sustainability-linked bond

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 eyes foreign investors with 7-year bond issue for €350m

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Power utility PPC, Greece’s biggest electricity producer and supplier, has announced a 7-year, sustainability-linked bond issue intended to raise 350 million euros.

The decision was prompted by a current favorable climate surrounding the company as well as its need to partially cover existing loans and reduce the average borrowing cost to less than 5 percent as soon as possible. The offer’s roadshow begins today.

PPC is aiming for an interest rate of close to 3.5 percent, according to banking and finance sector sources, which would be slightly below a 3.875 percent interest rate of a preceding SLB-linked issue in March.

The utility intends to list the bonds on the Dublin Stock Exchange for trading on its Global Exchange Market, or, possibly, another EU trading platform.

A domestic bond issue would probably secure PPC a lower interest rate of roughly 2.5 percent, but the company’s administration is determined to further expose the utility to foreign institutional and real-time investors, a strategy seen lowering future borrowing rates to levels that could be achieved locally.

Also, borrowing from abroad is expected to offer further support for the company’s market share, whose price was 8.75 euros at the end of trading last Friday.

PPC, at the forefront of Greece’s energy market for more than 70 years, fully owns the country’s electricity distribution network, operated by DEDDIE/HEDNO, a fully owned subsidiary.

PPC bond issue oversubscribed six times, key foreign investors dominant

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International investment powerhouses and real-money investors, including US players, were key participants in power utility PPC’s bond issue this week, oversubscribed by six times with orders totaling three billion euros, a vote of confidence for the course being pursued by the company.

PPC promoted the issue by highlighting its comeback over the past year and a half.

Foreign investors – including institutional investors, private banks and hedge funds – comprised 70 percent of the issue’s subscribers, providing approximately 450 million euros of 650 million euros in total, according to estimates by sources.

The issue’s two coordinators, HSBC and Goldman Sachs, were still working on a finalized list of subscribers late last night.

Importantly, half the investment amount provided by foreign investors concerned real-money investors, including top global players handling portfolios worth trillions of dollars.

PPC’s issue, a sustainability-linked bond through which the utility has pledged, to investors, carbon emission reductions, was too good an offer to ignore. Its yield, 3.875 percent, was a standout prospect given far lower yields offered in the eurozone.

The results, since the order book’s opening on Monday, have exceeded PPC’s expectations in what is being hailed as an unprecedented success for a Greek bond issue, both in terms of the level of capital amounts offered and number of participants.

Also, this issue means PPC has succeeded in borrowing at an interest rate that is one-and-a-half percent below its current borrowing cost.

Banking sector officials pointed out the issue’s outcome highlights a wider change in perception of Greece by investors.

Strong investor interest expressed in PPC’s bond issue

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Strong demand expressed by Greek and foreign investors for power utility PPC’s five-year, 500 million-euro sustainability-linked bond, whose order book closes tomorrow, suggests the issue will be oversubscribed by two to three times, sources have estimated.

Local brokerage companies are submitting order requests that represent up to three times the size of actual amounts investors have decided to place in this SLB issue in an effort to ensure their clients will get the bond quantities they want.

The level of interest of foreign institutional investors, targeted by PPC as a key group for the success of this bond issue, is expected to be even higher.

Analysts attribute this heightened investor interest to two main factors, firstly the bond issue’s yield, which is expected to close between 3.5 and 4.2 percent, well over levels registered by corporate bond issues of the past few years in eurozone markets; and secondly, the bond’s sustainability terms.

PPC is committing to a 40 percent CO2 emissions reduction by 2022, from 23.1 million tons in 2019 to 13.9 million tons next year. If this goal is not achieved, 50 basis points will be added to the bond’s yield.

The issue’s environmental, social and governance (ESG) factors, even without guarantees, are also a key attraction for investors.

Since the wider outbreak of the pandemic early in 2020, an increasing number of funds have opted to invest in companies observing ESG criteria. Capital amounts invested by funds in companies maintaining ESG criteria have increased by 170 percent since 2015.

PPC bond issue aims for real-money investors, market clout

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Power utility PPC, which has just issued a 500 million-euro bond expiring in 2026, is aiming to attract foreign institutional investors – or real-money investors placed in the real economy, not hedge funds – to the issue, which, the corporation hopes, will also enjoy a solid course in secondary-market trading and help establish the company’s clout in capital markets.

