Infrastructure Bond for prepaid meters

Distribution Company.
The bond, guaranteed by Government, will earn a net coupon rate of 10 percent per annum. It is due to close on November 30. It carries Prescribed Asset Status and will assist pension funds and insurance companies to comply with statutory portfolio composition guidelines. It will also assist in redirecting domestic capital towards infrastructure, which has been identified as a prerequisite for sustained domestic economic recovery and regional integration.
In terms of repayments, the IDBZ said the principal source of repayment for the bond would be the operating cash flows from ZEDTC. The IDBZ said it would create a sinking fund into which monthly deposits will be made to facilitate orderly repayment of the bond.
The IBDZ added that the successful issuance of the bond would not only have a direct positive impact on the electricity sector, but will also assist in reviving the bond market in Zimbabwe.
“Investors, particularly long-term investors such as pension and provident funds, and insurance companies, are therefore encouraged to participate actively in the bond issue,” the bank said.
According to a statement issued by the IBDZ, the issuing of the bonds was expected to become a regular feature on their calendar of capital market issues.
“The bond issue is in line with the IDBZ’s core statutory mandate to mobilise long-term capital from both domestic and external sectors in support of technically feasible and economically viable infrastructure projects,” read part of the statement.
“With structures on the external sector militating against resource mobilisation from that source by the bank, bond issues from the domestic capital market will be a major source of funding for priority infrastructure projects in the short to medium term.”
The bonds are being issued after stakeholder consultations resolved that the proceeds of bonds be directed to the power sector, a key enabler in the economy. Investment in prepaid meters will yield substantial benefits to both the utility and consumers.
For the utility, benefits of PPMs include increased cash flow and minimum exposure to credit risk.
Consumer benefits include advance budgeting and tighter control of electricity consumption, elimination of connection deposits, reconnection fees, no bill estimates and other discrepancies which consumers have complained about over recent years.