Industry analysts say the recent interest rate cut by the Bangko Sentral ng Pilipinas (BSP) would bolster both existing and upcoming energy projects in the Philippines, particularly those in the renewable energy sector that require significant funding.
In a report by Business World, AB Capital Securities, Inc. vice president Jovis L. Vistan said that the availability of cheaper credit is likely to encourage more investments in the energy sector, with developers becoming more inclined to pursue new projects or expand existing ones due to improved returns on investment.
Seedbox Securities, Inc. Equity Trader Jayniel Carl S. Manuel also echoed this sentiment, saying that a reduction in interest rates could aid in the expedition of the energy transition goals as it promotes the development of new renewable energy capacities.
The government has set a target to increase the share of renewable energy in the country’s power generation mix to 35% by 2030 and 50% by 2040.
Vistan said that lower interest rates make renewable energy projects such as wind, solar, or hydropower more financially viable due to the substantial upfront investments they require.
Last week, the BSP implemented a 25-basis-point rate cut, lowering the benchmark rate to 6.25% from the previous 6.5%, marking the first reduction since November 2020.
The decision was driven by an improving inflation outlook, with BSP Governor Eli M. Remolona, Jr. saying that inflation is expected to trend downward to within the government’s target range of 2% to 4%.
The Department of Energy (DOE) anticipates at least 4,164.92 megawatts (MW) of conventional and renewable energy projects to be online this 2024. As of April, 161.20 MW of these committed projects are in full commercial operation, while 835.89 MW are under testing and commissioning.
