Climate Bond Standard to be Released This Week
Tom Konrad CFA Conserving the planet for conservative investors. Investing in clean energy stocks has an (often well-deserved) reputation for risk. Although energy efficiency and more inclusive progressive energy indexes have held up fairly well over the last few years, the performance of narrower clean energy sectors has been dismal, and some industry observers feel that the declines in wind and solar are structural (and hence permanent) as opposed to cyclical (and therefor temporary.) This presents a conundrum for investors with long time horizons who not only need their investments to earn a steady return...
Terraform Power Issues $800m High Yield Green Bond
by the Climate Bonds Team This week the yieldco TerraForm Power (TERP) issued a huge high-yield green bond; seeing more high-yield bonds is a sign that the green bond market is continuing to mature. In addition to TerraForm, more green bonds from repeat issuers OPIC, World Bank, IFC and Credit Agricole have been announced and will be closing in the coming weeks. For today, let’s dig deeper into the latest green high-yield offering. The US-based renewable energy company TerraForm Power Operating has issued US$800m of senior unsecured green bonds (debentures), making it the largest green bond of 2015...
A Flurry Of Green Muni Bonds
by Tess Olsen-Rong Green municipal bonds are set to take off in 2015 after a flurry of issuances in the latter half of 2014. With interest rates at an all time low, this is the time to finance the vast backlog of infrastructure upgrades and developments needed – and to green that infrastructure. This, according to the Financial Times, is especially so in the US. With green muni growth has come a growing diversity in the use of proceeds. Some green municipal bonds are using proceeds for projects where the green credentials are more complex to analyse...
Green swan, Black swan: No matter as long as it reduces stranded spending
by Prashant Vaze, The Climate bonds Initiative
In January, authors from several institutions under the aegis of BiS, published The Green Swan Central banking and financial stability in the age of climate change setting out their take on the epistemological foundations for, and obstacles against, central banks acting to mitigate climate change risk.
The book’s early chapters provide a cogent and up-to-date analysis of climate change’s profound and irreversible impacts on ecosystems and society. The authors are critical of overly simplistic solutions such as relying on just carbon taxes. They also recognize the all-too-evident deficits in global policy to respond to the threat.
In short, they accept the need for central banks to act.
The Two Arguments
The paper makes two powerful arguments setting out the challenges central banks face using their usual mode of working.
Firstly, climate change’s impact on financial systems is an unknowable unknown – a...
Green Asset-Backed Bond From Hannon Armstrong Has Measured GHG Savings
by the Climate Bonds Team Hannon Armstrong’s (HASI) second green ABS, $118.6m, will save 0.39 tons of GHG annually per $1,000! ($100.5m, 4.28%, 19 yr, A and $18.1m, 5.00%, 19 yr, BBB) Hannon Armstrong (NYSE:HASI) closed its second green ABS bond (Sustainable Yield Bond) following its inaugural issuance in December 2013. The ABS was a private placement split into two tranches with different credit ratings (from Kroll Bond Credit Rating Agency): $100.5m with a rating of A and 4.28% interest rate, and $18.1m with a rating of BBB and 5.00% interest rate. Both tranches have a 19-year tenor....
Roundtable Greenlights Effort on Renewable Energy Covered Bonds
by Sean Kidney “There is more liquidity than ever being put into the system, but funds are still not being allocated to renewable energy projects” “The bottleneck for renewable energy is not in construction financing but a year or two after construction .” “ is not an asset class where risk changes over time – it changes between pre-completion to post-completion stages… it is incorrect to think that offloading an asset post-completion dumps risk onto others because the riskier part of the project is past.” “Alignment of interest with investors is strong as the issuing bank...
$37B 2014 Green Bond Issuance Triples Market
by Tess Olsen-Rong Following a landmark green bond growth year in 2013, the labelled green bond market has once again experienced a year of incredible growth in 2014: by year-end there had been $36.6bn of green bonds issued by 73 different issuers – that’s more than a tripling of the market! The final figure was boosted by a late flurry of green municipal bonds. This exponential growth takes the total amount of green bonds outstanding to $53.2bn by the end of 2014. So, what happened to cause this tripling of issuance? Well, corporate and municipal bond...
Enviva: Wood Pellets Into Dividends
by Debra Fiakas CFA Last week Enviva Partners, LP (EVA: NYSE) reported financial performance for its wood pellets business in its quarter ending September 2015. Sales totaled a whopping $116.6 million, representing a 53% increase compared to $40.5 million in the same quarter last year. The big jump in revenue resulted from higher volumes to larger customers. Distributable cash flow totaled $12.6 million compared to $8.2 million in the year ago period. Quarter performance made possible a declared cash distribution of $0.44 per common unit, which is 7% higher than the minimum quarterly distribution. At its...
