Green Bond Awards 2018

Green bond of the Year - Local authority: City of Cape Town

The City of Cape Town has since 2015 experienced a severe drought, which has left its stores of potable water running almost empty.

Deal highlights:

Issuer: City of Cape Town

Size: ZAR1 billion ($83 million)

Maturity: July 2027

Coupon: 10.17%

Use of proceeds: Water capture, storage and distribution infrastructure, alternative water treatment plants, and flood defences

Deal type: Use of proceeds

Lead manager: Rand Merchant Bank

External review: Climate Bonds certified, and Moody's (GB1)

Other highlights/notable features: The first bond listed on Johannesburg Stock Exchange's Green Bond Segment

In this context, it was no surprise that the local authority's ZAR1 billion ($83 million) inaugural green bond, issued in July, should focus on financing of the city's water infrastructure.

However, in order to make it easier to link the green bond issuance with assets, the refinancing of existing projects was preferred by the issuer. This presented a challenge for some investors, who wanted to address immediate issues such as the water scarcity caused by the drought, the city said.

The city identified eligible projects within its capital programme that were already significantly delivered. The projects were then evaluated according to the Climate Bonds Standard.

The issue, which was four times oversubscribed, was the first externally certified green bond issued by a South African municipality and the first to be listed on the Johannesburg Stock Exchange's green bond segment.

The issue has created further political demand and a push for green projects within the administration, and helped frame discussions about the assessment of future infrastructure development plans.

The city is committed to issuing more green bonds in the future, it said.