Since it began issuing green bonds, the electric company has not looked for another type of debt.
Over one third of EDP’s debt is already green, and the prospect is that it will continue to grow. Since October 2008 – when this market for Portuguese issuers debuted – the company led by António Mexia has maintained this strategy, which is already reflected in costs.
“Issuing green bonds show the alignment of EDP’s financial policy with the group’s strategy, focused on sustainability and, in particular, on renewable investments,” says EDP’s official source to ECO.
“It is a way of giving more visibility to this strategy and, because it involves additional reporting obligations, it attracts investors especially interested in issues regarding sustainability. For EDP, this attracts greater demand for its bond issues, particularly from long-term investors, boosting the success of these issues and with interest rate conditions with some advantage over non-green bonds.”
This was the case last week, when EDP held its fifth green bond issue. The electric company placed 750 million euros in green bonds with an interest rate of 1.72%. In a context of high volatility in the markets, demand was seven times higher than supply on a day than nine other issuers (including four utilities) were issuing debt.
EDP’s total green bonds amounted to 3.7 billion euros, of which 1,750 million were issues of subordinated debt (hybrid) and 1,950 million of senior debt. This amount represents 27% of the total debt of the electric company: 13.8 billion.
And although at the beginning of last year it was financed at high costs, this was the only issue whose yield was above average. In 2019, the average cost of EDP’s debt stood at 3.9% (10 basis points higher than the previous year) due to the impact of this placement, as well as the increase in the average weight of the US dollar and the Brazilian real.
“It has more advantages, no doubt,” says the electric company about the financing costs with this kind of debt. It adds that “it is EDP’s intention to continue making emissions that show the group’s commitment to a strategy focused on sustainability.”