The scalable loan instrument, arranged and structured by Citi with participation from leading development finance institutions and commercial lenders to help expand Kenyans’ access to finance to purchase green, affordable solar systems.
- The first-of-its-kind bank-led and entirely Kenyan-Shilling-denominated securitisation deal injects USD 130 million into Kenya’s off-grid solar energy sector;
- The four-year deal is issued under Sun King’s new Sustainable Financing Framework and is structured around credit Sun King extends to its Kenyan customers to pay for solar products in affordable instalments;
- The transaction aims to expedite clean and reliable energy access for Kenyan families and businesses.
The Eastern and Southern African Trade and Development Bank (TDB) is participating in a first-of-its-kind, bank-led and entirely Kenyan-Shilling-denominated USD 130 million sustainable securitisation transaction established by Sun King and Citi. The transaction leverages Sun King’s existing and future Kenyan customers’ payments for solar products to raise funding for further growth and expansion.
Arranged by Citi and supported by leading development finance institutions including TDB and commercial lenders from six countries across the globe, the investment paves the way for future African securitisation deals and diversifies funding for Kenya’s off-grid solar energy sector. Through the proposed transaction, customers’ future payments for solar products bought on credit will be securitised and funded by investors.
Approximately three out of every ten Kenyans live without access to electricity. Many off-grid households devote 5 to 10% of their income to dim, smoky kerosene lanterns or smog-emitting gas generators for light and power. Solar energy offers clean and reliable energy as well as long-term cost savings for homes and businesses, but the upfront equipment cost blocks many Kenyan consumers from transitioning to solar energy.
Sun King designs, distributes, installs and finances solar energy solutions for African and Asian households and businesses who cannot access, rely on or afford traditional electric grid connections. Sun King customers can purchase products using the company’s technology-enabled, pay-as-you-go “Easy Buy” financing service, which breaks payments down into regular, affordable instalments. These payments can be made via mobile money or cash for as little as USD 0.15 a day. Approximately half of Sun King’s registered pay-as-you-go customers in Kenya are women, the majority of whom access formal financing products for the first time.
Under the securitisation structure, investors are financing the pooled expected future payments from over a million Sun King customers. The structure connects unbanked or underbanked customers to the finance they require to purchase solar assets and provides investors with access to a steady yet underserved market that offers risk-diversified returns.
Sun King is raising the securitisation funds using its Sustainable Financing Framework, which has received a Second Party Opinion (SPO) from Moody’s Investor Relations (“Moody’s”). The SPO assesses the framework with a Very Good Sustainable Quality Score (SQS) and highlights its significant contribution to sustainability. The framework, facilitated by Citi, explains Sun King’s approach to integrating sustainability considerations into specific financial instruments, which facilitate enhanced access to clean energy and contribute to meeting the United Nation’s Sustainable Development Goals.
This securitisation involves participations by both commercial and development finance institutions, including ABSA Kenya, British International Investment, Citi, FMO, Norfund, Standard Bank Kenya and TDB. Citi served as the sole arranger, primary placement agent, security agent, facility agent, cash manager, sustainability structuring bank and secured accounts bank with Standard Bank Kenya acting as the co-placement agent.
Michael Awori, TDB CEO said: “TDB has been active in financing the energy transition via several projects in wind, geothermal, hydro and solar energy, as well as other sectors. We are very pleased to participate in this innovative transaction, which will reach over one million customers in Kenya, while indirectly contributing to other development outcomes such as job creation, quality of education, increased health and environmental benefits, and more. This is our third transaction in the region leveraging pay-as-you-go technology to boost access to electricity for the most vulnerable customers, and contributing to SDGs 7 and 13.”
Anish Thakkar, Co-Founder, Sun King said: “Over one billion people live off the reliable electric grid. This number is projected to rise. Sun King’s proven pay-as-you-go service dismantles the up-front cost barrier that blocks consumers from purchasing solar energy systems. This securitisation could be key to unlocking the extensive capital needed to fund solar energy initiatives at the scale the climate crisis requires.
“We applaud Citi for orchestrating this innovative transaction, which brings together leading organisations from across development finance and commercial banking sectors. We thank all the investors for their support and trust. These trailblazing financial mechanisms can convert the global challenges of energy access, social development and climate action into compelling investment opportunities.”
Manolo Falco, Global Co-Head of Investment Banking at Citi, said: “Sun King has been an important client for many years and we are pleased to be supporting them with this catalytic transaction. Our unrivalled global network and track record for delivering innovative sustainable finance solutions means we are expertly placed to build local sustainable financial infrastructure from the ground up.
“This first-of-its-kind deal originated from Citi’s Social Finance division, which supports socially conscious companies globally and was delivered in conjunction with our leading Financing and Securitisations team.”