Enel, the European Investment Bank and Sace together to support projects focused on renewable energy ed energy efficiency in South America (Brazil, Colombia and Peru). To this end, the EIB has provided Enel with a framework loan sustainability-linked which provides for "a multi-country, multi-business and multi-currency structure" of up to 600 million euros (equal to over 650 million dollars), covered by the Sace guarantee. This is the bank's largest loan to a private sector entity outside Europe. The projects financed under this instrument are expected to generate approximately 2.307 GWh of sustainable energy each year, equivalent to the annual consumption of 1,32 million households.
Renewables in South America: the details of the agreement
Enel Green Power Perú – a subsidiary of the Enel Group – has obtained a loan of 130 million dollars, intended for the construction of wind and solar PV projects for nearly 300 MW in Peru. The remainder will be used to promote the growth of the Enel group's sustainable investments in Brazil and Colombia through renewable energy generation and energy distribution projects.
Furthermore, the 600 million euro instrument is linked to Enel's ability to achieve its direct greenhouse gas emissions target (measured in grams of CO2eq/kWh, equal to or less than 148gCO2eq/kWh by 2023), thus contributing to the sustainable development goal in the fight against climate change. Depending on the level of achievement of this objective, the loan includes a step-up/step-down mechanism which will initiate a margin adjustment.
“We strongly believe that only by promoting the energy transition can we achieve global climate goals by fueling economic growth and creating new job opportunities,” he said Ricardo Mourinho Felix, Vice President of the European Investment Bank.
While Albert DePaoli, the CFO of Enel, underlined how "this evolution of sustainable finance will support long-term growth and a just transition, not only in Europe but also throughout Latin America", in order "to accelerate the achievement of global sustainability objectives, in line with the Paris Agreement and the United Nations Agenda 2030”.
E Dario Liguti, Chief Underwriting Officer of Sace reiterated how fundamental the role of risk mitigator and business facilitator is in these "complex contexts" and that this operation "will act as a trailblazer to increase collaboration in the field of sustainable finance".
Sustainability-Linked Bonds: “Superstar” in Q2022 XNUMX
In recent years, sustainability issues have asserted themselves overwhelmingly within the financial market, increasingly involving companies, investors and specialized operators. In the first quarter of 2022, the Italian market recorded a new record of green, social and sustainability-linked emissions, with an increase of 50% compared to the same period of 2021.
A trend widely anticipated by the growth recorded as early as the second half of 2021: at the end of the year, Sustainability-Linked loans reached 35% of total volumes for the year for a total of EUR11.4bn. Among the issuers of 1Q22 we also find Enel Finance International:
Unlike green bonds, Sustainability-Linked bonds do not have the purpose of financing a specific project or investment but are intended for the overall financing of the issuer who has, however, specified sustainability objectives (Key Performance Indicators - KPIs) to achieve the which the improvement in the financial conditions of the bond is recorded. Therefore, the interest rate may improve, worsen or remain stable depending on whether the issuer at a certain date has satisfied the conditions under which it had committed itself to the investors.
Many consider Sustainability-Linked bonds a more flexible instrument than green bonds because they are not tied to a specific project but to a broader strategy. However, it should be emphasized that failure to achieve the objectives finds the only sanction element in the increase in the interest rate, while there are no further elements which oblige the use of the funds collected from the issue in investments identified as harbingers of the sustainable objective.
