Monsoon Wind Project - Asian Development Bank

Asian Development Bank led the financing of this remarkable and large scale 600-megawatt, US $950 million renewable energy wind power plant located in Lao’s People Democratic Republic.

• Investor (lead): Asian Development Bank (ADB)
• Source of concessional finance: ADB (ADB Private Sector Window to Promote Private Sector Operations in Group A Countries), Government of Canada (Canadian Climate Fund for the Private Sector in Asia I&II – CFPS and CFPS II), Government of Japan (Leading Asia’s Private Infrastructure Fund – LEAP).
• Financial instrument: Concessional debt, debt, grant
• Sector: Electricity and energy (wind energy)
• Geography: Lao PDR

This project related to the construction of the Monsoon Wind Project, a 600-megawatt, US $950 million renewable energy wind power plant financed in 2023 and located in Lao’s People Democratic Republic. This project is the first utility scale wind project in Lao PDR, the largest wind project in southeast Asia and the first cross-border wind project providing energy to Vietnam, helping meet the growing demand for sustainable power and providing a new industry for Laos.

Capital mobilization and cofinancing activities are at the core of ADB's mission. Development banks use the term “mobilization” when talking about attracting additional capital to supplement investments that we make from our own balance sheets. Cofinancing is a key pillar of ADB's Strategy 2030, which targets a substantial increase in long term cofinancing by 2030 with every $1 in financing for its private sector operations matched by $2.50 of long-term cofinancing. (Q&A: The SDGs Won't Be Achieved Without Private Capital. Here's How ADB Mobilizes It | Asian Development Bank)

The Monsoon Wind Project was a complex project and feasibility took many years to complete. Discussions with Lao PDR government began in 2011 with a wind resource assessment undertaken in 2012. ADB led the financing of the project in 2021.

The project financing relied on a power purchase agreement (PPA) with the Vietnamese power utility (Vietnam Electricity) to ensure cashflow into the project.  This arrangement was governed by English law and Vietnam Electricity paid tariffs in $US. ADB structured its blended finance package with several reserve accounts to address potential curtailment risks not covered under the PPA. This was one of the key bankability constraints and encouraged private investors to participate in the deal. These reserve accounts provide funds to cover a portion of debt service repayments in periods where curtailment or extreme curtailment may result in insufficient cash for the borrower to repay senior lenders. This innovative and targeted structure was agreed with sponsors and lenders ahead of launching the syndication in order to bring a bankable financing structure to market. (ADB case study – link above).

Extensive dialogue with investors and the Governments of Laos, Vietnam and Thailand was required to work through structuring and syndication to bring this project to life.
The final structure incorporated two tranches of senior debt at different tenors; a 17-year ADB B loan tranche with participation from private sector commercial banks, and a 19-year tranche of parallel loans from the public sector lenders (with one domestic commercial bank also joining the 19-year tranche). ADB's concessional financing package of $60 million consisted of loans of up to $20 million from LEAP and up to $30 million from the CFPS and CFPS II in addition to a $10 million grant from ADB's ADF-13 Private Sector Window.

Final Insights

Patience is required to shepherd a blended finance transaction from start up to execution. Development Finance Institutions, such as the Asian Development Bank, play this critical catalytic role in developing countries.

A small concessional amount can catalyse a very large project.

All parties must take some risk, but this can be matched to the risk appetites of different investors if concessional capital is used strategically.
Concessional financing vehicles do not want to take the space of private sector investment. They want to facilitate more private sector investment through strategic use of concessional finance.

More information on this case study can be found on ADB’s website (Q&A: The SDGs Won't Be Achieved Without Private Capital. Here's How ADB Mobilizes It | Asian Development Bank)

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