SSE issues 'largest ever' green bond

UK energy company SSE aims to use capital raised through the £556m green bond to refinance its portfolio of onshore wind farms.
Published: Mon 04 Sep 2017

The bond will provide capital to refinance its portfolio of wind farms that have been recently constructed or are under construction.

The energy company owns the 71.8MW Gordonbush site and 119.5MW Hadyard Hill project, both in northern Scotland, amongst many others such as the 228MW Stronelairg site in the Scottish Highlands, as well as the Clyde and Clyde Extension wind farms in southern Scotland, which will have a combined capacity of 522.4MW when completed.

Currently, SSE has over 3.3GW of renewable generation in the UK.

Tackling climate change

SSE said the eight-year bond, which will pay a 0.875% coupon, the bondholder equivalent of dividends, “reaffirmed its commitment to tackling climate change”.

There was significant demand for this green bond, which enabled SSE to price at the tighter end of guidance achieving its lowest ever coupon for a senior bond.  

SSE added that the bond is the “first of its kind issued by a UK-headquartered energy company and supports not only the development of an active UK market in environmentally-friendly capital market products but, perhaps most importantly, shows a strong commitment towards the environment and future generations.”

Mitigating risk

Climate change presents a long-term risk to investors, but investing in a green bond, according to SSE, helps to mitigate that risk.

Gregor Alexander, finance director of SSE, said: "In line with our innovative approach to financing investment and as major investor in the UK and Ireland’s renewable energy infrastructure, we are pleased this new issuance shows our commitment to SSE’s sustainability and responsibility principles.

"At the same time we are being consistent with our commitment to maintaining a strong balance sheet and strong market rating, allowing this funding to be secured at very attractive pricing."

Green-bond market to grow

The World Bank’s International Finance Corp. and European asset manager Amundi SA are targeting year-end to raise $2bn for what is expected to be the world’s largest green-bond fund dedicated to emerging markets.

The fund aims to bring together the goals of investors looking for more high-yield opportunities and development banks aiming to expand the green economy in emerging markets. Initially, only 10% to 12% of capital in the Amundi-IFC fund will be invested in green bonds, according to Fred Samama, deputy global head of institutional and sovereign clients at Amundi in an interview with Bloomberg.

Lenders such as the World Bank are keen to see the market for environmentally-friendly securities grow faster to help attain global climate goals. The entire green bond market is projected to surge more than 30%  this year to a record $131bn, about 0.2% of the total bond market, according to Bloomberg.