Peru’s first domestic green bond from Energia Eolica; $204m, 6%, 20y, BBB-
Earlier this month Peruvian wind energy producer Energia Eolica SA (an indirect subsidiary of Contour Global) issued a $204m green project bond with a coupon of 6% and 20 year tenor. The deal achieved BBB- (investment grade) rating from Fitch. Goldman Sachs and Bank of America Merrill Lynch were the deal underwriters.
Kickstarting green bond markets in emerging economies is key - this is where the majority of economic growth, and environmental pressures, will be over the next decades. It is clear that there is plenty of investor appetite here; the first green bond in Peruvian soles was issued earlier this year by the IFC for a Peruvian investor. Energia Eolica’s bond received a significant number of orders from domestic investors. We think this shows Peru’s debt capital markets are ready for more green bonds in 2015.
Energia Eolica owns two wind power projects in north-western Peru with a combined capacity of 114 MW. In September 2014 the construction phase of the wind projects was completed and the turbines connected to Peru’s national grid. This is where institutional investors can step in because the higher risk construction phase is completed, and the operational phase can offer the steady revenue streams many institutional investors are looking for, particularly because most renewable power projects have an agreed supply deal. Indeed, this is also the case for the projects backing the bond from Energia Eolica. They benefit from Peru’s Renewable Energy Resource Program with a 20-year guaranteed power purchase agreement in place.
Energia Eolica didn’t get a second opinion on the green credentials of the bond, however, as the underlying projects are two wind farms (Cupisnique and Talara) we’d say the bond is really as green as it gets. Proceeds will be used to pay down existing loans and credit facilities from the construction phase of the projects.
Vardar AS issues its first green bond; NOK300m (US$41m), 5 year, 3.8% with 2nd opinion.
Norwegian renewable energy company Vardar AS has issued its first green bond. The NOK 300m ($41m) green bond has 5 year tenor and floating coupon of 3 month NIBOR+22bps. Nordea and Swedbank were the lead underwriters .
Vardar is a renewable energy company operating hydro, wind and bio-energy power plants in Norway, Sweden and the Baltics. Overall 89% of Vardar’s assets are green though the remaining 11% cannot be confirmed as green (comprised of property portfolios and part ownership of Norway’s national grid). Vardar committed in the bond’s term sheet that proceeds will only go towards green activities; as noted in the second opinion from DNV GL. We would consider this an earmarked bond as a result – since the company has expressly stated that proceeds will only go to green assets.
Repeat issuances: Rikshem SEK 450m (US$50m), 2-3 yr, A-; Vasakronan SEK 500m (US$68m), 5 year, BBB+ and Aligera SEK 100m (US$13.5m), 5 yr, B1
Vasakronan was one of the first ever issuers of green bonds in November 2013, with a SEK 1.3bn ($197m) green property bond. The Swedish real estate company issued more green bonds in March and April this year. Its latest offering was SEK 500m ($67.8m) with five year tenor and proceeds are earmarked for energy efficiency projects, small scale renewable energy projects, water and adapatation projects (related to green buildings) and green transport (infrastructure for electric cars).
Rikshem is another repeat issuer who first came to market with a green bond in May this year. Its latest green bond earlier this month is split across two tranches: SEK 250m ($33m) with three year tenor, and SEK 200m ($27m) with two year tenor. Proceeds from the bond are earmarked for green property renovation projects.
CICERO provided a second opinion on the Rikshem and Vasakronan green bonds.
Swedish wind power company Aligera AB issued its inaugural pure-play green bond in May this year. The SEK 300M ($46m) green bond has 5 year tenor and was given an indicative rating of B1 by Nordic Fixed Income Markets. After the success of the first issuance Aligera has tapped the bond for a further SEK 100M ($13.5m). Proceeds from the green bond will be used to replace “previous bank loans as well a financing of 5.5 new wind power acquisitions of 3 MW each” according to Aligera’s quarterly report. A good example of how green bonds can combine refinancing as well as new investments to grow green portfolios. No second opinion is provided because of the nature of the assets (wind farms) however it would be good to see a commitment to report on use of proceeds so investor can be confident the proceeds are still used for the wind projects.
PS. This flurry of issuance late in the year brings the total issued in 2014 up to $35.4bn – just off the mark, but it’s been a great year!
