Funding the energy transition: Masdar’s debut green bond

The Abu Dhabi clean energy company Masdar has issued US$750 million of green bonds to fund the development of renewable energy projects around the world.

The transition to cleaner energy sources is underway in many countries, with efforts supported by technological advances, energy efficiencies and cost reductions, to operate at scale.

The United Environment Programme (UNEP) estimates that around 80% of global energy and 66% of electricity generation are still supplied from fossil fuels, contributing approximately 60% of the greenhouse gas (GHG) emissions responsible for climate change globally. Funding renewable energy projects is critical to address the energy mix and to drive the shift from fossil fuels to sustainable energy sources and accelerate the transition. Financing is a critical part of this journey. The BNP Paribas Markets 360 team expects global green bond issuance to reach around US$600 billion for 2023.

Sustainability is an essential part of regional development plans, Abu Dhabi Future Energy Company PJSC (Masdar), a developer and operator of utility-scale renewable energy projects, has recently raised US$750 million through a debut green bond issuance. This is a first step in Masdar’s medium term note (MTN) financing strategy to meet equity funding commitments on new renewable energy projects at home and overseas. Under its MTN programme, Masdar aims to raise up to US$3 billion of bonds.

Masdar is active in 40 countries and has a renewable energy portfolio with a total capacity of 20GW. The company plans to expand its capacity to 100 gigawatts of renewable energy by 2030. Masdar has invested or committed to investments in projects totalling US$30 billion.

Mohamed Jameel Al Ramahi, CEO, Masdar says: “The success of this debut green bond issuance is testament to the pioneering spirit of all the people who have worked incredibly hard over the last 17 years to grow Masdar into one of the world’s leading renewable energy companies. We are thankful for the trust that the financial community has placed in us and we look forward to the involvement of many top class investors in our journey towards delivering renewable energy and accelerating the net zero transition around the globe.”

Proceeds from the MTN financing will be invested in renewable energy projects, specifically projects in developing economies and countries vulnerable to the impacts of climate change. Renewable energy projects range from solar, wind and battery storage assets, in addition to the related transmission and distribution infrastructure.

Niall Hannigan, CFO, Masdar notes: “The proceeds from our inaugural bond offering will be deployed in developing new renewable energy projects around the world. These projects will make a major contribution towards mitigating climate change, but they will also make a real difference to the local communities they serve, and that makes us incredibly proud. We remain committed to maintaining a prudent approach to funding our ambitious growth plans, which includes maintaining our investment grade credit ratings from Fitch and Moody’s.”

Assessment and measurement of the environmental benefits of projects will be in line with Masdar’s Green Finance Framework  issued earlier this year. Moody’s Investors Services provided the Second Party Opinion on the framework and assigned the highest rating of SQS1 to Masdar’s framework. Masdar’s Green Finance Framework is aligned with the four core components of the International Capital Market Association’s (ICMA) Green Bond Principles. The green bond is also certified by the Climate Bonds Initiative.

Amine Bel Hadj Soulami, Head of Middle East and Africa, BNP Paribas comments: ‘’BNP Paribas is pleased to have worked on Masdar’s first green bond issuance. Proceeds from the green bond will be used to fund projects delivering renewable energy. Our focus is our clients and we work to support them in their sustainable transition journey and commitments to reach net zero.’’

BNP Paribas acted as Joint ESG Structuring Advisor on Masdar’s Green Finance Framework, and Joint Lead Manager on its debut green bond. 

Agnes Gourc, Head of Sustainable Capital Markets, BNP Paribas notes: “We are proud to have worked with Masdar on setting up their Green Bond Framework, and helping them issue such a successful debut green bond transaction. The company’s unparalleled commitment to renewable energy and related technologies has been a unique selling point with investors.”