German biomass firm and Austrian power utility enter green bond market

Two-thirds of investors in Austrian bond were from the SRI sector

Two more “green” bonds from the German-speaking part of the world have hit the markets, one a €100m issue from a biomass firm called German Pellets and the other a €500m issue from Austrian power company Verbund.

In the case of German Pellets, the subscription period for its five-year bond began last week and will expire on November 24. After that, the bond will be traded on the stock exchange in Frankfurt. German Pellets’ unrated bond carries a coupon, or interest rate of 7.25% and the sole bookrunner for the issue is Quirin Bank.

According to German Pellets, the bond is being offered both to institutional and private investors. Proceeds from the issue, which, depending on demand, could be expanded to €130m, are to be used to finance the company’s further expansion in the USA. German Pellets already operates a plant in Texas and is constructing another facility in Louisiana.

Based in the east German city of Wismar, German Pellets says it is the world’s largest producer of wood pellets for heating from biomass. For the first half of 2014, it reported net profit of €5.1m on sales of €260m.

Meanwhile, Austria now has its first green bond, a 10-year €500m issue from Verbund, a Vienna-based power utility. According to Verbund, its “BBB+”-rated bond with a coupon of 1.5% was three-timesoversubscribed, with two-thirds of the investors coming from the socially responsible investment (SRI) sector. The names of SRI investors were not disclosed.

Verbund also said it would use the proceeds from the issue to finance energy efficiency projects, as well as the expansion of hydropower and wind power. The bond was certified as green by Munich-based ESG (environmental, social and governance) firm Oekom Research. Bookrunners for the bond included Commerzbank, JP Morgan, UniCredit, Société Générale and Austrian bank Raiffeisen.

Said Peter Kollmann, Verbund’s Chief Financial Officer: “We’re very proud to have provided a new feature to corporate finance. It highlights our reputation as a environmentally friendly and sustainable company.”

Other recent green bond issues include a plan by the US city of Spokane in Washington to sell $175m to help fund environmental projects.

And the Hawaii State Department of Business, Economic Development and Tourism has announced a $150m issue to support its ‘Green Energy Market Securitization’ program. Proceeds would fund a loan program expanding the installation of solar photovoltaic panels and other clean energy devices for Hawaii consumers.