Stockholm (NordSIP) – The first week of December saw the issuance of two very significant green bonds from the automotive and energy sectors. The last of these is perhaps the most important, as it stands as the first green bond explicitly issued to fund nuclear power activities.
EDF Launches Nuclear Green Bond Market
At the end of November, Electricité de France (EDF) issued a €1 billion 3.5-year Green bond “dedicated to the financing of the existing nuclear fleet.” The bond pays a 3.75% fixed coupon and was expected to receive a rating of BBB / Baa1 / BBB+ (S&P / Moody’s / Fitch)
This is the first such nuclear green bond ever issued. According to EDF, the net proceeds from this transaction “will be used to refinance EU-Taxonomy aligned nuclear energy capital expenditures in existing French nuclear reactors in relation to their lifetime extension, as defined in EDF’s Green Financing Framework.”
Nuclear energy and its relevance in the fight against global warming and climate change are complex issues. The sector’s inclusion in the EU Taxonomy on green investments was controversial and faced opposition from several sectors of society, not least from within the EU Parliament (EP), during the regulation’s development.
Ultimately, however, opposition was overcome in the EP and a Complementary Delegated Act (CDA) to the Taxonomy supportive of including nuclear power was adopted on July 6th, 2022 and entered into effect on the first day of 2023.
According to the CDA, nuclear energy projects are accepted as part of the taxonomy if they fulfil a number of safety criteria regarding the management of radioactive waste and the use of accident-tolerant fuel. France, where EDF is based, is the most nuclear-dependent country in Europe, with this energy source accounting for almost 40% of the country’s energy supply, according to the International Energy Agency (IEA).
Volkswagen Issues Inagural SEK Green Bond
Among other firsts, German car manufacturer Volkswagen issued its first SEK green bond at the start of December. The SEK1.5 billion bond was issued in three tranches. This transaction follows the publication of Volkswagen’s Green Finance Framework and an inaugural Euro-denominated Green bond transaction in the third quarter of 2023.
A 2-year floating rate worth SEK650 million pays 85 basis points (bps) over the 3-month STIBOR. Another SEK550 million was issued in 3-year floating rate bonds that pay 110os over the 3-month STIBOR. Finally, a 3-year SEK300 million fixed-rate bond was priced at 100bps over mid-swaps.
Demand was dominated by Swedish investors who purchased 95% of all the securities across formats and maturity. Sectorally, asset managers represented 71% of all investors, followed by insurance companies and pension funds (20%), corporates (5%), and banks (4%). Insurance companies and pension funds’ investments were focused on the 2-year floating rate note where they represented 46% of investors, while corporates focused on the 3-year floating rate note (10%) and banks focused on the 3-year fixed rate note where they represented 17%.
