Iberdrola, a leading European utility company, has once again demonstrated its financial prowess with a successful green bond issuance in the United States. Through its US regulated grid business, New York State Electric & Gas Company (NYSEG), a subsidiary of Avangrid, Iberdrola secured 525 million dollars, equivalent to approximately 490 million euros at the time of the transaction. This financial maneuver highlights not only the company’s robust access to international markets but also the strong investor confidence in its sustainable and green initiatives.
The 10-year green bond, placed in the US market, experienced remarkable demand, exceeding 2 billion euros. This overwhelming interest allowed Iberdrola to reduce the spread over the benchmark interest rate to an advantageous 135 basis points, resulting in a competitive transaction cost of 5.332%. This achievement in mid-August underscores Iberdrola’s continued ability to attract significant investor attention, even amidst fluctuating global financial conditions. More than 60 US accounts participated in this transaction, further solidifying the company’s appeal in diverse investment landscapes. This successful operation serves as compelling evidence of Iberdrola’s capacity to consistently draw investors from various markets, reinforcing its global financial standing.
One key factor contributing to this successful placement was Iberdrola’s strategic timing, capitalizing on a dip in long-term interest rates within the United States. Coupled with this favorable market condition, investor faith in Iberdrola remains exceptionally high. The green nature of the bond further amplified its attractiveness, appealing to an expanding pool of investors specifically focused on environmentally responsible investments. As a result, Iberdrola managed to secure funding with a minimal new issue premium. The proceeds from this 525 million dollar green bond are earmarked to bolster the network business in the United States, and the funds have already been disbursed, ready to fuel infrastructure development and expansion.
Several prominent financial institutions played crucial roles in facilitating this transaction. BNP Paribas, MUFG, Wells Fargo, Santander, SMBC, Intesa, and Commerzbank were the banks involved, showcasing the collaborative effort behind this significant financial undertaking.
This operation is the latest in a series of successful financial activities for Iberdrola. On August 1st, Iberdrola, in collaboration with ICO, Sabadell, and HSBC, finalized a syndicated green loan for 500 million euros, backed by Cesce’s coverage. This 15-year loan further diversifies Iberdrola’s funding sources and strengthens its long-term financial stability.
Looking at Iberdrola’s financial activities throughout the year, the NYSEG loan marks its fourth public transaction. Earlier in the year, Iberdrola issued a 700 million euro hybrid bond (subordinated debt) in January, followed by a 335 million Swiss franc placement in the Swiss market at the end of June, and a 750 million euro senior bond in July. These diverse transactions across different markets and financial instruments highlight Iberdrola’s proactive and multifaceted approach to funding its global operations.
The consistent market confidence in Iberdrola is a recurring theme throughout its financial activities. Prior to this 525 million dollar bond, the company successfully placed a 750 million euro senior bond with robust demand and diversified its financing portfolio with a 335 million Swiss franc green bond placement.
Further demonstrating its commitment to green finance and sustainable projects, Iberdrola signed a 700 million euro green loan with the European Investment Bank in March. This loan is specifically designated for the expansion of electricity grids in Spain. In January, Iberdrola and the World Bank extended their partnership with a 300 million euro green loan aimed at supporting renewable projects in emerging countries.
In January, Iberdrola also issued 700 million euros in hybrid bonds, maintaining the company’s hybrid volume at a stable 8.25 billion euros. The funds generated from this issuance were strategically used to refinance renewable assets previously financed by a 2018 hybrid bond, effectively replacing older debt with new capital.
At the close of December 2023, Iberdrola secured its largest credit line in history, amounting to 5.3 billion euros, with the participation of 33 international banks. This significant financial operation was achieved at highly competitive rates, comparable to those of 2019, and was oversubscribed by more than 40%, underscoring the banking sector’s strong endorsement of Iberdrola as a leading European utility.
Iberdrola’s consistent engagement with green and sustainable financing has firmly established it as a global leader in this domain. The company holds the distinction of being the first private group worldwide to issue green bonds, pioneering this financial instrument as the first Spanish company to issue such a bond in 2014. Currently, Iberdrola boasts approximately 23,000 million euros in outstanding green bonds.
In the banking sector, Iberdrola further demonstrated its leadership in sustainable finance by underwriting the first green loan for an energy company in 2016, amounting to 500 million euros. This landmark transaction paved the way for numerous subsequent loans and credit lines linked to sustainability criteria, solidifying Iberdrola’s position at the forefront of green financing.
This strategic financial approach is integral to Iberdrola’s ambitious investment plan, launched in March 2024. The plan outlines a substantial investment of 41 billion euros between 2024 and 2026, aimed at driving the electrification of the economy through significant advancements in electricity grids and renewable energy sources. By leveraging green financing instruments like the recent 525 million dollar bond (approximately 490 million euros), Iberdrola is not only securing the necessary capital but also reinforcing its commitment to a sustainable and environmentally responsible future, appealing to a growing segment of investors focused on Environmental, Social, and Governance (ESG) factors.
