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The Ministry of Finance succeeded in issuing the first public sovereign green bond offering in the Middle East and North Africa, at a value of $ 750 million for five years, at a yield of 5.250%, putting Egypt on the map of sustainable financing.
Dr. Mohamed Maait, Minister of Finance, confirmed that this issue witnessed a very high turnout from investors, as purchase orders exceeded the volume of the announced issue “$ 500 million” by 7.4 times, and the “acceptable volume” exceeded $ 750 million, equivalent to 5 times. This issuance attracted a new base of investors in Europe, the United States of America, East Asia and the Middle East at rates: 47%, 41%, 6% and 6%, respectively, with asset managers, pension funds, insurance and investment funds, and banks that represent: 77 %, 9%, 8%, who are classified as high quality investors due to their long-term retention of investments, which leads to the reduction of price fluctuation.
The minister explained that the very strong subscription to the government sovereign green bond offering, announced from Cairo, which reached more than $ 3.7 billion, helped the Finance Ministry reduce the interest rate on the bonds offered by about 50 basis points compared to the opening prices announced at the beginning of the offering process. ; Reflecting the increasing demands on international green bonds that Egypt is offering for the first time in its history, and the increasing investor confidence in the economic, financial and monetary conditions and the future of Egypt and commitment to Egypt’s sustainable development policies, indicating that the end of the offering witnessed the Ministry of Finance’s ability to offer the “five-year” bond at a return price. 5.250% against an opening return rate announced to investors of 5.750%
He added that for the first time we succeeded in reducing the pricing margin to reach a new negative issue premium of 12.5 basis points, stressing that this coupon is the lowest compared to the pricing of coupons for five-year bonds in previous years since 2016.
He added that the proceeds of the “green bond” will be used to finance expenditures related to environmentally friendly green projects, achieve a sustainable development plan in the areas of clean transportation, renewable energy, reduce and control pollution, adapt to climate change, raise energy efficiency, and sustainable water and sanitation management, in light of Egypt Vision 2030, which gives priority to green investment projects.
The minister said: “We are pleased to join the group of sovereign green bond issuers that play a leading role in green development, and we value the great turnout of investors for this successful issuance, which demonstrates their support and confidence in the government’s efforts to diversify the financing needed to achieve sustainable development goals.”
He explained the success of the offering process without the need for a promotional tour to meet with investors due to the circumstances of preventing travel abroad due to the Corona crisis. The precautionary measures were taken to inform them of the latest developments in economic performance, respond to their inquiries about the framework of green bonds for Egypt, the latest indicators, and also inform them of the precautionary measures taken by the government to deal with the repercussions of the “pandemic”. More than 100 investors viewed the presentation dedicated to pre-marketing.
Ahmed Kjok, Deputy Minister for Financial Policy, indicated that it was agreed with the World Bank to provide technical assistance to prepare and issue the required annual reports on the uses of the proceeds of this green bond, and the development and environmental impact expected for eligible projects, in line with the principles of green bonds of the International Capital Markets Association. «ICMA»; To ensure transparency and disclosure in accordance with international practices.
He said that this issuance contributes to diversifying the investor base, as this offering witnessed the addition of 16 new investors for the first time in bond issuances in US dollars, which highlights the success in continuing to diversify and develop the current large investor base, in light of the increasing global trend of the green bond market, and the turnout of many Countries have supported such proposals for environmentally friendly projects, which represent the beginning of Egypt in taking advantage of sustainable financing means, as the volume of global green investment is expected to reach from 175 to 225 billion dollars by the end of 2020, pointing out that this issuance provides a good opportunity to encourage growth. Sustainable, with Egypt’s leadership in the region’s clean and environmentally friendly investment community and the possibility of creating a margin of reference in pricing the terms of green bonds for the private sector.
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