Temasek shows how

Singapore showcased the huge possibilities of sovereign funds in being an agent of change during the recent state visit of President Tharman Shanmugaratnam.

Without intending it, the Singaporeans schooled Filipinos on the way the Maharlika Investment Fund (MIF) should be developed to make its mark on the economy and society.

Singapore’s Temasek is one of the most successful sovereign funds that can be a model for the MIF that is having a hard time raising capital a year after its launch.

Temasek, the early Malay name of Singapore, is bankrolling a breakthrough carbon neutrality project among the major players in the energy industry.

The project involves conglomerate Ayala Corporation’s energy unit Acen, Temasek-owned investment platform GenZero, and the city state’s global asset manager Keppel.

Initially, the venture will conduct a study using transition credits to decommission coal plants ahead of schedule.

Among the key hurdles for energy firms to transition to clean energy are the huge investments poured into building coal plants and many such projects in the Philippines that have yet to break even.

Transition credits are based on carbon emissions that are reduced by retiring a coal plant early and replacing it with green energy.

The venture’s pilot project is the South Luzon Thermal Energy coal-fired power plant in Batangas, which is being targeted for retirement in 2030, or 10 years ahead of schedule.

The operator will be entitled to transition credits which would have a financial value that could be used to augment the cost of replacing the power plant.

The project is significant because it will be one of the first converted coal-fired power plants in the world to generate transition credits.

President Tharman and President Ferdinand Marcos Jr. witnessed the signing of a memorandum of understanding between both governments that will pave the way for similar cooperation projects on carbon credits.

Coal-fired power plants are the single largest source of carbon emissions globally, with Asia being the largest coal producer and consumer, led by China and India.

Developing nations such as the Philippines are hobbled by a lack of funds for capital-intensive renewable energy projects such as solar and wind power generation.

As the economies of scale ramp up, the cost of the technology is expected to be more reasonable, yet at the moment, electricity demand is rising fast in parallel to the robust growth momentum.

The Temasek-initiated project will tap the Rockefeller Foundation’s Coal to Clean Credits Initiative and the Monetary Authority of Singapore’s Transition Credits Coalition.

By showing success in the coal plant transition program, the proponents hope to create a bandwagon for other transition credit projects to join in.

“By demonstrating the successful retirement of coal-fired power plants and transitioning to cleaner energy sources through collaborative public-private sector partnerships across borders, the pilot could pave the way for other plants and countries in the region to follow suit,” said GenZero chief executive Frederick Teo.

“We aim to harness learnings from this pilot and develop a viable commercial model that can catalyze the accelerated retirement of other coal-fired power plants in the region,” he added.

The recent COP 28 UN Climate Change Conference in Dubai set a tough target of phasing out most of the world’s coal plants by 2030, to which the Philippines sought a reprieve since this would affect its growth momentum.

Coal plants remain the fastest and among the most economical sources of electricity.

The aspiration of ecological groups of a complete shift to renewable energy can’t be realized without sacrificing the growth trajectory.

Temasek is providing a window for the MIF to become a catalyst of progress through the single project of reducing carbon emissions.

The MIF has huge potential and Temasek just gave a preview of the doors that it can open.