green bonds

Greece joining list of countries issuing green bonds, conditions entailed

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Greece is preparing to join the growing list of countries issuing green bonds, the plan being to funnel proceeds into green projects at areas that have been affected by this summer’s extensive fires.

But the venture has its challenges and commitments. Any state or corporation accepting funds from investors for green bonds commits to specific environmental clauses.

Projects must be classified entirely eco-friendly, based on international criteria; not financed by recovery funds or the National Strategic Reference Framework (NSRF); and not included in any public investment programs that could widen the primary deficit.

Also, projects funded by green bonds need to have short-term completion dates of no more than two or three years.

At this stage, it remains unclear when the Greek government will move ahead with its first green bond issue.

Greek corporations, including TERNA, followed by the power utility PPC, have already issued green bonds.

PPC raised 500 million euros through a sustainability-linked bond in mid-July at an interest rate of 3.375 percent, one of the lowest ever borrowing rates secured by PPC, following a March SLB issue that provided 775 million euros.

In return, PPC has committed to a specified CO2 emission reduction of 40 percent by the end of 2022, compared to the corporation’s 2019 level, which represents a cut of 9.2 million tons, otherwise interest rate penalties will be imposed.

 

PPC looking to capitalize on momentum with July bond issue

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Power utility PPC is preparing to issue a new ESG (Environmental, Social and Governance)-linked bond in July, driven by favorable market conditions and a recent B+ credit rating from S&P, banking sources have informed.

A PPC bond issue in July would capitalize on current market sentiment, still positive. If the Delta variant, a strain of Covid-19 believed to be more transmissible and dangerous than others, continues to spread, a growing number of countries will impose restrictive measures, which would dampen economic recoveries and investment activity.

A second driving factor for an issue in July is the increasing inflationary pressure triggered by economic recovery. The Fed has indicated that this inflationary pressure rise will continue.

Rising inflation combined with solid performances in the global economy suggests the time for interest rate increases is approaching, as indicated by a rise in yields on US bonds.

Internationally, investors believe it is a matter of time before central banks raise interest rates to control inflation rates.

This would be an unfavorable development for countries and corporations, such as PPC, that have managed to borrow at low interest rates.

Given these possibilities, PPC, in the months ahead, may not have the opportunity to achieve a bond interest rate that would be as good or better than the rates achieved with a double issue last March. PPC raised 775 million euros through two ESG-linked bond issues, the first at 3.875% for 650 million euros, and the second at 3.67% for 125 million euros.

 

PPC preparing sustainability-linked bond issue, Greece’s first

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Influenced by the global investment community’s turn towards investments in eco-friendly energy, power utility PPC is preparing to issue a Sustainability-Linked Bond, a new financial tool reflecting this investor trend, within the first half of 2021.

The initiative promises to make PPC the first company in Greece to employ such a financial tool and one of just a few internationally.

The SLB is more elaborate than existing green bonds, linked to specific projects, as it is aligned with the wider sustainability prospects of bond issuers.

PPC, which has yet to set a date for its planned SLB issue, will commit to improving its sustainability performance over a predetermined period through CO2 emission reductions at an increasing rate, as specified in its new business plan.

Companies with lower emission levels represent lower-risk investments for investors, which enables green-oriented enterprises to achieve better borrowing terms.

Even so, PPC will not necessarily achieve any great interest rate improvement through an SLB issue, financing officials have pointed out.

However, looking ahead beyond the issue, a solid performance by the utility’s SLB in secondary-market trading would enable PPC to borrow at a lower cost should it return to capital markets at a future date.

The power utility’s credit rating is BB- while, just a year ago, the company was struggling to remain afloat. Much work still lies ahead before PPC is transformed into the dynamic eco-friendly company described in its new business plan.

TERNA Energy was the country’s first company to issue a green bond with a 60 million-euro issue in 2017 for capital that was utilized in renewable energy and waste management investments. The company made a follow-up move in 2019, raising 150 million euros at 2.6 percent through a green bond issue that was oversubscribed by over four times.

Petroleum group ELPE (Hellenic Petroleum), aiming to reduce its carbon footprint by 2030, is also considering green bonds as a financial tool.

Green bonds, just arrived here, enjoying strong global growth

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The overwhelming investor turnout for a climate bond issued by Terna Energy, Greece’s first environmental bond, has turned the domestic market’s attention to this financing tool, introduced to Greece for the first time with this Terna issue but already experiencing rapid growth on an international scale.

Green bonds were introduced as financial tools to support RES projects developed by governments and private-sector enterprises.

Indicative of the emphasis on climate bonds being placed elsewhere, China’s seven major regulatory authorities recently announced a series of common guidelines for the establishment of a “green” financial system, the objective being to transform the country’s economy into an eco-friendly economy.

Climate bonds emerged in 2007 and have since experienced rapid growth. Green bond issues are expected to reach a total of approximately 150 billion dollars this year, up from 81 billion dollars last year and 3 billion dollars in 2012.

The USA stands is the biggest issuer of climate bonds ($29.2bn, based on data until 2016), followed by India ($23.6bn), China ($19.5bn), France ($19.4bn), Germany ($12.5bn), Sweden ($6.1bn), Mexico ($2.6bn), Canada ($2.4bn), Japan ($1.8bn) and Australia ($1.67bn).