$5 Million Zimbabwe Energy Bond Stalls Over Currency Fears

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The issuance of a US$5 million energy bond has been delayed due to concerns over currency issues relating to the introduction of bond notes, sources familiar with the developments have said.
Faced with a decade-long energy crisis, government liberalised the capital-intensive sector allowing independent power producers to generate power.
Uncertainty over the introduction of bond notes, among other interventionist measures by the Reserve Bank of Zimbabwe, has unnerved investors eyeing a hydro-power project in Manicaland.
Honde Hydro Power Consolidated (HHPC), a unit of United Kingdom based PGI Group Limited, is in the market seeking US$5 million through the issuance of a secured corporate debenture of five years to fund a 2,3 megawatts hydro power project.
HHPC is also the local subsidiary of Nyangani Renewable Energy (Pvt) Ltd which in turn is owned by PGI. Sources said the bond which has since been granted prescribed asset status by the Finance ministry has been temporary put on hold after investors asked for a currency clause that protects their investment. They added that the bond was supposed to be issued last Monday. The project is expected to be the sixth by the company.
“The bond in a way was also meant to dilute shareholding through a debt to equity arrangement. For a development project such as this most institutional investors such as you Old Mutual, ABC and Zimnat were keen to invest in it,” a source said.
“But uncertainty over the bond notes has forced investors adopt a wait-and-see attitude as they demand a clause that protects their investments. As you might be aware, all regulatory matters relating to this bond had been made, but the currency issue remains a headache.”
This comes after the Reserve Bank of Zimbabwe last month announced that it would among other measures introduce bond notes to ease the biting liquidity and cash crunch. The bond notes will come into circulation in October.
Reached for comment on the status of the bond, Nyangani Renewable MD Ian McKersie referred all questions to Imara Capital, who are lead advisors of this bond. Officials at Imara declined to comment, citing non-disclosures clauses.
Zimbabwe’s unsustainable trade or current account deficit, poor balance-of-payment position as well as massive revenue leakages and an uneven distribution of liquidity in the market are the major reasons behind the prevailing serious cash shortages buffeting the economy.
This has forced the central bank to implement new monetary policy measures to address the current cash crisis through a combination of export incentives and bond notes, but the move has sparked a storm of doubts and protests largely due to lack of confidence in monetary and fiscal authorities, as well as government as a whole.
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