Weekly blog: TfL’s £400m green transport bond big success / China's first on the way / first M&A green bond for Senvion / NIB back in market with SEK 1bn ($116m) 5yr / littlies from EBRD, World Bank, City of StPaul, Mytrah Energy / + gossip

Development Bank issuance

Nordic Investment Bank issues its third green bond (SEK 1bn ($116m), 5 yr, 0.155%, AAA)

Nordic Investment Bank (NIB) has issued a SEK 1bn ($116m) green bond, its third SEK denominated green bond issuance (they call them Nordic Environmental Bonds – NEBs). The bond has a 5 year tenor, coupon of 0.155% and was rated AAA by S&P. SEB and Credit Agricole-CIB were the joint bookrunners for the deal.

Almost all the investors (a whopping 95%!) in the green bond were ESG (Environmental, Social and Governance) investors. Geographically, it was the Nordic investors that dominated the orders, comprising 67%, with German investors also taking a chunky slice with 19% of the book. The US market accounted for a further 12%, with France and Australia both taking a modest 1%.

CICERO provided a second opinion on the green bond framework last year. That’s the benefit for repeat green bond issuers, by the way: once the framework is in place for the first green bond issuance, as was the case for NIB with this bond, there is no need for a new second opinion, making it even easier to keep coming back to the green bond market for more.

NIB has provided a high level of disclosure with details of each project financed by the proceeds available online, allowing us to dive into the green credentials at a project level. Great with such a level of transparency. This green bond is funding a mixture of renewable energy, energy efficiency, green buildings, waste management and wastewater treatment projects.

Repeat issuances from EBRD (IDR 230bn ($17m), 4 yr, 6.91%, AAA) and the World Bank (INR 63m ($1m), 5 yr, 5.2%, AAA)

EBRD issued an Indonesian Rupiah denominated green bond of IDR 230bn ($17m). It has a 4 year tenor, coupon of 6.91% and was rated AAA by S&P. The bookrunner was Deutsche Bank Uridashi. This follows several other green bond issuances by EBRD this year including March issuances in Brazilian Reals (BRL 48m, $14.8m) and Indonesian Rupiah (IDR 200m, $15m). CICERO has provided a second opinion and EBRD provides green bond reporting on all its green bonds in its sustainability report.

The World Bank also has repeat green bond issuance this week issuing an Indian Rupee denominated bond of INR 63m ($1m). The bond has a 5 year tenor, 5.2% coupon and was rated AAA by S&P. Bookrunners were CACIB Uridashi. Like all World Bank green bonds CICERO has provided a second opinion but this is not yet publicly available. This is the third INR issuance from the World Bank this year; it issued Indian Rupee denominated bonds in January (INR 34.5m) and February (INR 436m).

Municipal bond issuance

City of St Paul, Minnesota, issued an $8.7m green bond (1-19 yrs, 0.55-3.239%, AAA) for its storm sewer system

The City of St Paul, Minnesota, has issued an $8.7m green muni bond. It has 19 tranches with maturities ranging from 2016-2034 and coupons between 0.55-3.239%. The bond is rated AAA by S&P. The underwriter is Hutchinson Shockey Erley.

This is the first green muni bond to come out of Minnesota and proceeds are going to the city’s storm sewer system. This includes rehabilitation of storm sewers, tunnels, storm water ponds, pump stations, and catch basins. The capital raised will go to complete improvements to the water and wastewater systems that began in 1997. It is good to see an indication of climate adaptation measures however, as with other recent US muni green water bonds, there is no second opinion provided on the green credentials of the bond. Hopefully next time City of St Paul come back to the green bond market they might consider a second opinion or provide additional details on its climate adaptation plan as part of the bond-offering document.

Corporate bond issuance

See our separate review of the first ever green covered bond.

Transport for London issued a green bond to fund low-carbon transport (£400m ($596m), 10yr, 2.125%, AAA)

Transport for London (TfL), a public-private partnership responsible for London’s massive transport network, has issued a £400m ($596m) green bond. The bond has 10-year tenor and a coupon of 2.125%. The bond was rated AAA by S&P. Underwriters were Bank of America Merrill Lynch and Deutsche Bank. This is TfL’s inaugural green bond and the third sterling denominated green bond ever issued, following Unilever’s £250m and EIB’s £500m green bonds issued in March last year.

According to the FT, the deal couldn’t be done at the size and price “without a significant green investor base”. Deutsche Bank Treasury was a vocal supporter and investor in the bond as part of its green bond portfolio (they’ve made a EUR1bn green bond investor commitment).

