The sustainability bond market had a record year in 2021, with issuance rising to $859 billion from $534.3 billion in 2020, according to data from Refinitiv. Of the 2021 total, green bonds that target environmentally friendly projects had the highest issuance at about $482 billion. However, the market’s momentum didn’t carry over into 2022, as investors grew skittish following Russia’s invasion of Ukraine. Through April, European corporate green bond sales fell 23% from the previous year.
Thankfully, the market roared back in May when Dutch power company TenneT Holding sold 3.85 billion euros ($4.06 billion) worth of green debt across four maturities. The sale represented the biggest corporate green bond sale ever and came on the heels of Honda’s $2.75 billion green bond issuance in March, which had been among the biggest corporate green bond deals.
Proceeds from the TenneT sale will be used to fund environmentally friendly electricity grids in Europe, which aims to become the first continent to become climate neutral by 2050 through the expansive European Union (EU) Green Deal. To achieve the Green Deal objectives, the EU will require more than 1 trillion euros in financing, with more than half of that coming through the EU Emissions Trading System.
TenneT will play a vital role in helping Europe move to a more sustainable energy system because of its wide reach. The company is one of the continent’s leading investors in national and cross-border grid connections on land and at sea, with about 23,500 kilometers of high-voltage lines.
“This is a company that is at the heart of the energy transition in Europe,” said Arthur Krebbers, NatWest Markets’ head of corporate climate & ESG capital markets. “It is amongst the players helping the German and Dutch economy transition to green, which has never been more topical.”
Most of the bond sale will be invested in eligible green power transmission projects in Holland and Germany, TenneT said in a press release. The primary focus will be on connecting large-scale offshore wind farms to the onshore electricity grid to increase renewable energy transmission.
“Green financing aligns perfectly with our role in facilitating the backbone of a secure, reliable, and zero-carbon energy system, as our work contributes towards national and international climate goals, in particular our home markets in the Netherlands and Germany,” TenneT Chief Financial Officer Arina Freitag said in a statement.
TenneT offered notes ranging from 4.5 years to 20 years, Bloomberg reported. Investors quickly pounced on the bonds, which might pave the way for future green bond initiatives.
“TenneT has a large Capex budget to fund, including for energy transition,” said Scott Freedman, a fund manager at Newton Investment Management. “I think there will likely be a lot more to come from the sector in general.”
TenneT expects to spend at least 6 billion euros (about $6.3 billion) a year on the green energy transition by 2025 as part of a broader effort to help countries meet their climate targets. Most of the company’s investments are directly related to the increase in renewable energy sources, such as wind and solar. By 2030, TenneT expects to have realized at least 38 gigawatts of connection capacity for offshore wind farms in the Dutch and German parts of the North Sea.