I'm at the Bloomberg New Energy Summit in New York, and we've had green bonds green bonds green bonds on the agenda - that's good news.
But talk today is all about yesterday's bond from Iberdrola - EUR750m, BBB, 8.5 years - and how it was four times oversubscribed! That's right, four times as many orders as they could fill - and they hadn't even bothered with a roadshow.
Whoa! That's what you call a market signal.
Iberdrola is only the second electricity utility (first was EDF) to issue a green bond. This is the first Spanish corporate green bond. ¡Hola España.
Proceeds will be used for their renewable energy business, to refinance existing investments (very important for bank bond teams to note) as well as new investment in:
- Renewable energy (hydro, geothermal, wind, solar, waves, tidal or ‘other’ non-fossil energy)
- Transmission and distribution that connect renewable energy
- Smartgrids that improve efficiency and demand management of networks
A third party opinion was provided by Vigeo and is published on the company website (Yes! Transparency! That's what we want!). Vigeo was commissioned to advise on compliance with the Green Bond Principles as well as provide an opinion on issuer and the environmental purpose of the projects.
Iberdrola's green bond portfolio fits very much within our taxonomy of a low carbon economy. With Vigeo providing additional criteria, proceeds are unlikely to be made in difficult ‘renewable’ areas such as large scale tropical hydropower. We are encouraged by the company’s transparency and commitment to annual reporting in the Green Bond section of its Sustainability Report.
Seeing more green bonds from utilities is a welcome development. Utilities clearly need to be major contributors to the low carbon economy by building clean energy assets; the easier it is for utilities to fund these types of project, the more likely they are to make them and so lead to genuine additional investments. This particular bond also enables SRI investors to invest in the renewables part of the business alone, something they have not been able to do at the equity level since Iberdrola Renovables was merged back into the main group in 2011.
The bond was priced with a zero NIP, in line with where a vanilla/brown bond would price. At 2.5% this is Iberdrola's lowest ever coupon. This is the tightest spread on any tenor EUR deal since March 2010 and 41bps tighter than their 7yr deal from 6 months ago. I'll let you read the tea leaves on that one, but it's very good news for Iberdrola whichever way you look at it.
The EUR750m bond was 57% placed with SRI/green investors. Investor types were:
- Fund managers = 68%
- Insurance & Pension funds = 21%
- Bank = 7%
- Others = 4%
Geography
- Germany & Austria = 28%
- France = 24%
- Iberia = 17%
- UK=14%
- Benelux=8%
- Switzerland = 3%
Joint bookrunners were Santander, Bank of America Merrill Lynch, Goldman Sachs, HSBC, JP Morgan and Lloyds Bank.
