California power company issues second wind bond, green bond investor standard expected within days

Certificate will allow investors to check whether green bonds meet C02 reduction levels.

The Southern California Public Power Authority (SCPPA) is to give a further major boost to wind-generated power in California by issuing a tax-exempt $159.4m project revenue bond to prepay the electricity generated. The bond is the second green project bond issuance by the SCPPA, a non-profit “joint powers” agency of 12 public power utilities. Its 2010 Milford Wind Corridor Phase I Project Revenue Bonds worth $237m won several renewable energy deal awards. The SCPPA takes equity stakes in energy facilities then issue tax-exempt debt financing to pay for the energy delivery before selling the output at cost. The California green bond project issuance comes days ahead of an expected announcement on the first Climate Bonds Certificate, which will enable investors to check whether so-called green bonds support agreed CO2 reduction targets. Significantly, the benchmark is being backed one of California’s largest pension funds, the California State Teachers’ Retirement System (CalSTRS) as well as the California State Treasurers’ Office.
Other major backers include lobby groups such as the Natural Resources Defense Council, the Investor Group on Climate Change (IGCC); the Carbon Disclosure Project; and the Ceres Investor Network on Climate Risk. The Climate Bonds Initiative, the organisation creating the standard, says compliant assets will include wind farms and solar energy plants.Licensed third party verifiers will review proposed bonds to confirm their compliance. Some $12bn of green bonds backed by investments related to climate change solutions have already been issued into the market. The Climate Bonds Initiative says growing this green debt market will give institutional investors opportunities to switch from carbon intensive to low-carbon investments and fuel the growth of the low-carbon economy.
 Launched in 2009, the initiative is a civil society network, which was created by the Network for Sustainable Financial Markets and the Carbon Disclosure Project. It has since gained significant support from institutional investors. In another related green bonds, the state of Delaware has issued one of the first energy efficiency tax-exempt bonds via its States Sustainable Energy Utility (SEU), a non-profit utility. It will raise $72.5 million through AA+ rated (S&P) issuance to fund an energy conservation programme and create 1,000 local jobs. The bonds are backed by money-saving pledges from six different energy service companies (ESCos) that will participate in the programme. Elsewhere, Ecoplanet Bamboo is aiming to raise $12m through asset-backed bonds of a bamboo plantation in Nicaragua. Revenues from the plantation will be placed directly into a trustee-held account to pay the interest on the bonds, with 25% of the funds accessible to the issuer for core operating expenses.