Enel electrifies sustainability market with inaugural green-linked bond and swap


Enel has raised US$1.5 billion from a five-year bond that has broken new ground for environment-linked financing.

Adopting a technique already successfully used in the loan market, the Italian electricity company’s bond was issued with a condition that ensures the coupon payment to investors steps up should Enel fall short of a self-imposed emissions target.

The latest issue follows three previous green bonds from Enel by which it has raised €3.5 billion, the last of which was a €1 billion deal this January. While new green issuance can be limited by the constant need to locate qualifying assets, sustainability-linked bonds are an innovative complementary tool to green bonds in the financing of companies with ambitious targets and commitments in their businesses to fight against climate change, according to Stephane Marciel, Head of Sustainable Bonds  at Societe Generale, a bookrunner on the new bond.

The fundraising is complemented by the world’s first SDG-linked cross currency swap, by which the group hedges its exposure against euro-dollar exchange rate and interest rate risk. 

After taking a leading role in a number of sustainability linked loans in 2018,Societe Generale has taken that expertise and applied it to hedging, according to Isabelle Millat, Head of Sustainable Investment Solutions for Global Markets at Societe Generale.

The sustainable bond reflects Enel’s commitment to the United Nation’s SDGs, specifically 7.2, which states that companies should ‘increase substantially the share of renewable energy in the global energy mix by 2030’. The company’s commitment has been validated by its top management, shareholders and employees.

The new bond is not green in the conventional sense but is, instead, linked to the group’s ability to take its installed renewable electricity generation capacity from 45.9% (as of 30 June 2019) to 55% by December 2021. The single tranche issue offers a rate of 2.65% and was priced at 99.879%, taking the yield of the due 2024 bond to 2.676%. Should Enel not achieve the stated environmental objective, the interest on the bond will rise by 25bp, to 2.9%.

The popularity of the bond allowed the issuer to tighten indicative pricing, with around $4 billion of investor interest attracted to an issue that attracted an A-minus rating from Fitch and BBB+ and Baa2 from Standard & Poor’s and Moody’s, respectively. Initial price talk of 150bp over US Treasuries was chiselled down to official guidance of 125bp due to the demand.