NRG Energy Issues First Sustainability Linked Bond in North America
US energy company NRG Energy announced today the completion of the first Sustainability-Linked Bond (SLB) issuance in North America, also marking the first SLB issued by any energy company outside of Europe. The offering raised $900 million through the sale of senior secured first lien notes. Proceeds from the issue will go towards financing NRG’s $3.6 billion acquisition of Direct Energy, announced in July 2020, and to supporting efforts to pursue growth, achieve its climate transition strategy, and bring increasing value to its stakeholders, according to the company.
Jeanne-Mey Sun, Vice President, Sustainability, NRG Energy, said:
“For over a decade, we have considered our comprehensive sustainability framework foundational to our company strategy. We have a legacy of leading our sector in sustainability, transparency and disclosure, and the issuance of this Sustainability-Linked Bond is another example of our dedication to lead in the energy transition.”
Securities issued under sustainability-linked frameworks have attributes including coupon payments tied to an issuer’s achievement of key performance indicators (KPIs) and associated Sustainability Performance Targets (SPTs).
NRG’s SLB is linked to the company’s previously announced goals to achieve a 50% reduction of absolute greenhouse gas (GHG) emissions by 2025 from a 2014 baseline, and to reach net-zero GHG emissions by 2050. Specifically, the SPT set by NRG is absolute GHG emissions of 31.7 million metric tons of carbon dioxide equivalent by the end of 2025, with measurement of the KPI covering emissions from the production of wholesale electric power at facilities owned or controlled by the Company (Scope 1), emissions generated from the electricity purchased and consumed by the Company (Scope 2), and emissions encompassed by employee business travel (Scope 3). According to NRG, the SPT is aligned with United Nations Sustainable Development Goals (SDGs) #7 (Affordable and Clean Energy) and #13 (Climate Action).
Gaetan Frotte, Senior Vice President and Treasurer, NRG Energy, said:
“We’re proud to lead the way with this innovative Sustainability Linked Bond, which ties our financing to the achievement of our sustainability objectives. We are pleased by the overwhelmingly positive response to this offering, demonstrating the depth of interest for this type of instrument in the market.”
NRG has obtained a separate second-party opinion (SPO) from Vigeo Eiris on the robustness and relevance of the KPI and SPT. The company was advised on the deal by Natixis, which acted as sole sustainability-linked bond structurer and coordinator.