The eligible green projects in TfL’s green bond framework are split into low carbon transport categories for overground rail, the underground, station infrastructure, low emission hybrid buses and cycling improvements. This falls in line with the Climate Bonds standard for low carbon transport that advocates rail and bus rapid transit as climate investments because they provide massive savings in GHG emissions compared to using cars. DNV-GL provided a second opinion to assess the alignment of the bond with the Green Bond Principles. TfL also stated the key performance indicators that it would be reporting on during the lifetime of the green bond. Although not project level reporting it’s great to see this disclosure at issuance. We can’t wait to see the outcomes reported in 2016 (and those new cycle lines and tube upgrades making it easier for us Londoners on our daily commute!).

German company Rapid Holding use EUR 400m green bond to acquire Senvion’s wind manufacturing assets, 5yr, semi-annual coupon 6.625%, B2

Rapid Holdings mbgh, a SPV for private equity house Centerbridge Partners, issued a EUR 400m ($450m) green bond to fund its acquisition of wind manufacturing company Senvion Wind from Indian parent company Suzlon Energy. The 5 year senior secured green bond has a 6.625% fixed, semi-annual coupon, and is non-investment grade with a B2 rating from Moody’s Great to see more high-yield green bonds, as investors are looking for diversification in yields in the green bond market! The lead underwriters in the deal were Banca IMI, BayernLB, CaixaBank, CITI, CACIB, Deutsche Bank, JP Morgan, Raiffeisen Switzerland, RBC, Santander, SEB.

DNV GL provided a second opinion on Rapid Holdings’ adherence with the market best practice guidelines, the Green Bond Principles, which we are happy to see that Rapid Holdings/Centerbridge has published publically on the Senvion website. The bond will be used to acquire Senvion’s assets and since these are all offshore and on-shore wind turbines we give full score on green credentials. The Climate Bonds Wind Standard explicitly includes manufacturing of turbines, as it’s a key enabler for great wind renewable energy generation.

‘Unlabelled’ climate bond issuance

Mytrah Energy issues an INR 3.45bn ($56m) unlabelled climate private placement bond for its wind energy generation (4 yrs, semi-annual coupon 12%, BBB)

Indian wind power generation company Mytrah Energy issued an INR 3.45bn ($56 m) unlabelled climate bond earlier this month for its wind projects.  The bond has a 4-year tenor and a semi annual coupon of 12%. India Ratings & Research Private Limited has assigned Mytrah Energy a rating of IND BBB. ICICI Securities Ltd is the lead manager on the deal.

The bond issuance was a private placement offering bought by three investors; Bank of America Merrill Lynch, Aion Direct Singapore and Apollo Funds. The private placement market can be a good channel for climate investments in emerging markets with less developed public debt capital markets. Private placement can also be a suitable option for smaller scale issuers that struggle to get to the bond issuance scale required by public bond markets.

According to Environmental Finance, proceeds will be used to refinance existing debt and for new wind projects in Mytrah’s existing pipeline of 3.5MW wind projects (bringing 1MW to operational phase).

Climate Bonds consider Mytrah Energy India a green pure-play company as it sole business line is wind power generation. The company operates ten wind farms in 6 states across India generating 543MW of energy. For this reason Mytrah Energy will be included in the HSBC state of the Market report update coming out in the next few months. But a note to Mytrah’s treasury team - consider adding a green label next time! Makes it easier for investors to identify it as the clearly green investment it is, and so allow Mytrah to achieve some investor diversification.

Market Developments

  • The Global Investor Coalition on Climate Change has published an updated climate change investment guide for Asset Owners. GICCC is a group bringing together four large investor groups from the USA, Europe, Australasia and Asia  (IIGCC, INCR, IGCC and AIGCC). The report shows how asset owners can integrate climate into investment strategies and highlights the potential to use green bonds in the solution. A must read for any asset owner out there!
  • Bloomberg New Energy Finance predicts that there will be $80m green bonds issued this year. Bang in the middle of other predictions. BNEF also announced the winner of its FIRE competition: Carbon Count, which is a project looking at impact measurements for green bonds.

Green bond gossip

  • China is about to see its first ever green bond. Using the term "green" for a bond requires regulator approval in China; after a long wait this has now been granted by the People's Bank of China (who we've been working with on proposals to develop a green bond market). The bond will be issued by the Industrial Bank of China in the near future.
  • India’s largest power utility NTPC Limited is planning to issue a $500m green bond. The state owned entity will follow Yes Bank’s pioneering lead and the direction of the government, which last month urged issuers to leverage green bonds to finance clean energy projects. We’re hoping this bond will be the first Indian bond to get a second opinion on the green credentials.
  • San Francisco Public Utilities Commission will be closing its first green water bond this week (those interested can catch up with Mike Brown at Climate Bonds SFO event next Tuesday – places still available)
  • Connecticut’s done it again, issuing a second green water bond. Details when it closes.
  • A third NRW Bank green bond is also on the near horizon.
  • Capital Stage is issuing an unlabelled climate project bond backed by UK solar. Details when it closes.