Swedish company Arise Windpower has just announced the successful issuance of a SEK1bn ($167m) 5 year green bond linked to wind farms. Interest rate was set at 3% above STIBOR (the Stockholm Interbank Offered Rate).
Arise indicated that investor interest was 'strong', partly due to the green stamp on the bond.
This is the first senior secured bond issue in Sweden in the wind power sector. DNB Markets was the sole bookrunner. DNV GL also provided a second opinion on the bond. All good.
The bond will be used to refinance existing wind farms in the southern part of Sweden, all of which have production and operating history. Wind is a clear part of the low carbon economy and Arise's earlier unlabelled bonds are already included in our annual market sizing report as they are a pureplay company in this space.
By refinancing its debt, the bond allows the company to diversify its financing and, because bond rates are so low, improve cash flow by SEK30 million ($4.5 million) a year. Nice.
Refinancing is important for the capital pipeline, especially for pureplay companies like Arise who will be building more wind farms.
So the bond is good ... but something in the press release is not quite right:
"DNV GL has given an opinion stating that the bond meets the criteria for the Green Bond Principles ... by this opinion the green integrity of the bond is verified."
This is a little misleading. Scanning the press coverage in past months it's clear there's confusion about whether the Principles constitute "Standards" or not.
The Principles are important as a guide to issuers and underwriters about a number of key features of green bonds: a focus on the utilization of the proceeds of the bond rather than the issuer's "green-ness"; identifying that transparency is critical; saying issuers should regularly report; etc. But they are not definitive. When it comes to "what is green" the Principles first make a very broad statement that assets linked to green bonds are:
"... projects and activities that promote climate or other environmental sustainability purposes."
They do go on to say that several broad categories are "recognized": renewable energy; energy efficiency; sustainable waste management; sustainable land use; biodiversity conservation; clean transportation; and clean water. But then ...
"There is diversity of opinion on the definition of Green Projects; therefore it is not the intent of the Green Bond Principles to opine on the eligible Green Project categories."
To look for criteria you can use about "green-ness" you're then referred to go the Appendix of the Principles for examples you could use. The Climate Bonds Initiative's taxonomy is in there, as well as those for the World Bank, IFC, EIB and EBRD, and the OECD. They are all reasonably in sync.
The Principles are broad guidelines; doing as the guidelines suggest is great. But for a reference definition to back up your claims of being green you need to look beyond them.
But back to Arise - Bravo!
