Green Project Bonds in Africa
Lessons from Egypt's First Issuance

When the USD 334.5 million Benban green project bonds closed in 2021, they established two historic firsts simultaneously: Africa's first green project bonds, and Egypt's first project bond issuance of any kind. The transaction has since served as a reference point for discussions about green capital markets development across sub-Saharan Africa and North Africa.

This article draws on our experience advising on that transaction to identify the key structural and legal issues that arise when project bonds are used to finance renewable energy infrastructure in emerging markets, and what future issuers and advisers should consider.

Why Project Bonds Rather Than Bank Debt?

The Benban transaction was a refinancing: six operational solar plants that had been built and commissioned under standard project finance bank facilities were refinanced through the bond market. The primary advantage of the project bond structure was tenor — the 19-year bond closely matched the remaining duration of the power purchase agreements, whereas bank facilities in emerging markets rarely extend beyond seven to ten years for project finance. The longer tenor eliminated the refinancing risk that would have arisen had the bank facilities matured significantly ahead of the PPAs.

Bond investors also provided a different cost of capital than bank lenders in this context. The green designation — backed by Climate Bond Initiative certification — attracted a class of ESG-mandated investor that may not have been accessible through the bank market, and this investor base competition contributed to competitive pricing.

The Green Certification Process

Obtaining Climate Bond Initiative certification required detailed environmental diligence on the six solar plants. The CBI certification confirmed that the assets met the CBI's solar energy criteria, which include requirements on land use, water use, and environmental management. This diligence process added time and cost to the transaction but was essential to accessing the green investor base.

For future transactions seeking green bond or green loan certification, the environmental diligence process should be factored into the transaction timeline from the outset. The requirements vary depending on the certification standard chosen and the asset class, and the documentation required to satisfy the certifier is more extensive than the environmental documentation typically required for standard project finance.

Egyptian Capital Markets Regulation

As Egypt's first project bond, the transaction required navigation of the Egyptian Financial Regulatory Authority's capital markets regulations alongside the international bond documentation framework. The bonds were issued under an international documentation framework — using English law — but the Egyptian regulatory approvals required for a capital markets issuance by an Egyptian special purpose vehicle needed to be addressed in parallel.

The dual-track nature of this regulatory work — running Egyptian regulatory processes alongside the international documentation — required close coordination between the Egyptian legal team and the international advisers on the transaction. This coordination challenge is a feature of any capital markets issuance by an Egyptian issuer and must be built into the transaction management plan.

Replicability Across Africa

The Benban transaction demonstrated that African renewable energy assets can access international capital markets on competitive terms. The key prerequisites that made the transaction possible — a long-term USD-denominated PPA with a creditworthy offtaker, operational assets with a track record, and experienced project finance sponsors — are not unique to Egypt. Similar structures should be replicable for qualifying assets in other African markets with appropriate local regulatory adaptation.