Exclusive-Angolas next debt issuance to be ESG bond, but not in 2023

By Joe Bavier and Jorgelina do Rosario

WASHINGTON (Reuters) -Angola‘s next sovereign debt issuance will be an ESG bond of up to $1 billion, its finance minister told Reuters on Thursday, but she added that the southern African oil producer’s government would not tap the market this year.

Angola, like other African frontier market nations, has been frozen out of international capital markets since early last year. It last issued dollar bonds in late 2019 to fund its ambitious economic reforms.

But yields on its bonds spiked to around 30% during the COVID-19 market rout in March 2020.

In an interview on the sidelines of the International Monetary Fund and World Bank spring meetings in Washington, Finance Minister Vera Daves de Sousa said the government had now approved a framework for issuing so called environment, social and governance debt.

That framework will likely be published this month, she added.

“We are open to get funding from whoever is interested to participate,” she said. “We already know how to do eurobond issuances … But any ESG issuance will be the first one for us, so we want to start with the hard work.”

However, she said Angola would wait for market conditions to improve before returning to the market.

“We are very cautious about the moment to step into the markets because we want to stabilise our debt,” she said.

Temporary oil bump

Daves de Sousa said that recent efforts to attract new investment to the OPEC members oil and gas sector were beginning to be reflected in oil output.

“We will have a slight increase (next year) but still less than 1.5 (million barrels per day), I think. And after that, we will start seeing a slight reduction,” she said, adding that current production stood at around 1.12 million bpd.

Beyond 2024, she said production was set to stabilise around 1 million bpd.

Oil constitutes the bulk of Angolas government revenues, and Daves de Sousa said it was using a reference price of $75 per barrel when calculating its budget.

“Below $70, it starts becoming uncomfortable, and we should take some measures like freezing some expenditures. In a worst scenario of $50 per barrel, we should present a supplementary budget,” she said.

The government of President Joao Lourenco, who came to power in 2017, has embarked on an ambitious push to reform the former communist nation, including a campaign to privatise, at least in part, state-owned companies.

The strategy is making progress, Daves de Sousa said. But plans to partially privatise state oil company Sonangol were moving slowly due to the need to ensure that all its assets are accounted for ahead of a planned dual listing in Angola and a yet to be chosen foreign stock market.

“We hope to see in one year, worst case scenario two, all this situation stabilised,” Daves de Sousa said. “We need to fix this … Despite all this, it is a good company.”

Angola had initially hoped to list a 30% stake in the company in 2022.

(Reporting by Jorgelina do Rosario and Joe Bavier; Editing by Paul Simao)