World Bank Citi SIPCO Vietnam Emission Reduction-Linked outcome bond

Terms

Announced

14 Feb 2023

Instrument

Debt · Outcome bondA bond whose return is linked to the credits the project delivers.

Amount

US$7.20mReported as US$7.2m up-front (from a US$50m bond)

Source

worldbank.org

Parties

Project developer

SIPCO

Country

Vietnam

Capital providers

Capital providers and the amount counted for each

Party	Role	Amount	Basis
Velliv	Bond investor	US$2.40m	Estimated: an even share, 1 of 3
Nuveen	Bond investor	US$2.40m	Estimated: an even share, 1 of 3
Impax Asset Management	Bond investor	US$2.40m	Estimated: an even share, 1 of 3

Arranged by

Arrangers and what each arranged

Party	Role	Arranged	Basis
Citi	Arranger	US$7.20m	Sole arranger: the whole transaction

Carbon

Pathway

Other

Project type as recorded

300,000 water purifiers for about 8,000 schools and institutions in Vietnam

Backed by offtakes from

• Citi

What happened

US$7.2m of up-front financing to SIPCO, the Vietnamese developer and manufacturer of water purifiers, from a US$50m, five-year, principal-protected IBRD Emission Reduction-Linked Bond priced 14 February 2023 and settled 22 February 2023 (maturity 31 March 2028). Investors Velliv, Impax and Nuveen forgo ordinary coupons; the foregone coupons are converted into the up-front amount transferred to the developer, and the investors' return is instead linked to Verra credits issued by the project, with principal protected. Citi was lead manager and arranger of the bond and is the counterparty to the forward flow agreement under which it receives the credits from the developer. The project distributes 300,000 water purifiers to about 8,000 schools and institutions, reaching about 2 million children. The US$7.2m up-front figure is stated in the World Bank case study; the World Bank press release gives the US$50m bond size.

Kumo note

- An outcome bond: the World Bank borrows on its own balance sheet and redirects the coupons its investors give up to the project, so the developer is paid up front while the bond investors carry the credit-delivery upside and keep principal protection. - Citi sits on both sides of the mechanics, as lead manager of the bond and as the party that receives the credits under the forward flow agreement.

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