The FINANCIAL — The Asian Development Bank (ADB) and PROPARCO, the subsidiary of Agence Française de Développement (AFD) focusing on private sector funding, have signed an unfunded risk participation agreement to boost lease financing of clean buses by Far East Horizon Ltd. in the People’s Republic of China (PRC).
As part of the agreement, ADB provided a $100 million senior loan with PROPARCO’s participation amounting to $20 million. The agreement will allow Far East Horizon Ltd., one of the major Chinese financial services companies, to expand its activities in the public transport market with a focus on clean buses.
The agreement was signed by Christine Engstrom, Director for Financial Institutions at ADB’s Private Sector Operations Department, and Christophe Blanchot, Regional Director of AFD in the Philippines, on behalf of PROPARCO, according to ADB.
“The long term funding to the financial leasing company is part of ADB’s commitment to promote green transportation in the PRC by reducing greenhouse gas emissions of public bus fleets,” said Ms. Engstrom.
The PRC’s national and local governments see promotion of public transport as a priority. Severe air pollution is adding to the urgency to replace older diesel bus fleets and adopt clean bus technology. Clean buses must meet stringent emissions and energy efficiency criteria, running on cleaner fuels such as compressed or liquefied natural gas or biomethane, or involving hybrid or electric motors.
PROPARCO Deputy CEO for Operations Amaury Mulliez welcomed the partnership agreement with ADB, and said: “This transaction will contribute to the mobilization of clean buses in the PRC’s public transport system. It will initiate a strong partnership between ADB and PROPARCO and promote our joint operations in Asia.”
Between 2003 and 2014, AFD and the ADB have cofinanced 34 projects amounting to $1.6 billion. In 2013, the two institutions renewed their partnership framework agreement to increase cofinancing activities in 18 countries in Central and West Asia, East Asia, South Asia and Southeast Asia with a focus on sustainable infrastructure and urban development, sustainable management of natural resources, climate change and biodiversity and support for productive sectors.
PROPARCO is a development finance institution jointly held by AFD, and public and private shareholders from the North and South. Its mission is to catalyze private investment in emerging and developing countries with the aim of supporting growth, sustainable development and the achievement of the Millennium Development Goals. PROPARCO is one of the main bilateral development finance institutions in the world. It invests on four continents encompassing the major emerging countries and the poorest countries, particularly in Africa, and has a high level of requirements in terms of social and environmental responsibility.
Based in Manila, ADB is owned by 67 members, including 48 from the region. Its main instruments for helping its developing member countries are policy dialogue, loans, equity investments, guarantees, grants, and technical assistance. In 2014, ADB assistance totaled $22.9 billion, including cofinancing of $9.2 billion.
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