GB Market Rpt: Alliander €300m ($339.6m, 10yrs); 1st China onshore corporate Concord Wind RMB200m ($31m, 3yrs); Iberdrola €1bn ($1.13bn, 10yrs), Vasakronan SEK550m ($67.6m, 2yrs); Latvenergo €25m ($28.4m, 6yrs)

For this market report edition we are focusing on the recent flurry of Corporate Green Bonds. There has been so much going on in the green bond space over the past couple of weeks that we will be blogging more about the municipal and development bank green bonds - and all those market developments - seperately, so keep an eye out

Corporate green bonds

 

Alliander makes green debut with a EUR 300m issuance ($339.6m, 10yrs, 0.875%, Aa2e)

Dutch electricity network company Alliander entered the green bond market for the first time with an issuance of EUR 300m ($339.6m) with 10-year tenor and coupon of 0.875%. Moody’s rated the bond Aa2, with CITI as lead underwriter.

Oekom provided a second review.

82% of the proceeds will be used to refinance the deployment of smart meters for Alliander customers. The smart meters must meet criteria for longevity and end-of-life recycling.

The remaining 18% of proceeds will be used to fund green building projects. This includes the redevelopment of Alliander’s own premises in the Netherlands. Projects must meet one of the following green building standards in order to qualify as eligible:

  • BREEAM “Very Good”
  • DGNB “Gold”,
  • LEED “Gold” certificate or
  • HQE “excellent” label.

Alliander is aiming towards the higher end of the green building standards with the green bond. Well done! Though we would love to see information on what level of emissions performance those ratings levels translate into.

Additionally, green building projects funded by the bond can include water use minimization and the use of certified sustainable building materials.

Sounds promising, but some more precise information on what level of water use reduction is required, and which certifications of building materials will be accepted would be welcome.

The company will publish a one-off impact report one year after the issuance, which will be available on their website.

Three indicators will be reported:

  • total number of smart meters installed,
  • average energy consumption and
  • CO2 emissions of the green buildings compared to the Dutch average and total annual supply of district heating.

We like reporting on environmental impact, but would prefer not just a one-off. 

All up though a good start. Go Alliander for this inaugural green bond!

 

First onshore Chinese corporate green bond from Century Concord Wind Power Investment – proceeds for solar and wind (RMB200m ($31m), 3yrs, 6.2%, AA)

Century Concord Wind Power Investment has issued the first onshore Chinese corporate green bond in China’s interbank bond market to the tune of RMB 200m ($31m).

The green bond has a tenor of 3 years, fixed coupon of 6.2% and has been rated AA by SBCR (Shanghai Brilliance Credit Rating and Investor Services), a large Chinese rating agency. China Development Bank was the lead underwriter for this deal.

New entrant in Chinese domestic green bond market

After a flurry of green bonds from commercial banks in China so far this year (including SPD, China Industrial Bank and Bank of Qingdao), it’s exciting to see the first green bond from a non-financial corporate in the domestic bond market.

Century Concord’s green bond was registered with NAFMII (National Association of Financial Market Institutional Investors), which oversees the issuance of corporate bonds in China’s interbank market. In fact, it’s the first bond to be approved under NAFMII’s new – but still draft - green bond guidelines. NAFMII will review and then publish the guidelines over Summer.

The bond has robust green credentials, proceeds will be used to finance solar and wind power projects in China, and the details of the specific projects to be funded are disclosed.

The criteria for eligible projects are aligned with the Green Bond Endorsed Projects Catalogue, developed by China’s Green Finance Committee. These criteria are the same that are endorsed by PBoC for green financial bonds issued in the interbank bond markets, creating consistency in the market for investors.

KPMG provided the second party review of the green bond, corroborating that eligible projects are aligned with the criteria set out in the official Green Bond Endorsed Project Catalogue. Concord Wind has set up a special account to manage proceeds.

Commitment to reporting

Concord Wind commits to the disclosure of the use of proceeds semi-annually. This is more frequent than most existing green bond issuers in the international market who report annually, and will provide investors will on-going information on the green credentials of the bond.

A warm welcome for the first domestic Chinese corporate green bond.

 

Iberdrola issues their second green bond for wind projects (EUR1bn/$1.13bn, 10yrs, 1.125%, BBB)

Spanish utility company Iberdrola returned to the green bond market with a EUR1bn issuance of 10-year tenor and 1.125% coupon. The bond was rated Baa by Moody’s and BBB by Fitch. Banca IMI, Banco Sabadell, Bank of America Merrill Lynch, BNP Paribas, CaixaBank, Citi, HSBC, Mizuho International, RBS acted as joint lead underwriters for this deal.

The proceeds will be used to refinance existing wind power projects that are located in Spain, Portugal and the UK. Vigeo provided a second review on the use of proceeds and the reporting framework, just as it did for Iberdrola’s inaugural issue in 2014.

So all the projects are wind power projects. But in addition, these wind power projects must be aligned with three principles in Iberdrola’s ESG policies:

  • Environment (Environmental management, Protection of biodiversity, Atmospheric emissions and Energy management);
  • Creation of value (ESG risk management, Responsible Customer Relation, Sustainable Procurement, Promotion of Business Ethics) and
  • Social dimension (Improvement of Health & Safety and Employment Conditions, Respect of human rights, Sustainable local insertion and Access to energy and prevention of fuel poverty).

