Project bonds support Egypt’s green ambitions

Project bonds support Egypt’s green ambitions

Renewable energy provider Scatec and its partners have refinanced the non-recourse project debt for six solar power plants in Egypt, with a total capacity of 380 megawatts (MW), through the issuance of a 19-year USD334.5 million non-recourse Green Project Bond.

The refinancing will provide increased leverage, extended tenor, and reduced interest costs which will improve Scatec’s and its project partner’s future cash distributions from the power plants.

The Project Bond benefits from a Climate Bond certificate from the Climate Bond Initiative. This climate finance transaction is the first of its kind in Africa and has been distributed to a consortium of development finance institutions, comprising the European Bank for Reconstruction and Development (EBRD), the US International Development Finance Corporation (DFC), the Dutch entrepreneurial development bank FMO and German Investment Corporation DEG, alongside private institutional investors from around the globe.

Multilateral Investment Guarantee Agency (MIGA), a part of the World Bank Group, and EBRD risk mitigation instruments were incorporated into the structure to facilitate distribution to the private sector investors, including major institutions for whom these are first-ever investments in Egypt. This innovative capital markets exercise has benefitted from the proactive encouragement of the Government of Egypt. Mitsubishi UFJ Financial Group acted as arranger for the bond issue.

The credit enhancement structure establishes an efficient precedent for future transactions, including the prospect of an investment grade credit rating for the green bond.

 

Supporting Egypt’s ambitions to become green hub

“With this innovative green transaction, we have gained access to the international debt capital markets for project financing, improved our financing terms and supported Egypt’s ambition to become a green hub in the Middle East. Once again, we have demonstrated our ability to find innovative financial solutions and new funding sources to enhance project returns,” says Scatec CFO Mikkel Tørud.

“The refinance is being granted for six operational photovoltaic power plants participating with capacity 380 MW in the Benban Solar Park with total capacity 1465 MW, initiated as part of the Egyptian government’s ambitious Sustainable Energy Strategy for the period ending 2035.

The Benban Solar Park is funded by private sector capital, enabling the Egyptian government to support its goal of generating 20% electricity from renewable energy resources by 2022.

The Benban Solar Energy Complex was selected as the best infrastructure development project winning the Arab Government Excellence Award in 2020. It was also named as the most successful project implemented by the World Bank in 2019. This agreement reflects the great confidence of the private sector in the Egyptian electricity sector,” says Dr. Mohamed Shaker, the Minister of Electricity of Egypt.

“This landmark transaction showcases Egypt’s pioneering presence in the green financing market after its inaugural green bond issuance in 2020, which was the first sovereign green bond issuance in the Middle East and North Africa.

Due to the credit enhancement structure, as well as the Egyptian economy’s exhibited resilience during the COVID-19 pandemic, better refinancing terms have been obtained for this transaction, which is a hoped-for development that green financing is obtained at better terms compared to other traditional financing options. We aim to continue the path of encouraging additional sustainable financing options in the future,” says Dr. Mohamed Maait, the Minister of Finance of the Arab Republic of Egypt.

“As highlighted at COP26, Africa must leverage innovative mechanisms to further attract much-needed investments into climate-resilient infrastructure projects. This pioneering transaction demonstrates Africa50’s commitment to mobilising funding from international capital markets to support its shareholder countries’ transition to low-carbon economies, while generating attractive returns,” says CEO of Africa50 Alain Ebobisse.

“We are delighted to continue our support of Egypt’s renewable energy sector and to mobilise new private and institutional capital through this highly innovative and timely instrument,” says Nandita Parshad, EBRD Managing Director for Sustainable Infrastructure group.

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