Global lender seeks Sh51bn to finance energy projects in developing countries

The International Finance Corporation has issued a Sh51 billion ($500 million) bond to fund investments in developing countries.

The cash call brings to total the amount of money raised by IFC through its Global Green Bond Program to Sh438.6 billion ($4.3 billion) over the past five years.

According to a brief from the IFC, the proceeds of the bond will be used to finance investments in renewable energy, energy efficiency and other projects aimed at reducing greenhouse emissions.

The institution did not provide details of the particular projects it is targeting with the new cash.

However, its disclosures show that between 2014 and this year, 38 investments around the world received funding through the programme.

“Green bonds can play a powerful role in mobilizing international savings for climate finance, thereby reducing greenhouse gas emissions. IFC will continue bringing greater diversity, liquidity and transparency to strengthen this important asset class,” said Jingdong Hua, IFC’s vice president and treasurer, in a statement.

GREEN PROJECTS

The latest bond is US dollar-dominated and has been listed on the London Stock Exchange.

In the last decade, the World Bank Group’s private lending arm has invested Sh1.3 trillion ($13 billion) in green projects.

The latest local investment by IFC in green projects took place in September when it announced issuance of a Sh2.6 billion ($25 million) loan to the Kenya Tea Development Agency to set up seven small hydro-power plants to reduce the  cost of energy in processing tea.

The total cost of the project that will see the generators set up in Kirinyaga, Tharaka Nithi, Meru, Bomet and Kisii counties is Sh8.8 billion ($86 million).

Official data shows that energy costs account for nearly 30 per cent of the operation costs in tea factories with electricity alone accounting for 17 per cent.

As a result, the KTDA management has often cited high cost of production as part of the reasons the bonus paid to small scale traders has been reducing over the years.

On average, individual KTDA factories spend between Sh30 million and Sh65 million annually to pay electricity bills.

VARIABLE COSTS

This may however change depending on the size of the factory and other variable costs such as the cost of fuel and foreign exchange rates which Kenya Power uses to calculate monthly power bills.

“This project when completed will result in a significant energy cost saving for tea factories thus increasing financial benefits to farmers,” reads a disclosure document on the hydro plants.

Each of the seven small hydro power plants will have an installed capacity ranging from 1.1 megawatts to 6.5 megawatts.

IFC has committed Sh87 billion for projects in Kenya this year, representing a marginal increase from Sh84.8 billion committed in 2014, according to its annual report.