Iberdrola commits to comprehensive annual reporting in its Sustainability report, covering project details, fund allocation, compliance of selected projects with the green bond framework, and environmental benefits.

Well done Iberdrola, welcome back.

 

Vasakronan comes back to market yet again, issuing its third green bond for SEK550m ($67.6m, 2yrs, 0.288%)

Swedish real estate group Vasakronan has issued another green bond for SEK 550m ($67.6m). Vasakronan has been a regular in the green bond space since its inaugural issuance in 2013. This latest green deal has 2-year tenor and coupon of 0.288%. The lead underwriter was SEB.

The green bond’s proceeds will be used for low carbon buildings projects. Vasakronan’s green bond framework indicates that selected buildings (new or existing) will have a minimum certification of:

  • LEED Gold;
  • BREEAM Very Good; or
  • Miljöbyggnad Silver (Swedish rating).

Like Alliander, Vasakronan, is aiming towards the higher end of the green building ratings, although again we would prefer to see additional disclosure on what the ratings mean in terms of emission performance.

As with its previous green bonds, CICERO provided the second review of Vasakronan’s green bond.

 

Latvenergo reappears with a EUR25m green bond ($28.4m, 6yrs, 1.9%, Baa2)

Latvian utility company Latvenergo appeared in the green bond market again with a $28.4m issue with 6-year tenor and coupon of 1.9%. The issuance was rated Baa2 by Moody’s, with SEB as lead underwriter.

The investor base was fully European, with 27% from Estonia, 18% from Lithuania and the rest from other parts of the EU. In terms of investor type, 59% were asset managers, 35% banks and 6% from the insurance sector.

CICERO did a second review of Latvenergo’s green bond framework.

Diverse Proceeds Mix

The proceeds will be channelled to:

  • renewable energy (hydro, biofuels and wind),
  • energy efficiency (transmission and distribution networks, smart grid),
  • environment preservation (flood protection, waste and water management) and
  • sustainable environment (R&D in nature conservation and biodiversity).

The latter will account for no more than 10% of the total amount.

Overall, it looks promising, but as we commented on Latvenergo’s inaugural issuance last year, we would like to see more details on the selection criteria for biofuels in particular, to ensure the emissions performance of the projects are sufficiently ambitious.

Experts tell us that using sustainable feedstock is crucial in bioenergy (see the Climate Bonds Standard for more details).

Latvenergo will report on eligible projects annually.

 

FlexiGroup issued Australia’s first green ABS with proceeds for solar, certified under Climate Bonds Standard (AUD 50m/$39m, 5yrs, AAA)

This landmark deal has a tenor of 5 years, rated AAA (Fitch) and Aaa (MDY). National Australia Bank (NAB) was the lead underwriter.

The Flexi Group green ABS is certified by DNV GL against the Climate Bonds Standard 2.0 under the Solar Technical Criteria. Underlying assets consist of rooftop solar energy PV system loans located across Australia.

With the verification and certification, we can be sure that projects financed by the underlying solar loans have a minimum of 85% of electricity generated from solar energy resources, as required by Climate Bonds Solar Criteria.

Check out the details in this in-depth blog from last week.  

 

Unlabeled climate-aligned bonds

 

Three climate-aligned project bonds issued for solar and wind projects in the US and Japan

Three unlabeled climate-aligned project bonds have been issued to finance solar and wind projects in the US and Japan, according to Credit Agricole’s March global project bond newsletter:

  • ConEdison Development issued senior secured notes ($217.7m, 25 yrs) to build the 106MW Alamo 7 solar PV projects in Texas.
  • A project bond (¥3BN/$27m, 20yrs, 1.4%, A) by Aomori-Misawa to construct a solar project in Japan.
  • A privately placed senior secured note ($150m, 19yrs, 4.11%, BBB) by Renewable Power Generation LLC to fund five wind and two solar facilities in five states across the United States.

 

Green Bond Gossip

 

BAIC (Beijing) Motor Corporation is to issue the first green enterprise bond in China for RMB2.5bn ($387.5m)

This is the first bond to be issued under China’s NDRC (National Development Research Commission) green bond guidelines published in January.

Yes, it’s complicated – there are now three sets of guidelines or regulations in China, with a fourth set on its way.

We’ll explain all this in an upcoming blog.

The bond will have a 7-year tenor and is rated AAA by Dagong Global Credit Rating, a large Chinese rating agency. BAIC is planning a first bond of RMB 2.5bn, making up close to half of the total RMB 4.8bn issuing quota approved for BAIC Motors. Haitong Securities is the lead underwriter for the deal.

The proceeds will be used to produce low emission passenger cars and electric cars, as well as R&D for environmentally friendly cars.

BAIC did not obtain a second review or certification, but the green credentials of the bond were reviewed by the China Central Depository & Clearing Co, at the request of NDRC, before being approved. This is expected to be standard practice for green bonds issued under NDRC guidelines.

 

Still to come this week, posts on municipal green bonds, development banks green bonds and other market updates:  

See you then,

The markets team.