UAE’s Masdar successfully issues first $750m 10-year green bond

Masdar has announced the successful completion of its first green bond issuance for $750m 10-year senior unsecured notes.

There was exceptionally strong appetite from regional and international investors with the orderbook peaking at $4.2bn. It was 5.6x oversubscribed.

Pricing tightened 35 basis points between launch and final terms, with a final landing spread of 115 basis points over US Treasuries and a coupon of 4.875 per cent.

Allocation was finalised with a split of 87.5 per cent to international investors and 12.5 per cent to MENA investors.

The debut green bond demonstrates investor confidence in the financial strength of Masdar, which has credit ratings of A2 (Moody’s) and A+ (Fitch), and its strong sustainability credentials.

In line with Masdar’s Green Finance Framework, net proceeds from this bond and future offerings will be used to invest exclusively in ‘dark green’ renewable energy projects, many of which will be in developing economies and climate-vulnerable countries that have a critical need for investment.

The bond is the first part of a programme to raise up to $3bn of bonds to meet the company’s equity funding commitments on new renewable energy projects at home and overseas, as it seeks to grow its global portfolio to 100GW of capacity by 2030.

Proceeds from all bond offerings under the programme will be deployed towards the greenest projects in the renewables sector, namely solar, wind, renewable power transmission and distribution infrastructure, and battery storage assets, and strict ESG criteria will apply to restrict the eligibility of projects.

#Masdar completes US$750M, 10-year Green Bond offering, more than 5x oversubscribed. Proceeds from the sale will fund eligible green projects under our Green Finance Framework, driving #RenewableEnergy projects around the world, including in developing economies. pic.twitter.com/56tHLklnjZ

— Masdar (@Masdar) July 19, 2023

Masdar focused on driving climate action

Dr Sultan Al Jaber, UAE Minister of Industry and Advanced Technology, chairman of Masdar and COP28 President-Designate, said, “It is vital to make finance more available, accessible and affordable for developing economies if we have any chance of meeting climate goals to supercharge sustainable development. Ahead of the UAE hosting the UN climate change conference, COP28, we must champion initiatives that advance climate finance and decarbonisation. The successful issuance of Masdar green bonds will support these twin aims, by helping to provide funding towards renewable energy projects where they are needed most.”

Niall Hannigan, Masdar’s chief financial officer, commented, “The proceeds from our inaugural bond offering will be deployed in developing new renewable energy projects around the world. These projects will make a major contribution towards mitigating climate change, but they will also make a real difference to the local communities they serve, and that makes us incredibly proud. We remain committed to maintaining a prudent approach to funding our ambitious growth plans, which includes maintaining our investment grade credit ratings from Fitch and Moody’s.”

The bond was rated A2 by Moody’s and A+ by Fitch, in line with the corporate credit ratings of the company, and was priced at a coupon rate of 4.875 per cent with maturity on July 25 2033.

The issuance was arranged and offered through a syndicate of joint lead managers and bookrunners comprising BNP Paribas, Citi, First Abu Dhabi Bank, HSBC, SMBC Nikko, Société Générale and Standard Chartered.

Masdar’s Green Finance Framework, established in February, was updated in May to reflect changes to the ‘Green Loan Principles’.

In other news, Masdar, Mitsubishi Chemical Group Corporation and INPEX Corporation will explore the production of the world’s first commercial-scale polypropylene made from CO2 and green hydrogen in Abu Dhabi.

The green hydrogen and CO2 will be converted to e-methanol, which will subsequently be converted to propylene and polypropylene.

Polypropylene, a type of plastic material, is used to manufacture everyday items such as bottles, jars and food packaging.  E-methanol is a key synthetic fuel that can be used to decarbonise maritime transportation.