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Investors keen on eco-friendly projects now have a platform to raise money. This is after East Africa’s premier Sh4.3 billion green bond started trading at the Nairobi Securities Exchange (NSE) yesterday.
The five-year bond, issued by real-estate developer Acorn, will be listed in three tranches, with the newly listed first tranche floated at Sh786 million.
Green bonds seek to raise capital for sustainable projects, for example in renewable energy, eco-friendly transport, energy efficiency, and waste-water treatment.
The green bond market globally has grown tremendously with issuances totalling $155.5 billion (Sh16 trillion) in 2017 and an estimated $250-$300 billion (Sh25.7-31 trillion) in 2018.
Kenya launched its green energy programme in 2017, with the government initially setting the 2018/2019 financial year for the first publicly traded green energy bond.
The Acorn-issued bond, which attracts a 12.5 per cent interest annually, is waiting for final approvals to cross-list next week on the London Stock Exchange (LSE).
Visiting UK Secretary of State for International Development Alok Sharma described the listing of the green bond, which is supported by UKAid, as a “landmark for Kenya.”
“I recognise the role that capital markets can play in creating jobs and driving forward the economy, and that’s what this transaction is all about,” he said.
Central Bank of Kenya Governor Patrick Njoroge also hailed the bond, saying Kenyan banks had committed to sustainable financing, especially after the signing of the Banking Charter last year.
“In the future, all the financing will be green,” said Dr Njoroge.
Student housing
Acorn Housing has since 2015 been developing accommodation units for students and is the developer of Qwetu residences.
Acorn Chief Executive Edward Kirathe said the bond would help them add 5,000 beds in Nairobi within three years time.
“Young people have the greatest need for housing in Africa and affordability is a big issue,” he said.
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NSE boss Geoffery Oundo said the bond, which is a secondary listing, would act as a catalyst for the bonds market, which has slowed down in the recent past.
“We think the green bond is going to create a new interest in the market,” said Mr Oundo.
He projected that international investors and local private equity funds would be the early investors for the bond. Before the listing, Acorn was looking to raise a minimum of Sh2 billion and a maximum of Sh5 billion.
The bond issue was structured as a “restricted public offer”, targeting sophisticated investors who received a 50 per cent guarantee from credit guarantees provider Guarantco on both their investments and the interest.
Over-the-counter trading was allowed.