With more and more investors seeking financial products that have the express purpose of financing environmentally sound projects, Anglian Water impressed our Deals of the Year judges with its inaugural green bond and a well-made case.
An increasingly wide range of asset classes are now clustered under the environmental banner. However, Anglian’s inaugural green issuance stood out.
Anglian’s team marketed an eight-year fixed-sterling bond and demonstrated that the proceeds would be used in line with Green Bond Principles, assured by independent opinion provider DNV GL.
An ACT CPD-accredited employer, Anglian Water operates in one of the UK’s driest regions. At the same time, the region is fast growing in economic and population terms, and water resources are under pressure: 25% of its area is below sea level.
A number of other UK corporates are thought to be considering similar issuances and debt investors are increasingly looking for corporates with strong environmental credentials
The company builds and develops new infrastructure to ensure it can provide continuity of supply. Anglian’s green bond will finance sustainable water and water-recycling projects.
The bond, listed on the London Stock Exchange green bond segment, is the first sterling green bond to be issued by a UK utility. It attracted a coupon of 1.625% and was priced at 82bps over the benchmark for its equivalents.
Proceeds were swapped to sterling Libor, offsetting existing swaps with a counterparty enabling pricing of Libor plus 63bps to be achieved. The order book peaked at £800m at one point, with nearly 80 investors participating.
The green bond, only the third-ever green sterling public benchmark transaction and the first since Transport for London’s green bond in 2015, has helped raise the profile of green finance, and Anglian’s treasury function. The Anglian bond featured in the UK government’s Clean Growth Strategy.
A number of other UK corporates are thought to be considering similar issuances and debt investors are increasingly looking for corporates with strong environmental credentials.
Internally, Anglian Water has used the successful launch of the bond to celebrate the work that its treasury function carries out, as well as the work that goes into reducing the water company’s carbon footprint.
The funds raised will finance a £25m water-preservation scheme at Grafham Water, a £28m initiative to secure water supplies for Norwich, with its growing population. A further £6m will go towards improving bathing water at Southend.
Combined, these projects have saved or avoided 84,000 tonnes of carbon. In addition, Anglian Water has pledged to become a carbon-neutral business by 2050. It has already reduced its embodied level of carbon by 55% since 2010, and aims to reach a 60% carbon reduction by 2020.
According to group treasurer Jane Pilcher FCT, the bond has increased the profile of the treasury team and that she has seen greater interest from individuals wanting to join the team.
“Externally,” she explains, “it enabled us to elevate our communications on sustainability and green finance with the UK government, financiers and key stakeholders.”
She added: “We were also able to demonstrate one of the key principles of the privatisation of our industry was raising funds from the private sector, and not competing for public funds with education and health.
“It is a transaction others are wanting to follow and our assurance provider says they have never been so busy.”
“A well-thought-out deal in a space where we are starting to see real interest and variety.”
Issuer Anglian Water
Amount £250m
Structure Listed green bond
Rating (at time of deal) A/A3/A-
Currency and tenor £/8yr
Interest rate/coupon 1.625%
Green Finance award sponsor
The Treasurer's Deals of the Year Awards recognise the outstanding work of treasurers, both within the treasury community and the wider business world. Through them we champion the success and achievements of treasury teams that have stood out in the market over the prior 12 months. Winning an award is a great way to strengthen your organisation's and your treasury's profile, bringing peer and industry acknowledgement. Find out more here.