Rwanda's Inaugural Green Bond Signals Market Development - Experts

13 March 2024
The New Times (Kigali)
By Alice Kagina

Experts in the capital markets industry say the issuance of the first-ever Green Bond on the Rwandan market signifies the pace at which the market is growing and is timely given the investor appetite observed with similar financing instruments.

Following the approval from the Capital Market Authority (CMA), Prime Energy, a local hydropower company, announced the issuance of the first-ever Green Bond in Rwanda worth Rwf9.5 billion, on March 13.

The 7-year tenor bond offer will be open to the public on March 18 and close on April 5, after which it will be listed and traded on the Rwanda Stock Exchange on April 26, according to an official statement.

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A green bond is a debt instrument used to mobilise resources and whose proceeds are exclusively used to finance projects that have a positive environmental impact, such as renewable energy and green buildings.

For this specific bond, structured by supported by the International Finance Corporation (IFC), the proceeds are expected to be invested in a new renewable energy project and finance the maintenance of existing four hydropower plants across the country.

The New Times learnt that the green bond features two subscription tranches. The first tranche has a fixed interest rate of 13.3 per cent that won't change over the 7-year period. The other part of interest rate, 9.5 per cent, is tied to the US Dollar's value and might change over time.

Sandy Rusera, the CEO of Prime Energy said this move provides the company with alternative options of financing through capital markets and could enable them to expandtheir capacity to provide clean power in Rwanda.

"We are excited to use this type of instrument to increase our hydropower capacity and explore new opportunities to bring sustainable energy to more communities."

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Siongo Kisoso, CEO of BK Capital - an investment and wealth advisory firm - noted that Rwanda's market depth, which has seen sustained subscription of government bonds, is an indicator of investor appetite and funds diversification, making it an excellent time to issue a green bond.

"We hope it will send a signal to other companies that it is possible to cloud in sustainable finance with particularity on Environmental, Social, and Governance impact."

Coming from a period of high inflation which stabilized over the past few months and unparalleled depreciation that countries like Rwanda faced, the head of the advisory firm added that this is an instrument that can safeguard an investor from future shocks and give real returns.

Eric Bundugu, Executive Director of CMA noted that the green bond marks another milestone on the diversification of asset classes while deepening further the Rwandan capital market.

"This landmark achievement reflects a significant step forward in ensuring our domestic capital market continues to support Rwanda's commitment towards sustainable finance development."

Speaking to The New Times, Celestin Rwabukumba, CEO of Rwanda Stock Exchange, said the new bond is aligned with the bourse's goal to diversify its portfolio of instruments toattract impact investors in sustainable projects.

Additionally, he expressed confidence in full subscription of the green bond given that it is relatively a lesser amount and the local investors are more likely to scoop the offer.

"Funds are available and nowadays, investors are becoming more responsive to sustainable finance and impact money."

As Rwanda continues to call on private sector contribution in dealing with climate change impacts, the green bond is yet another impetus in sustainable finance, in addition to the Rwf30 billion Sustainability Linked Bond that was issued by the Development Bank of Rwanda (BRD) in 2023, as well as the Ireme Invest facility aimed at providing green finance to the private sector.

According to S&P Global Rating, a leading global firm that ranks debt instruments, green bond issuance expanded 10 percent year on year in 2023, with a total of $575 billion, mainly driven by non-financial corporates who make up the largest portion of the green bond market.

It projects sustainable bond issuance to approach $1 trillion in 2024 from a total of $98 billion in 2023, across the world.

Read the original article on New Times.

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