Highlights

• Iberdrola mobilises €1 billion through green hybrid bond under the EU Green Bond Standard.
• Bond attracts over €8 billion investor demand with 87% sustainable investors.
• Hybrid bond refinancing keeps Iberdrola’s capital structure stable and protects credit ratings.

Iberdrola has returned to the capital markets with a €1 billion green hybrid bond aimed at refinancing an earlier bond maturing next year.

The bond, which is perpetual with a repurchase option starting in August 2031, carries a coupon of 3.75%, as well as makes it the lowest for this type of transaction since March 2022.

This issuance complies with the ICMA Green Bond Principles and the European Union Green Bond Standard and is also the first hybrid bond issued under this new EU standard.

Read More: Green Bonds Explained: Definition, Types, Benefits & Risks

Investor interest in the bond was substantial, with demand exceeding €8 billion, creating an oversubscription of eight times the final offer.

Incidentally, more than 400 qualified international investors, mostly from Europe and the United Kingdom, participated in the operation.

Over 87% of these investors are sustainable or aligned with the United Nations Principles for Responsible Investment, which shows the popularity of green bonds and sustainable investment opportunities in the market.

The bond issuance comes on the heels of the release of the company’s financial results and ahead of central bank meetings in the United States and Europe. The low cost of financing helped reduce expenses compared with previous hybrid bonds.

Also Read: Blue Bonds: Catalysing Investment in Marine Conservation

Nine leading international banks, including Barclays, Deutsche Bank, and MUFG, facilitated access to investors and managed the placement.

The bond attracted investment from regions including the United Kingdom (31%), France (19%), Germany (16%), Asia (5%), the United States and Canada (3.5%), and the Nordic countries (2.5%).

Nearly 86% of the investments came from investment funds, which indicates confidence in the company's financial stability and hybrid bond strategy.

What is a green hybrid bond?

A green hybrid bond is a type of bond that combines features of both traditional bonds and equity-like instruments, while also funding environmentally friendly projects. It allows a company to raise money for green initiatives, such as renewable energy or clean transportation, and often offers higher returns than regular bonds because of its hybrid structure.

Part of it behaves like a standard bond with fixed interest payments, and part can be treated like equity, giving flexibility to the issuer. Investors benefit by supporting sustainable projects while earning potential returns. These bonds are becoming popular as companies focus more on sustainability.

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Source: Iberdrola