Iberdrola Raises €400M Green Bond Linked To Shares

Iberdrola, a top energy and electricity supplier globally, has successfully raised €400 million from a new green bond issue. This new financial instrument is different from other green bonds as it is based on the share price of the company, providing investors with a chance to earn from the stock performance of Iberdrola while investing in environmentally friendly projects.

The newly launched bond has a five-year term and includes a call option, which gives investors the right to exercise within the three months prior to maturity. Nevertheless, in a tactical effort to avoid shareholder dilution, Iberdrola has designed the option so that investors must pay the difference rather than issue new shares. In order to further control this mechanism effectively, the company aims to purchase a similar hedging option to the one that has been incorporated in the bond offering. This groundbreaking blend not only reduces risk but also achieves cost savings when compared to conventional financing, making it an appealing choice for investors. The bond has a 1.5% coupon rate, which strikes the right balance between competitive investor yields and the financial viability of Iberdrola.

Being a leader in green financing, Iberdrola has had a long-standing commitment to issuing green bonds to finance renewable energy projects, energy efficiency, clean transport, and waste management. The company's green financing strategy has made remarkable strides over the years, with a strategic target of growing the share of sustainable financial products within its debt base. Iberdrola also established a goal in 2021 to ensure that green and sustainable products account for almost two-thirds of the company's total financing by the year 2025. Recent statistics in 2024 present the company with its high drive towards this target, with a stunning 94% of last year's financing agreements being marked as sustainable.

At the close of 2024, Iberdrola's overall sustainable financing surpassed €60 billion. This comprises €22.9 billion in green bonds, €15.6 billion in sustainable credit lines, and €6 billion in sustainable commercial paper. In addition, the company has used green and sustainable bank loans, structured finance solutions, and multilateral loans to further enhance its responsible financing stance. These actions complement Iberdrola's wider goal to be the protagonist of the clean energy transition while ensuring financial stability.

The release of this new green bond also aligns with Iberdrola's huge electrification-oriented investment plan, which was announced last year. Through the program, the company committed to invest €41 billion between 2024 and 2026, targeting network infrastructure and developing renewable energy. A whopping 60% of these investments will go towards network-based expansion, such as transmission and distribution enhancements, while 40% will go towards building Iberdrola's renewable energy portfolio, especially in the U.S. market. This investment policy reflects Iberdrola's commitment to speeding up the transition towards cleaner energy solutions worldwide and further positioning itself competitively in major markets.

Through this latest financial initiative, Iberdrola remains at the forefront of sustainable finance, providing investors with innovative opportunities to join the clean energy transformation. Not only does the company raise capital in an effective manner, but by tying its share price to green bonds, it also upholds its long-term commitment to financial and environmental sustainability.