Citi and Sun King pioneer Kenyan-Shilling-denominated USD 130 million sustainable securitisation transaction

  • 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.

Citi is a preeminent banking partner for institutions with cross-border needs, a global leader in wealth management and a valued personal bank in its home market of the United States.

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.

Author: Bryan Groenendaal

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