PPC began presenting this bond issue to institutional investors yesterday and will continue to do so over the next two days in an effort to maximize the level of participation in the issue, a Sustainability-Linked Bond, the first of its kind to be offered by a Greek company.

The power utility is committing to a 40 percent CO2 emissions reduction by 2022, which if not achieved, will add 50 basis points to the bond’s yield.

The issue’s order book closes on Thursday. A clear picture on the turnout and type of investors drawn to the issue should emerge today or tomorrow, the latest.

PPC’s push to reduce CO2 emissions, which the company has told investors will fall from 23.1 million tons in 2019 to 13.9 million tons in 2022, is based on two key factors, a planned withdrawal of lignite-fired units representing a total capacity of 3.4 GW by 2023 and a change of investment direction focusing on renewables.

Data shows that PPC managed to reduce its CO2 emissions by 56 percent between 2005, when levels were 52.6 million tons, and 2019. A drop to the 2022 objective of 13.9 million tons would represent a 74 percent reduction, compared to 2005. If achieved, such a reduction would exceed the national target of 62 percent.

An improved BB- rating from Fitch late in December was a key factor in PPC’s decision to head to capital markets at this point in time.

PPC, on solid ground, set for SLB issue, possibly next week

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Power utility PPC is set to issue – any day now, possibly during the upcoming week – a 500 million-euro Sustainability-Linked Bond, through which it would commit, to investors, to a specified carbon emission reduction.

Given the heightened activity of late by the corporation and its advisors for this issue, it appears PPC believes now is the right time to head to the bond market, as long as no big changes occur on the wider economic front.

The prospective SLB would mark PPC’s return to capital markets following a seven-year absence. It also promises to make the company the country’s first to issue a bond incorporating sustainability terms.

Until just a few weeks ago, PPC was aiming to make its SLB move within the year’s first half, but the company’s prospects have improved further, as reflected by a recent BB- rating from Fitch.

The power utility is now getting started on the implementation of a business plan aiming for a green-energy transformation at PPC.

SLBs differ to green bonds as they are associated with specific indices, including CO2 emission reduction figures throughout an issuing company’s business plan.

PPC does not necessarily expect any great interest rate improvement through the anticipated SLB issue. Instead, looking further ahead, a solid performance by the utility’s SLB in secondary-market trading would enable the corporation to borrow at a lower cost should it return to capital markets at a future date.

PPC’s share price has risen by more than 170 percent over the past year, from 3.28 euros yesterday, representing a market capitalization value of 761 million euros, to yesterday’s closing price of 8.87 euros per share, putting the utility’s market capitalization value at 2.057 billion euros.

Besides the bond issue, investors are also expecting a list of second-round qualifiers, from 11 possible suitors, in the sale of a 49 percent stake of distribution network operator DEDDIE/HEDNO, a PPC subsidiary. Second-round qualifiers are expected to be announced once PPC has completed its qualification process, seen requiring a few more weeks.

PPC awaiting right time for €500bn Sustainability-Linked Bond

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Power utility PPC is all set and waiting for the right time to issue a 500 million-euro Sustainability-Linked Bond, through which it would commit, to investors, to a specified carbon emission reduction.

According to sources, PPC, keeping details on the issue under wraps, has not planned to market an SLB in March, but could, theoretically, do so at any given moment from here on if it deems market conditions are ripe.

An SLB issue by PPC promises to make the company the country’s first to issue a bond incorporating sustainability terms.

Companies that issue SLBs promising carbon emission reductions over an extended period of time represent lower-risk propositions for investors, enabling issuers to achieve better borrowing terms.

PPC does not necessarily expect any great interest rate improvement through an SLB issue, financing officials have pointed out, but, looking further ahead, a solid performance by the utility’s SLB in secondary-market trading would enable the corporation to borrow at a lower cost should it return to capital markets at a future date.

The company’s profile has greatly improved in the eyes of investors. PPC’s share price climbed to €9.05, its highest level since October, 2014, last Thursday, on the eve of the first-round deadline for bids in the sale of a 49 percent stake in subsidiary firm DEDDIE/HEDNO, the distribution network operator.

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.