€5 mln green bond to invest in solar parks
With the issue of the first ‘green bond’ which will be listed in the
Cyprus Stock Exchange by Scandinavian Solar Parks, new opportunities emerge for retail and institutional investors to diversify in a low-risk domestic industry with a sound track record.
Scandinavian Solar Parks is an independent power producer that has built, operates and maintains nine solar parks in Cyprus.
It is now seeking to raise EUR 5 mln through this issue with maturity in January 2028.
The total capital expenditure in the EU for energy transition could reach EUR 1.7 trln by 2030 with roughly 45% going towards offshore wind farms and solar photovoltaic (PV) parks.
And from all the countries in Europe, Scandinavian Solar Parks chose Cyprus to launch this business more than ten years ago.
“Back then we did a lot of research around Europe to see which country in the EU was the most efficient place to build solar parks, from a solar radiation perspective. The conclusion back then was either Cyprus, Crete or Malta,” explained the company’s CEO Hakan Henriksson.
“We then decided on Cyprus because I had some experience and connections in the country. Our first move was then to participate in the first auction in Cyprus which was arranged by CIE.”
However, investing in this sector in Cyprus has not been without challenges.
“The first challenge is to find suitable land. Second is long lead times before you can start to build and third is slow expansion of electricity networks,” said Henriksson.
“As far as synergies are concerned, we need to work together with the local companies. We can use our experience from the Scandinavian market, which has been free for the last 20 years, to make improvements in the Cypriot market. That allows us to see what the next step will be in energy storage and electric charging for the transport sector, like cars and trucks.”
Right time
After ten years in the business Henriksson believes now is the right time for the company to launch a green bond.
“We have an entrepreneurial growth strategy: to identify attractive solar projects at an early stage, complete their construction and bring them online and sell power via long term power purchase agreements. This strategy provides affordable, zero emission electricity to utilities and industrial consumers.
“After ten years we have built up a strong cash flow which allows us to pay decent interest to the green bondholder in the future. Our growth during 2023 will be around 60% and for 2024 it will be close to 100%.”
As regards the main characteristics of this instrument, Henriksson said it is a corporate quoted guaranteed Green Solar bond, which means the financial risk is low compared to similar corporate bonds in the European markets.
He explained that the interest is linked to the cost of fuel and it offers 8% per annum with a minimum guarantee of 4% in the following three years.
And if the cost of fuel to produce electricity stays at this level or doesn’t fall more than 20% then investors are expected to earn 8% for the whole period. A memorandum is available for investors and financial experts to review.
Asked how fast the company will be able to deploy the capital it is seeking to get from the Cypriot market, Henriksson concluded: “I believe we will use the money within the next 12 months.”