May 10 (SeeNews) - Green bond issuance in April 2016 has reached at least USD 5 billion (EUR 4.4bn), according to figures by the Climate Bonds Initiative (CBI).
Most of the proceeds will go for renewable energy, water and wastewater projects across the globe, including in Australia where the first certified green bond was issued recently.
Financial services provider FlexiGroup Ltd (ASX:FXL) issued AUD 50 million (USD 39m) of Class A2-G Notes, as part of an AUD-260-million asset-backed securitisation (ABS) transaction. The proceeds from the green portion will refinance residential solar photovoltaic (PV) systems.
When the news of FlexiGroup’s green ABS came, the CBI pointed to the fact that the certified green notes closed 5 basis points (bps) lower than the non-green notes. “A demonstration of pricing benefit for green is new [..]This tranche of FlexiGroup deals provides us with comparable deals and evidence of significant pricing benefits - 5 bps pricing benefits is not to be scoffed at.”
CBI chief executive Sean Kidney also said there is “enormous potential for this green ABS to be the first of many” as the Australian rooftop solar segment is flourishing.
Green bonds for renewables
Spanish utility Iberdrola (BME:IBE) closed an issuance of EUR 1 billion (USD 1.13 bn) in green bonds in the Euromarket to refinance onshore wind parks in Spain, Portugal and the UK. The notes mature on April 21, 2026 and have an annual coupon of 1.125 % -- the lowest achieved by Iberdrola for 10-year bonds.
Banco Nacional de Costa Rica issued a USD-500-million green bond to finance wind, solar, hydro and wastewater projects. The bond has a coupon of 5.875% and matures on April 25, 2021.
In the first quarter of 2016 Costa Rica sourced 97.14% of its power from renewables. Hydro's share was 65.62%.
Century Concord Wind Power Investment issued a CNY-200-million (USD-31m) green bond to finance solar and wind projects. It has a term of three years and a 6.2% coupon. This was the first onshore corporate green bond from China.
Latvian power supply company Latvenergo tapped again into the green bond market after an inaugural deal last year, this time issuing a EUR-25-million (USD 28.2m) bond. It has a six-year tenor and a coupon of 1.9%. Latvenergo will use the proceeds for renewable energy projects, including hydro, biofuels and wind; energy efficiency in the areas of transmission and distribution networks and smart grid; environment preservation; and sustainable environment.
Some expectations for China
In a blog post last week, the CBI said Shanghai-based New Development Bank is reported to be planning a green bond of between CNY 3 billion (USD 462m) and CNY 5 billion (USD 769m). The proceeds will go for renewable energy projects.
The New Development Bank bond looks tiny when compared with the total issuance of CNY 2.6 trillion of bonds in 2015 by China’s three national development banks -- China Development Bank (CDB), Agriculture Development Bank (ADB) and the Export and Import Bank of China. They already have extensive green assets in their existing portfolios and could easily issue green bonds to refinance these assets, the CBI said.
Chinese green bonds account for CNY 54.3 billion (USD 8.3bn) so far in 2016, including two corporate issuances (the one by Concord Wind and a CNY-2.5-billion bond by BAIC Motors) and issuances from local banks (China Industrial Bank, Shanghai Pudong Development Bank and Bank of Qingdao). According to the Climate Bonds Initiative this is just the beginning.
The Chinese green bond market is seen hitting CNY 300 billion this year.
Other big bonds
The International Finance Corp (IFC) has issued a USD-700-million bond with a 10-year term and a coupon of 2.125%. Proceeds could support renewables, energy efficiency, agriculture and forestry, waste management, climate resilience, etc.
The World Bank also issued USD 280 million of green bonds with a two-year tenor and 1.005% coupon.
The European Investment Bank (EIB) issued its fifth Climate Awareness Bond (CAB) of the year, this time for USD 1.5 billion, with a 10-year maturity and a semi-annual coupon of 2.125%.
There were also several green bond transactions to support water supply and wastewater projects, including California Infrastructure and Economic Development Bank’s inaugural USD-411-million green bond, and Massachusetts Water Resources Authority’s first-time USD-682-million green bond.
(USD 1 = EUR 0.878)