Italian energy giant Enel today issued what it described as “the world’s first bond linked to the achievement of a sustainable objective”, meaning the multinational company will pay investors higher returns as a penalty if it fails to raise its renewables capacity fast enough.
The Rome-headquartered power company has pledged to have 55% of its installed electricity generation capacity devoted to clean energy by the end of 2021 – or it will pay the price on today’s $1.5 billion bond. Some 45.9% of Enel’s generation capacity is currently comprised of renewables.
The bond was launched on Thursday by the power company’s Netherlands-based Enel Finance International NV division and the issuer said it was oversubscribed by institutional investors to the tune of $4 billion. That market interest came despite a BBB+ rating for the bond from agency Standard & Poors, with Moody’s scoring the investment Baa2 and Fitch a more positive A-, reflecting all three institutions’ ratings of Enel itself.
The bonds – which will be used to fund Enel’s general operating expenses – will pay 2.65% annually with an issue price of 99.879% and an effective yield on maturity on September 10, 2024 of 2.676%, provided Enel achieves its independently monitored clean energy capacity commitment.
Should Enel fall short, a step-up mechanism will kick-in from the first interest period after failure to hit the target is confirmed and will raise the interest rate 25 basis points to 2.9%.
Enel Finance International NV has previously issued three green bonds worth a total €3.5 billion ($3.86 billion).