UPDATED: EBRD open to supporting sustainable bonds in southeast Europe

LONDON (ICIS)–The European Bank for Reconstruction and Development (EBRD) could invest in future Sustainability-Linked Bonds (SLBs) issued by utilities in southeast Europe, a source within the bank told ICIS on 17 March.

On 11 March the EBRD invested €50m in a five-year SLB issued by state-owned Greek supplier the Public Power Corporation (PPC).

PPC said it will use part of the proceeds to fund renewable projects as the company looks to reduce its dependency on coal-fired generation. It was the first SLB issuance in the region covered by the EBRD.

George Gkiaouris, EBRD regional head, said this sent a signal that access to the bank’s finance increasingly depends on a commitment to decarbonisation and sustainability.

A second official based at the EBRD said: “We will be happy to support other coal dependent utilities in south eastern Europe adopt similar decarbonisation and coal phase out strategies.”

BULGARIA

State-owned Bulgarian Energy Holding (BEH) could be another potential issuer of an SLB, according to investment bankers in debt capital markets.

“Potentially BEH could issue such a bond integrating its decarbonisation pathway into a credit story,” one source said.

On 2 March ratings agency Fitch raised the outlook for the BEH’s long-term credit rating from stable to positive.

Pilar Auguets, head of Iberian Utilities at Fitch , said: “EBRD investing €50m in PPC sends a message for energy-intensive utilities in Europe, which is that you need commitment to decarbonisation to find funding. This could be followed by others in Bulgaria and Romania.”

Bankers stressed that a possible SLB issue from the Romanian power producer Complexul Energetic Oltenia will be difficult due to the company’s lack of credit rating from a major agency.

On 5 February the European Commission opened an investigation into the Romanian government’s support for the power producer.

Balkan energy firms with a credit rating could be eligible for SLB issuance and expect some support from the EBRD, a London-based banker added.

PPC SLB LANDMARK

On 11 March Greece’s PPC raised €650m in Europe’s first large-scale SLB, according to the International Capital Market Association.

A source at PPC said: “The multiple times oversubscription allowed us to upsize the transaction from €500m to €650m and repay facilities with lower priced debt, while at the same time message to the market our strong conviction and confidence in our de-lignitisation strategy.”

The firm committed to reducing carbon emissions by 40% by 2022 through the SLB, although part of the funds will also be used to refinance debts of around €450.

“One of the most important steps that the company has ahead is the decommissioning of its lignite fleet.

“This is causing currently meaningful losses and the decommissioning itself is positive for the financials,” added Auguets.

Greece aims to reduce greenhouse gas emissions by 55% by 2030 and to decommission all remaining lignite plants by the end of 2023 except for Ptolemaida V.