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Philippines, Rural Electrification

Delivering affordable power for people living in remote parts of the Philippines

Philippines Rural Electrification

Context

The Philippines has a population of over 100m people living across 2,000 of the archipelago's 7,100 islands. Unable to connect the most remote islands to the national grid, the Government of the Philippines faces the challenge of supplying reliable, affordable off-grid electricity to rural customers. Per capita incomes in rural areas are around PHP100 a day (US$2) and, until recently, 74 islands relied upon heavy government subsidies for off-grid diesel power. Power was expensive, black-outs were common and many thousands of people had no access to electricity. The government was keen to reduce the cost of subsidies and deliver a more efficient, reliable service.

Project
DevCo's financial support enabled the government to receive critical Public Private Partnership (PPP) transaction structuring advice. The work included help in developing a regulatory framework to govern private sector involvement in rural electrification and establishing a PPP to improve electricity supply for the islands of Marinduque, Romblon and Tablas, and a separate PPP for Masbate. Following a competitive selection process, the project signed 15-year supply agreements with two local operators; DMCI Holdings and 3iPowerGen consortium. The companies took over the islands' supply from the national utility, the Small Power Utility Group (SPUG), committing US$40m to refurbish existing diesel plants and develop 38MW of additional power.

Impact
The landmark project has delivered affordable power to 160,000 people and existing customers pay 40-50% less for their electricity. Access to reliable power has stimulated economic development with tourism, mining and fishing-related industries expanding. The project has stimulated innovation in off-grid wind/diesel hybrid power, reducing carbon emissions. The initiative has generated US$1m in savings for the government in reduced subsidies, allowing it to redeploy remaining subsidies to areas without service. The PPP framework developed for this transaction has been widely replicated for the delivery of similar basic services across the country.