The Water and Power Development Authority (WAPDA) launched its first green Eurobond called the ‘Indus bond’.
The Indus bond is the first green Eurobond in the international capital market by Pakistan. It was listed on the London Stock Exchange earlier this week on Monday.
The bond has a tenure of 10 years and brought the WAPDA $500 million at a price of about 7.5 percent interest rate. It will be formally launched by Prime Minister Imran Khan on 31 May.
The launch of the Indus bond brought six times more subscriptions, of $3 billion, from a number of international investors, including Goldman Sachs, Blackrock, Bluebay, Fidelity, Ashmore, Amundi, and UBS.
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The WAPDA needs nearly $2.2 billion over five years to fund the Diamer-Bhasha and Mohmand dams projects. The funding requirement for the first two years is $1.1 billion, after which the authority may issue more bonds. According to an official statement, the Indus bond will initially be issued for only $500 million but the number of bonds will be gradually increased depending on the financial needs of the projects.
A report compiled by the WAPDA for the bonds states that the ten-year dollar bond has been launched at a competitive price of 7.5 percent. “[This] is unprecedented, given Pakistan’s sovereign bond maturing in 2031 has a coupon of 7.375 percent,” said the report.
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The report added that the issuance of Indus bond will go a long way in diversifying the funding sources for financing capital-intensive projects. This is also notable because the launch of the debut $500 million Green Eurobond by WAPDA is among the first instances in Pakistan where a state owned enterprise has reached the international debt market without any financial guarantee offered by the government and without adding any obligation to the government as well.
The report also mentioned that this is a gold-plated transaction and the WAPDA-appointed top international banks led by JP Morgan that came to Pakistan after a hiatus.
“The co-book runners included Deutsche and Standard Chartered with HBL as co-manager,” the report added.
All three international rating agencies — S&P, Moody’s and Fitch — have given the WAPDA a stable outlook equal to that of the government.
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