Can you describe the project around the first social bond in the energy sector? How did this project come to life?

Access to electricity is a fundamental driver of socio-economic development, yet many regions in the world still face significant challenges in achieving universal electrification. Ivory Coast is no exception, with a national electricity access rate of 71.1 percent in 2021, according to World Bank data. This disparity is particularly stark in rural areas where many households cannot afford the connection fees. Addressing this issue is therefore crucial to meet the government's vision of universal electricity access by 2030.

To tackle this challenge, the Programme Electricité Pour Tous (PEPT) has been set out in 2018 by the government of Côte d’Ivoire to finance the costs of connection of low income households to the electricity grid. The PEPT program has been a success and in order to increase its capabilities, a securitisation transaction has been set up in 2023.

Such a securitisation transaction has required the setting-up of a securitisation vehicle governed by WAEMU regulations and was the largest on the WAEMU market.

What makes this project particularly innovative?

The project stands out for its originality, combining several unprecedented elements in the WAEMU. Firstly, it utilized a securitization vehicle to pool and structure receivables from the PEPT program, transforming illiquid assets into tradable securities. This approach attracted long-term private sector funding in the capital markets. Secondly, the issuance of a social bond targeted a specific social issue, providing electricity access to the most vulnerable populations. Thirdly, a direct agreement between the securitization vehicle and the State of Ivory Coast ensured the sustainability of the transaction and the PEPT program. Additionally, the project mobilized an anchor investment from the International Finance Corporation (IFC), adding 

credibility and confidence for other investors. Support from the International Development Association (IDA) Private Sector Window further helped provide local currency funding and mitigate risks.

What is the impact of the project and how can it be measured?

The impact of this innovative financial solution has been significant for all key stakeholders. For the IFC, it fulfilled their mission of creating markets and opportunities in developing countries, addressing global crises like poverty, inequality, and climate change. In practical terms, this innovation is set to finance the connection of up to 800,000 additional households to the electricity grid over the next four years. This represents an increase in the national electricity access rate by more than 13 percent, significantly improving living and working conditions for the population. The success of this initiative is measurable by the size and tenor of the bond, the diversity of investors, the social and environmental benefits of the PEPT program, and the recognition and appreciation from involved parties. This model also holds potential for replication in other West African countries, further extending its positive impact.

In conclusion, the issuance of the social bond for the PEPT program in Ivory Coast is a prime example of how innovative financial solutions can address critical social issues. The collaborative effort between legal experts, government entities, and international organizations demonstrates the power of strategic partnerships in achieving sustainable development goals.

NB: Gide’s team composed of Dimitrios Logizidis (Partner, London), Victor Grandguillaume (Partner, Paris), Jérémie Bismuth (Counsel, London), Imane Bellafqih (Associate, London) et Lucile Meurin (Associate, London), advised the IFC on all legal aspects, including setting up, arranging, and finalizing the securitization transaction. Gide’s team has been shortlisted for the FT Innovative Lawyers Awards for this deal (results will be published in October 2024).