Tanga UWASA Lists East Africa's 1st Subnational Green Bond on LuxSE

On Thursday 17 October 2024, the Luxembourg Stock Exchange (LuxSE) announced that Tanga Urban Water Supply and Sanitation Authority (Tanga UWASA) has brought its pioneering green bond to LuxSE; the bond will finance access to clean and affordable water in Tanzania.

During a visit by a Tanzanian delegation to Luxembourg, which included representatives of the country's Ministry of Finance, Ministry of Water and other public authorities, LuxSE and Tanga UWASA celebrated the listing of the Tanzania-based water authority's pioneering green bond on LuxSE. The bond is displayed on the Luxembourg Green Exchange (LGX), the world's reference platform for sustainable securities. 

LuxSE explained that this achievement was made possible through the support and coordination of the UN Capital Development Fund (UNCDF), which played a pivotal role as the lead development finance advisor and technical partner to Tanga UWASA throughout the entire bond issuance process. UNCDF's support included project development, raising national awareness, creating and financing the issuance roadmap, and developing innovative risk mitigation strategies tailored to the Tanzanian market. This project serves as a model for UNCDF's efforts to develop sustainable finance mechanisms across East Africa and beyond.

The TZS 53 billion bond (equivalent to €17.8 million) is the first green bond to be issued by a public institution in East Africa. It has a ten-year maturity and aims to finance water infrastructure projects and environmental conservation initiatives.

"As we appreciate that LuxSE is a place where ideas meet capital, become reality and create real impact; we aspire for our future Tanzanian issuers - both public and private sector - to access Luxembourg markets, get connected with a pool of global investors, raise capital and drive growth," said Dr Mwigulu Lameck Nchemba, Tanzania's Minister of Finance. "In other words, we would want to see more subnational, corporate and even sovereign debt products listed in Luxembourg. We are developing a pipeline of transactions to facilitate this positive trend of sustainability investments, and remain committed to improving our country's enabling environment to attract foreign investors and private sector."

As reported by LuxSE , the bond, which was open to both domestic and international investors, was met with "great interest" when issued earlier this year, and twice oversubscribed. Around 65% of the funding came from domestic investors, while 35% came from international investors. This is seen as an indication of the growing interest of the international investor community in sustainable investment opportunities in Tanzania.

LuxSE added that the issuance highlights the important role subnational entities such as Tanga UWASA can play in unlocking capital market financing in local currency to fund sustainable development projects in Tanzania. The proceeds of the bond will go towards propelling thousands of households' access to safe and affordable water in the East African country and protecting the natural resources of the nation's famous Zigi river, among other environmental projects.

The Managing Director of Tanga UWASA, Geofrey Hilly, emphasised that "the listing of our green bond on LuxSE underscores the utility's commitment to advancing sustainable water services to our customers while remain a pioneer and an excellent model for replication by other public entities. We are thankful to all our investors and partners who supported our transaction, and we reaffirm our assurance in meeting applicable standards including our investment obligations."

With more than 44,000 listed securities, LuxSE is the leading exchange for the listing of international bonds, serving 1,800 issuers across 100 countries. Since establishing LGX in 2016, LuxSE has focused on advancing the sustainable finance agenda across the world. Over the past few years, LuxSE has established cooperation agreements with selected exchanges in Africa and worked with market participants to help foster sustainable finance initiatives on the continent.  

"Access to safe and affordable water and sanitation is a key factor in achieving the United Nations Sustainable Development Goals, and the very foundation of health and safety. We are delighted to mark the listing of this pioneering green bond from Tanga UWASA on our exchange, it is a great illustration of the role that international capital markets play in mobilising financing to secure access to essential services for everyone," said Julie Becker, CEO of LuxSE.

Tanga UWASA, which was established in the historic city of Tanga in 1998, plays a key role in supplying sufficient, clean and safe water to Tanga City, Muheza and Pangani Townships residents and safely collecting and disposing of sewage in compliance with both environmental and health standards.

The bond issuance, which is hoped to pave the way for other such issuances in the region, is the result of close collaboration between the subnational entity, the country's Finance and Water Ministries, its Capital Market and Securities Authority (CMSA) and the UNCDF, among other players. 

"The successful issuance and cross-listing of the Tanga Water Bond demonstrates UNCDF's commitment to promoting sustainable finance and developing domestic capital markets in Tanzania," said Peter Malika, Head of UNCDF Tanzania. "Our team has worked tirelessly to coordinate the National Municipal and Subnational Bond Stakeholders Taskforce, which was instrumental in launching this first national pilot. This bond issuance is part of UNCDF's ongoing commitment to unlock domestic capital for sustainable development in Tanzania. Moreover, UNCDF's work has contributed to improving the regulatory environment for subnational bond issuances in Tanzania, paving the way for future similar initiatives."