnam while helping it meet its climate goals and supporting the growth of climate finance in the region.”

The project includes a technical assistance of $950,000 from the ACFP and the Clean Technology Fund, a global fund that promotes investments to initiate a shift towards clean technologies.

ADB’s Private Sector Operations Department under Gaboury catalyzes, structures, and provides financing to privately and state-sponsored companies across industry sectors throughout developing Asia and the Pacific.

This March, ADB and Monsoon Wind Power Co. Ltd. in Laos signed a $692.55 million nonrecourse project financing package to build a 600-megawatt wind power plant in southern Laos to sell power to neighboring Vietnam.

As sole mandated lead arranger and bookrunner, ADB has arranged, structured, and syndicated the entire financing package, the largest syndicated renewable project financing transaction among ASEAN countries to date.

Gaboury said in an announcement for the financing, “Developing economies in Asia and the Pacific face shortfalls in climate investments that are needed to clear a pathway to green growth.

“The syndication of development and commercial financing for this project bridges this gap by mobilizing private capital to develop wind resources which are translated into clean power generation that can spur economic and social advancement in the region.”