A new €1.4bn green bond issued by French state-controlled utility Électricité de France (EDF) to finance renewable projects has met with strong demand from institutional investors.
EDF, the world’s largest producer of electricity with a strong bias towards nuclear energy, said the 7.5-year issue was the first green bond in euros by a large corporate and that it was “twice oversubscribed” and a “great success among institutional investors”.
The strong demand specifically came from investors integrating environmental, social and governance (ESG) criteria in their investment decisions – accounting for 60% of the allocation.
“Through this transaction, the group has over achieved its objective to attract new investors,” said EDF, which is 84.4% owned by the French state. It said this initial transaction was a major commitment which paves the way for new channels of financing for other EDF businesses, such as hydropower and energy services.
Proceeds will go exclusively towards financing future renewable energy projects led by its subsidiary EDF Energies Nouvelles [New Energies]. The projects will have to comply with eligibility criteria drawn up by French ESG ratings house Vigeo with verification by Deloitte.EDF Energies Nouvelles has a gross installed capacity of 6.4GW and a 1.5GW pipeline. Wind is the main component of its mix, accounting for 87% of total installed capacity.
The new bond pays a coupon, or interest rate, of 2.25%. Lead managers for the issue were Commerzbank, JPMorgan, Mizuho, Credit Agricole CIB, Morgan Stanley and Société Générale CIB. It was rated Aa3 by Moody’s, A+ by S&P and A+ by Fitch.
French investors took 36% of the issue, according to the Climate Bonds Initiative group, a project of the Network for Sustainable Financial Markets and CDP [Carbon Disclosure Project]. German and Austrian investors accounted for 17% while Southern European players took 10%. By type they were fund managers (70%), central banks (13%) and insurance and pension funds (13%).
In what’s proving a bumper month for green/sustainability bond issues, the EDF bond follows earlier issues from Swedish property company Vasakronan, Bank of America, Norway’s Kommunalbanken, Dutch development bank FMO and the World Bank’s IFC. On top of this, insurance giant Zurich has signalled a €1bn appetite for green bonds.