Sustainable Finance

Scatec Refinances Solar Power Plants with Green Project Bond

Published on: 30 April 2022 05:10 PM
by KnowESG

Scatec, a major renewable energy solutions supplier, and its partners have refinanced the non-recourse project debt for six solar power facilities in Egypt, totalling 380 megawatts (MW), with a 19-year non-recourse Green Project Bond. The refinancing will raise Scatec's and its project partner's future cash distributions from the power plants by providing more leverage, longer tenor, and lower interest expenses.

The Climate Bond Initiative has granted the Project Bond a Climate Bond certificate. The European Bank for Reconstruction and Development (EBRD), the US International Development Finance Corporation (DFC), the Dutch entrepreneurial development bank FMO, and the German Investment Corporation DEG, and private institutional investors worldwide, have participated in this innovative climate finance transaction, which is the first of its kind in Africa.

The structure includes risk mitigation instruments from the World Bank Group's Multilateral Investment Guarantee Agency (MIGA) and the European Bank for Reconstruction and Development (EBRD) to facilitate distribution to private sector investors, including major institutions making their first investments in Egypt. The Egyptian government has been engaged in encouraging this unique capital market exercise. The bond issue was arranged by Mitsubishi UFJ Financial Group.

The credit enhancement structure sets a good precedent for future transactions, including the possibility of a green bond with an investment-grade credit rating.

Scatec CFO Mikkel Tørud said:

"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."

Dr Mohamed Shaker, the Minister of Electricity of the Arab Republic of Egypt, said:

"The refinance is being granted for six operational photovoltaic power plants participating with a capacity of 380 MW in the Benban Solar Park with a total capacity of 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 the most successful project implemented by the World Bank in 2019. The agreement signed today is reflecting the huge confidence of the private sector in the Egyptian electricity sector."

Dr Mohamed Maait, the Minister of Finance of the Arab Republic of Egypt, said:

"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."

Source: GlobeNewswire