Stockholm (NordSIP) – Landsvirkjun issued US$80 million in SDG-linked bonds placed privately with US and UK institutional investors. The securities are linked to the company’s carbon sequestration targets, which are informed by the UN’s Sustainable Development Goal (“SDG”) 13 on climate action.
Landsvirkjun is a state-owned Icelandic electricity generator. It is the largest such company in the country, where it processes 75% of all electricity used, and one of the ten largest producers of renewable energy in Europe.
The notes have a 3-year maturity and carry a fixed interest rate of 2.51%, with semi-annual payments. Proceeds from the transaction will be used to refinance existing debt and for general corporate purposes. Barclays acted as Sole Placement Agent in this transaction. Landsvirkjun’s legal advisors were Logos and Morrison & Foerster. The funders’ legal advisor was Greenberg Traurig.
“We are very pleased with our second successful issuance in the USPP market and the support that we have received from our investor group,” Hörður Arnarson, CEO of Landsvirkjun, says. “The private placement provides further diversification of funding sources and demonstrates our ability to access financing on attractive terms. As sustainability and the environment are core to our social responsibility initiatives, we are proud to have issued the first SDG-linked USPPs in Europe, which further reinforces our commitment to achieving carbon neutrality by 2025.”
As part of the transaction, Landsvirkjun has committed to increasing its carbon sequestration efforts to reach at least 32,538 tons of CO2 eq. for 2020 (up by at least 2% from 31,900 tons CO2 eq. for 2019). The USPP is directly tied to this commitment, whereas the annual coupon will increase by 10 bps if Landsvirkjun fails to achieve this target. The target forms part of Landsvirkjun’s strategy to become carbon neutral by 2025. The details of this security are consistent with the details of the SDG bond issued by Enel at the end of 2019.
According to the issuer, “the offering was very well received, with an order book which was multiple times oversubscribed. The attractiveness of this funding opportunity was enhanced by the ability of the US and UK investors to provide short-dated notes in a favourable rate environment. The issuance demonstrates Landsvirkjun’s continued commitment and focus on sustainable development and follows the execution of a US$150 million sustainability-linked revolving credit facility in 2019 and the successful placing of a US$200 million green bond in the USPP market in 2018.”
Image courtesy of Landsvirkjun