Retail Renewable Energy Bonds Proliferating
by Sean Kidney Renewable Energy Finance via BigStockPhoto There has been a bit of interest recently about rapidly expanding options for retail investors to get involved in renewable energy projects. While we still see retail bonds as making a relatively modest contribution to the transition to a low carbon economy, they are important in engaging the public and creating awareness for green thematic investments which can only be good. Here’s a round up of some of the activity going on in the retail bond market (please note, this...
Should Pattern Energy Shareholders Vote Against the Merger?
by Tom Konrad Ph.D., CFA
This morning, hedge fund Water Island Capital called on Pattern Energy (PEGI) Shareholders to vote against the merger with the Canada Pension Plan Investment Board (CPPIB).
Water Island claims the merger is undervalued compared to the recently surging prices of other Yieldcos, and that PEGI would be trading at over $30 given current valuations. There are not a lot of other Yieldcos left, especially if we eliminate those with their own special circumstances. These are Terraform Power (TERP) which is subject to its own buyout agreement with Brookfield Renewable Energy (BEP), and Clearway (CWEN and CWEN/A) where...
Four Clean Green Dividends
by Debra Fiakas CFA The recent pullback in stock prices in the U.S. equity market has opened the door to some interesting dividend yields. Investors with a taste for environmentally-friendly businesses have some particularly interesting alternatives that can pump up the purse as well as protect Mother Earth. AES Corporation (AES: NYSE) is a world-class power generator from mixed portfolio of conventional and renewable power sources. About 28% of its 29,352 megawatts of generation capacity is from renewable fuel sources, including hydro, biomass, solar and wind, and another 33% from plants using natural gas. The balance of...
SolarCity’s Second Solar Lease-Backed Bond Closes Thursday
SolarCity is on the road with a $70.2m, 8yr, BBB+ rooftop solar leases securitization; closes Thursday Sean Kidney US company SolarCity (NASD:SCTY) has priced a solar bond backed by cash flows from a pool of 6,596 mainly residential solar panel systems and power purchase agreements in California, Arizona, and Colorado. Expected bond figure is $70.2 million, but the bond doesn’t close until Thursday this week. Interest rate is 4.59%. Credit Suisse is structurer and sole bookrunner. This is SolarCity’s second solar securitization in six months. Their previous (ground-breaking) bond was for $54.4 million with an...
Green Bond Market Heats Up After Slow Start To 2015
$7.2 billion of green bonds issued. Market shows signs of maturity, including more currencies, and non-investment grade bonds. Emerging market green bonds are ramping up, while green munis are booming. by Tess Olsen-Rong, Climate Bonds Market Analyst The first three months of 2015 (Q1) have seen 44 green bond deals totalling $7.2bn of issuance. After relatively low issuance in January the amount of green bonds issued has been climbing each month, with March three times bigger than January. This year will be the biggest year ever for green bonds: there’s a healthy pipeline of bonds in the...
Trina Solar’s Second Convertible Bond
By Beate Sonerud and Sean Kidney China’s Trina Solar (TSL)is issuing US$100m of convertible bonds with 5-year tenor and 4% annual coupon, with semi-annual payments. An extra US$15m could be raised, as Trina has given the underwriters a 1-month window to buy additional bonds. Guess they are waiting to gauge demand. Underwriters are Deutsche Bank, Barclays, and Credit Suisse, with Roth Capital Partners as co-manager. The bonds can be converted to shares (American Depositary Shares, meaning they are listed in the US) at an initial price of US$14.69 per share. Currently, Trina’s shares are trading at US$11.40, after...
Greening of Utility Dividends
Investors looking for income have long relied on the stocks of electric utilities. Naturally cash generative utility companies have a history of generous dividend payout policies. However, for those investors who have a concern about sustainability or climate change, even utilities with the highest dividend yields may not be appealing.
We looked at a selection of nine utility companies with mixed achievements in terms of the percentage of renewable energy sources found in their retail sales of electricity. The intensity of renewable energy in utility portfolios varies considerably across the industry. Many utilities are grappling with legacy coal and oil infrastructure. Others are not favored...
Developments in the Solar Corporate Bond Market
by Corporate Bonder The global bond market is huge. Data from the Bank for International Settlements shows that the total size of the global debt securities market (domestic and international securities) was $99.5 trillion as at June 2011, of which $89.9 trillion were notes and bonds. Governments accounted for $43.7 trillion of outstanding debt securities, financial organizations $43.8 trillion, corporations $11.0 trillion and international organizations $1.0 trillion. Against that, Bloomberg has estimated that there are $230bn outstanding of fixed-interest securities that meet their “green bonds” definition. And of course the IEA talks of $1 trillion of investment a...
