The world-first Green Borrowing Programme enables debt investors and lenders to access a broad range of certified green debt instruments.
Earlier this month, Contact Energy announced the launch of its Green Borrowing Programme, the first for a New Zealand company
In a world-first, the NZ$1.8bn programme will allow debt investors and lenders to access a broad range of certified green debt instruments, including committed bank facilities, commercial paper and retail bonds issued by the company. The programme has been certified by the Climate Bonds Initiative (CBI), one of its largest certifications to date.
Pioneering structure
Contact Energy is committed to sustainability. Indeed, the company has invested significantly in renewable energy and has reduced its greenhouse gas emissions by 50% over the last five years. The jewel in the crown is the company’s new geothermal power station, which, alongside its existing geothermal and hydro power stations means that its power generation is now more than 80% renewable.
Louise Tong, Head of Capital Markets & Tax at Contact Energy was keen to ensure that the company’s financing activity reflected the low carbon nature of these generation assets. She set about speaking with Contact’s banking partners to learn more about the green financing structures popular in the market.
Unsurprisingly, green bonds dominated the discussion. But given the uniquely sustainable nature of Contact Energy’s balance sheet – where renewable generation assets dominate and are worth multiple times the value of its debt – Tong began to ask the question to the banks: could we class all our debt as green?
“There was no precedent for this,” says Tong. “I don’t even think that the question had been asked before.” However, after speaking with the banks and bringing on board the CBI to provide guidance, the Green Borrowing Programme was given the green light and certified by the CBI.
Green coverage
Under the programme, all the group’s existing committed bank facilities, commercial paper, retail bonds and US Private Placement Notes and wholesale bonds maturing after 2018 are now certified as green.
All future funds raised by the company are intended to be included in the Green Borrowing Programme and are therefore certified as green debt (as long as the total value of green assets outweighs the total value of green debt). The first new transaction under the programme was a new NZ$75m Bank Facility with ANZ.
“We have had to exclude our hydropower generation assets from the Green Borrowing Programme for now,” explains Tong. “Although hydropower generation qualifies under the Green Bond Principles, the CBI has not yet released final hydropower criteria. Contact has a seat on the Technical Working Group that is aiming to develop this and once the criteria are finalised, we will bring our hydropower assets into the programme which will enable us to expand the amount of debt we can certify as green. Most importantly, this will allow us to include the refinancing of our 2018 capital markets maturities (currently not certified as green debt instruments) into our Green Borrowing Programme.”
Tong is hoping that in addition to promoting the company’s green effort, the programme will also enable Contact to tap into a new investor base. “It was important for us to get CBI certification to make it easy for green investors to find us and be comfortable investing in our debt,” she explains.
Sowing seeds
Aside from supporting Contact Energy’s financing efforts, Tong also hopes its Green Borrowing Programme will inspire other New Zealand-based corporates to consider green financing options.
“The green debt market in New Zealand is lagging behind Australia and Asia,” says Tong. “This is surprising given that there is so much focus on renewable energy and sustainability more broadly in the country. I hope that this programme will get other corporates looking at this space and be the start of a vibrant green debt market in New Zealand.”
