When John Yeap was a lawyer working in the energy sector in Southeast Asia in the mid-1990s, he built a career advising governments on setting up coal-fired power plants, helping fuel the stellar economic growth of many countries in the region . in the years that followed.
But, since 2021, he and colleagues at the Pinsent Masons law firm have been at the forefront of a plan to help those governments — in Indonesia, Vietnam and the Philippines — liquidate some of the same plants to kick-start their transition away from fossil fuels and towards renewable energies.
“I’ve spent most of my time in jobs related to building power plants, but the demands of a low-carbon world mean I’m now dedicating my life to getting some out of the system,” says Yeap, former partner and head of the firm’s Asian energy team and now a consultant to the firm, based in Hong Kong. “It’s a nice change.”
Coal is the single largest contributor to carbon dioxide emissions from the energy sector. In Southeast Asia, home to the 10-member Association of Southeast Asian Nations (ASEAN), fuel has accounted for the largest share of total energy supply growth since 2000, according to the International Agency for Energy Efficiency. ‘power. The IEA said in November that energy demand in Southeast Asia was set to grow about 3% a year through 2030, with three-quarters of that increase in demand being met by fossil fuels.
Energy analysts say it is imperative to facilitate a careful transition to renewable energy. “The riddle that the [Asean] what the bloc’s leaders now face is how to secure energy supplies to develop the region’s economies while decarbonising them,” they noted at the World Economic Forum in January.
For Pinsent Masons, this involved developing a financing structure for decommissioning coal-fired plants before the end of their useful life, while also unlocking financing for renewables.
The firm was part of a consortium of consultants, including consultants from accounting firm KPMG and engineering consultancy Mott MacDonald, who advised the Asian Development Bank on a financing vehicle known as the Energy Transition Mechanism (ETM). . Plans for the early retirement of coal-fired plants in Southeast Asia were agreed in November, starting with Cirebon-1, a 660 megawatt plant in West Java, Indonesia.
Yeap and his team helped design and pilot the ETM through the creation of two funds. The first will bring together funding from philanthropic and impact investors willing to provide debt at below normal market rates to reduce the cost of servicing coal-fired debt, enabling power plant owners to pay down debt more quickly, in return for the early retirement of their plants. The second fund will bring together investors and lenders focused on renewable energy projects.
Structuring the ETM, to be implemented over several years, involved balancing various stakeholder interests. “Many of these rigs were built under solid contracts, so lenders and sponsors have pretty solid contract frameworks in place,” Yeap explains.
“So if governments were to suddenly say ‘we’re tearing you down’, they would end up in arbitration.”
Finding ways to cater to diverse, often competing interests is becoming a major factor in how lawyers address environmental, social and governance (ESG) financing challenges.
One way to do this is to involve recipients of government funding in organizing how social services are delivered.
Law firm King & Wood Mallesons (KWM) has partnered with a community of Indigenous Australians to set up a governance structure to hold local community leaders accountable for funding coming from government for various programmes, in line with the National Accord to bridge the gap.
A new Aboriginal-led body, set up in August 2022, ensures that the community of around 1,500 First Nations people living in Doomadgee, a remote town some 2,500km from Brisbane, takes the lead in designing and implementing government services .
“We had been listening and mentoring community members for some time to help understand how services like housing, child safety, health, youth justice, could be delivered differently,” says Berkeley Cox, the KWM partner who leads the project. Local leaders had felt their voices were not being heard, which fueled mistrust between the community and the government.
The new governance structure was designed by community members with support from KWM. It incorporates the First Nations concept of cultural governance “that developed over 60,000 years” into a business framework, Cox explains, such as including membership requirements tied to ancestral family clans.
Meeting different priorities was also central to Gilbert + Tobin’s work. The law firm advised the Commonwealth Bank of Australia on a financial structure under which the bank prepaid A$1.7 million ($1.1 million) for carbon credits to be generated by an agricultural conversion project in Western Australia.
The bank’s upfront payment of Australian Carbon Credit Units (ACCUs) unlocks funds that two groups – Forever Wild, a green and social enterprise, and Corporate Carbon, an emissions abatement business – can use to purchase the most easily, with a pastoral lease, than if they tried to get standard debt financing for that purpose.
This has allowed groups to raise livestock in Western Australia using sustainable agricultural practices, but also to restore other parts of the land, generating carbon credits to be repaid to the bank, says Ilona Millar, partner at Gilbert + Tobin in Sydney.
“One of the reasons the bank was interested in this transaction was that it gives it access to a supply of ACCU, which it can then use with its institutional banking clients or for its own ESG purposes,” he says. “For the two groups, it’s a way to achieve their conservation goals.”
—————————————————-
Source link