China’s first domestic green bond sales come on the heels of the hottest year on record
Renew Economy, 27 January 2016
Concern about climate change is helping to fuel the growth of the market for green bonds. Last week, Shanghai Pudong Development Bank laid the first stakes in China’s domestic green bond market, offering a sale of as much as CNY 20bn ($3bn) and the Industrial Bank of China followed suite with plans to sell CNY 10bn ($1.52bn) of green bonds in support of clean energy. A record $46bn of new green bonds were issued in 2015, including $19.2bn in issuance by development institutions, $17.3bn in corporate volume and $3.8m in US municipal bonds, according to a BNEF Analyst Reaction.
Last year topped 2014 as the hottest ever recorded, with global temperatures exceeding the 1961-90 average by 0.76 degrees Celsius, according to the World Meteorological Organization, an agency of the United Nations.
Record levels of atmospheric carbon dioxide were measured at Mauna Loa Observatory in Hawaii in December 2015. Compounded by the effect of El Nino, increased C02 levels have brought temperatures to a record high, said the WMO. Of the 16 warmest years ever recorded, 15 have been in this century – the odds of this occurring due to natural climate variations range from one in 5,000 to one in 170,000, according to the Potsdam Institute for Climate Impact Research. ““Natural climate variations can’t explain the observed recent global heat records, but man-made global warming can,” said the Potsdam Institute in a statement.
Also in China, a unit of Shenzhen Energy Group raised some CNY 1bn ($152m) in an issue of China’s first solar asset-backed securities. The company will pay interest of 3.6% to 4.5% annually for the securities, backed by earnings from its solar projects. Chinese developers are seeking ever-more inventive financing methods in a bid to secure lower capital costs for the country’s fast-expanding solar industry.
Elsewhere in financial innovation, the Indian Ocean archipelago of the Seychelles will offer so-called blue bonds to fund the development of sustainable fisheries, as part of an initiative to address the impact of rising sea levels. Multilateral agencies including the African Development Bank and the World Bank are said to be involved in facilitating the sale of $10m of government-backed debt.
In other emerging-market news, the price paid for solar power in India touched a record low of 4.34 rupees (6 US cents) per kWh in the latest auctions held in the state of Rajasthan, where a total of 420MW of capacity was awarded. Foreign developers and investors bid the lowest price in five out of seven of India’s auctions in the last six months, according to the BNEF Analyst Reaction: Foreign players drive Indian solar bids to record lows. The share of foreign companies with winning bids in recent auctions amounts to 40%, against the 25% share of Indian solar companies. An intensely competitive live e-auction process, combined with favourable resource conditions in the desert state of Rajasthan, could be the reason behind such low bids in India’s latest tender round, says BNEF.
In US solar, SunEdison has taken another step towards reducing its $11.7 billion in debt, with a plan to hand back four of its recently acquired solar projects in Hawaii and Utah to the previous owners. The deal will cancel some $336m debt for the Californian solar company, as it seeks to realign its balance sheet.
Meanwhile in Nevada, NV Energy has proposed a grandfather clause to exempt existing customers with rooftop solar panels from the new net metering rules imposed by the state on 1 January. Such an exemption would offer existing customers relief from increased fees and reduced credits for sending electricity to the grid, and comes as solar companies, including SolarCity and Sunrun, are exiting the state.
BNEF’s new Company Peer Comparison Tool for global solar companies, offers a side-by-side comparison of company financial data across different time scales.
In corporate renewable energy purchasing, McDonald’s signed a 20-year power purchase agreement with developers Baywa for a 27MW solar farm near Oxford in the UK, while Ikea agreed to buy a 42MW wind farm in Finland following its renewal and extension by developer, OX2 Group. Also in Scandinavia, a joint venture between private investment firm Ardian Infrastructure and Norway’s Finnmark Kraft will build a 53MW wind park in the wind-rich, Finnmark region of Norway inside the Arctic Circle. The project is expected to be operational by 2017.