New Green Bond for Carbon Capture

    Stockholm (NordSIP) – Reykjavik Energy (“Orkuveita Reykjavikur”; OR) issued a 15-year inflation-linked green bond worth ISK2.04 billion (approx. €14 million) on August 27th. The bond pays a fixed real interest rate and will be listed on the Nasdaq Iceland Sustainable Bond market. The security has a semiannual annuity amortization schedule and a final maturity on September 2nd 2034. Fossar Markets managed the process on behalf of OR.

    After attracting bids worth ISK3.73 billion for yields between 1.64% and 1.90% the security was priced at a yield of 1.79%. Arion Banki, Íslandsbanki, Landsbankinn and Kvika Banki were appointed as market makers by OR. Their agreement with the energy provider obliges them “to enter buy and sell offers for the new series on the NASDAQ OMX Iceland exchange before the opening of the market.” The day after the OR bond was issued the market makers exercised their right to purchase ISK260 million of the bond. On that occasion, OR also let it be known that it would further issue bonds in the new series for a total nominal amount of ISK400 million that will not be sold to investors, so OR can meet its bond lending obligations under the previously mentioned market making agreement. With these steps, OR brings the total outstanding nominal value of the bond to ISK2.7 billion.

    We last heard from OR at the start of May, when they stopped by Stockholm to discuss investment opportunities with Swedish investors. At that time, Ingvar Stefánsson, CFO of OR, told us about the promising CarbFix project at Hellisheiðarvirkjun where CO2 is captured and stored as rock in the subsurface. Asides from this project, the OR bond issued at the end of August may also finance a range of other projects, including Technologies that support smart grid applications and renewable energy, energy distribution and expansion of the district heating system.

    According to Fossar Markets, the bond proceeds will be used to finance an array of green projects within OR, whose ambitious goal is to reduce carbon emissions by 60% by 2030.

    The bond was issued under OR’s Green Bond Framework, Reykjavik Energy Green Bond Framework, which conforms to the “Green Bond Principles”, guidelines put forward by the International Capital Market Association (ICMA). CICERO rated the framework “dark green”, the highest possible rating, and rated its governance structure as “excellent”.

    Picture courtesy of OR

    Filipe Albuquerque
    Filipe Albuquerque
    Filipe is an economist with 8 years of experience in macroeconomic and financial analysis for the Economist Intelligence Unit, the UN World Institute for Development Economic Research, the Stockholm School of Economics and the School of Oriental and African Studies. Filipe holds a MSc in European Political Economy from the LSE and a MSc in Economics from the University of London, where he currently is a PhD candidate.

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