UK-based utility National Grid announced today the successful launch of its first green bond in the U.S., with over 100 institutional investors placing orders, including pension funds and major banks. The bond was issued through Niagara Mohawk Power Corporation, one of National Grid’s U.S. operating companies.
Green bonds are securities issued specifically for financing environmental and climate-related projects. The bonds may be issued by government-sanctioned organizations, and typically enjoy tax incentives. National Grid’s US green bond issue follows a similar bond it issued in the UK earlier this year, which was also part of the National Grid Green Financing Framework.
The issuance was part of a two-bond offering, including the 10-year green bond, with a value of $600m, alongside a $500m 30-year non-green bond. According to National Grid, the response by investors was very strong, with the order book for both bonds nearly four times oversubscribed, boosted by the green bond in particular. Overall, approximately 110 investors placed orders for the green bond, including pension funds and major banks, mainly from the US but also from Europe and Japan. The bond was issued with an interest rate of 1.96%, the lowest ever achieved for a 10-year bond by any of National Grid’s U.S. operating companies.
National Grid stated that the green bond issue is in line with the company’s commitment to play a key role in the transition towards a low-carbon economy, with the funds being used to support investments in the decarbonisation of its electricity networks. Specifically, the green bond proceeds will be used to fund a range of clean energy projects across five categories, including:
- Renewable energy
- Energy efficiency
- Clean transportation
- Pollution prevention
- Environmentally sustainable management of living natural resources and land use
Part of the proceeds in the ‘Renewable energy’ category will fund maintaining, enhancing and increasing the renewable energy capacity of National Grid’s infrastructure, in order to raise the share of low-carbon electricity that flows through the company’s networks.