State-owned electricity transmission system operator (TSO) Augstsprieguma tîkls AS (AST) issued green bonds to diversify its funding base and use green funding sources to facilitate its transition to a low-carbon-emission power system. It is the first time the company has approached the capital market to raise funds. The total amount of the programme in nominal value is 160 million euros. The issue will also contribute to the deepening of the Baltic capital market.
AST has established a Green Bond Framework in alignment with the four core components of the International Capital Markets Association Green Bond Principles 2021. The framework has been reviewed by an external second party Standard & Poor’s Financial Services LLC and in their view is aligned with the Green Bond Principles.
“For the purpose of refinancing project investments made in previous years as well as to plan the future capital investments aimed at enabling large scale renewable energy integration into the Latvian power system and achieving synchronous interconnection of the power system of the Baltic States and power system of Continental Europe, AST is the first among the Baltic transmission system operators to debut in capital markets by issuing Green bonds,” said AST Chairperson of the Management Board Gunta Jēkabsone adding that the issuance of Green bonds will facilitate the transition towards a zero-emission power system and will support Baltic market development.
Acting as an anchor investor, the European Bank for Reconstruction and Development (EBRD) has supported the issuance of a 100 million euros green bond, the first tranche of a 160 million euros green bond programme to refinance existing loans associated with the unbundling of transmission system operators in Latvia in line with EU regulations.
AST also aims to raise funds to finance future investments that enable the large-scale integration of renewables into the Latvian power system and synchronise the Baltic electricity network with that of Western Europe.
Grzegorz Zielinski, EBRD Director, Head of Energy Europe said that concluding the transaction shortly before the start of the COP26 conference sends a strong signal that capital markets are prepared to support sound sustainable projects.
The green bond will be listed on the Nasdaq Riga exchange, an EU-regulated platform and part of the Sustainable Stock Exchanges Initiative, which aims to enhance corporate transparency on environmental, social and corporate governance (ESG) issues.
According to the credit opinion issued by the international rating agency S&P Global Ratings in August 2021, AST has obtained a BBB+ long-term issuer rating with a positive outlook.
AST has about 5,600 kilometres (km) of transmission lines that transmit approximately 8,700 gigawatt-hours (GWh) of electricity through Latvia. Therefore, the company plays an important role in establishing a secure, sustainable, and efficient transmission network in the country.
AST’s projects, such as the Latvia-Estonia Third Interconnection project and its initiative to ultimately disconnect from Russia’s and Belarus’ fossil-intensive power sector, are aimed at ensuring a more reliable, green power supply as it connects with the EU’s electricity market.
Similarly, higher voltage lines via the Kurzeme Ring transmission project should increases grid strength and reliability, while promoting wind renewable capacity. Through its green bond framework, AST aims to raise funds that will directly contribute to its objective of ensuring the security of the energy supply for Latvia.