Vattenfall’s Dark Green Bond Overcomes COVID19

    Stockholm (NordSIP) – Vattenfall has issued its second green bond on Thursday, March 5th. The fixed-rate note was worth €500 million, pays a 0.05% annual coupon and matures in October 2025. The bond was jointly managed by Danske Bank.

    Vattenfall is the Nordic region’s largest utility company. The company is completely owned by the Swedish state. Vattenfall’s green bonds finance renewable energy projects, energy efficiency investments related to existing facilities and electrification of transport, as well as the HYBRIT project (a joint pilot project by Vattenfall, LKAB and SSAB to produce fossil-free steel). CICERO Shades of Green‘s 2nd opinion rated the company “Dark Green”, the greenest rating it can provide.

    According to the Environmental Finance Bond Database, there were no green bond transactions between February 24th and March 3rd. However, after the week and a half hiatus caused by heightened Coronavirus concerns activity in the primary markets restarted on Wednesday, March 4th, with several successful EUR IG transactions, including Cadent Gas, the Republic of Lithuania, and Reykjavik Energy.

    “After a busy start to the year, with a 25% growth in green bond issuance by mid-February, we have seen a dramatic slowdown in new issuance due to COVID-19,” said Lars Mac Key, Head of DCM Sustainable Bonds at Danske Bank. “We were extremely happy to see how the green investor community engaged in this green bond by Vattenfall.”

    €3 billion in bids from over 170 accounts pushed the spread over mid-swaps to 45bps, down from initial price guidance of MS+75bps. The bond was priced at an average 100.061 to yield 0.039%, 88bps over the equivalent German Bund benchmark.

    “We have once again seen a very strong interest among European investors when issuing our new green bond,” Vattenfall’s CFO Anna Borg commented. “Vattenfall has considerable investment plans for the coming years, where we will continue to invest according to our vision of enabling a fossil-free life within one generation.” The settlement date is 12 March

    Geographically, demand was dominated by French investors, which purchased a third of the tickets. Germany, Austria and Switzerland took up another 24% of the green bonds, followed by the Benelux (23%), Spain (7%), the UK (6%), the Nordic (4%) and other miscellaneous European investors (3%).

    Sectorally, demand was concentrated among asset and fund managers (64%), followed by pension and insurance companies (21%), banks (9%), corporations (3%) and central banks/official institutions (3%).

    Image © Vattenfall

    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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