State-owned electricity generator Eesti Energia has raised €400 million via green hybrid bonds offered on the London Stock Exchange bearing an interest rate of 7.875 percent.
The announcement marks the first hybrid bond issued in the Baltic states which will be traded on the London Stock Exchange.
Eesti Energia noted on Tuesday: “A green hybrid bond means that the company commits to investing the capital raised via that bond exclusively in green projects.”
“Hybrid bonds are considered by rating agencies to be 50 percent equity and 50 percent debt. According to International Reporting Financial Standards (IFRS), a hybrid bond is classified entirely as equity” Eesti Energia went on.
“A hybrid bond is perpetual and, due to higher risk from the investor’s perspective, carries a slightly higher interest rate than a conventional bond,” the company added
Eesti Energia’s hybrid bond was oversubscribed more than fourfold, with offers exceeding €1.6 billion. Nearly 200 investment funds worldwide participated, with two-thirds of the investors coming from Europe, including Estonia.
Marlen Tamm, Eesti Energia’s CFO, said a bond’s interest rate hinges mainly on three factors: The issuing company’s credit rating, market conditions, and the nature of the instrument being issued.
Tamm said: “The exceptional interest rate allows us to offer the bonds at a lower interest rate than initially planned.”
“We were able to reduce the interest rate by more than half a percentage point during the offering process, closing it with a coupon rate of 7.875 percent, which is comparable with other similar bond offerings both internationally and inside Estonia. We are delighted with the outcome and with the trust of the international investor community,” Tamm added.
Eesti Energia has developed a green finance framework, the company says, which has been approved by the independent consultancy ISS Corporate Solutions.
Issuing the hybrid bonds was prepared with the assistance of Goldman Sachs Bank Europe SE, LHV Pank, A&O Sherman, Linklaters, Sorainen, and Ellex Raidla.
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