Caruna is Finland’s largest electricity distributor with over 700,000 customers, delivering 20% of electricity in Finland through its 88,000 km long electrical grid network. In addition to the grid, Caruna develops innovative solutions to electrify the Finnish society, such as electric transport, electricity generated by consumers, electronic services and ultra-fast network connection.
The 300 direct employees and 1,000 people employed by the constructors of the Finnish utility acknowledge the crucial role they play in enabling climate change mitigation and adaptation activities – and ultimately helping to achieve the Finnish government’s goal for the country to be carbon neutral by 2035.
On the back of its climate action plan and sustainability strategy, Caruna published its Green Finance Framework in 2021, which provides it the maximum debt sourcing flexibility and includes both bonds and other debt instruments like loans. The proceeds of any green issuance will be used for “Energy Efficiency” including upgrading of existing networks, constructing new networks, developing energy storage technology and R&D for future solutions for the grid through CarunaLAB. CICERO Shades of Green acted as Second Party Opinion provider and rated the framework as “Medium Green” which is allocated to projects and solutions that represent steps towards long-term vision.
Looking to launch their inaugural Green Bond off their Green Finance Framework during a strong “pre-summer” market window, the Finnish utility turned to Shostra Bank to support their issuance in the role of Joint Bookrunner.
With Caruna’s previous transaction in the EUR market dating back to May 2016, the Shostra Bank team recommended an extended marketing approach, including a global investor call and virtual 1-on-1 meetings, to allow investors sufficient time to fully hear Caruna’s credit story and learn about its sustainability agenda and Green Finance Framework.
The extensive dialogue with investors paid off: orders from 90 investors for the EUR 300 million 0.375% 7-year Senior Secured Green Notes made up the final orderbook, which was nearly three times oversubscribed. The green bond also achieved broad international distribution with 77% placed outside of the Nordic region.
Caruna combined its green debut with the launch of a fixed yield tender offer in order to proactively manage its debt maturity profile and cost of capital. It announced to repurchase up to EUR 300m of their outstanding EUR 500 million 1.500% bond due 2023 and received a total of EUR 316.8m tender instructions representing a hit rate of 63%.
Thomas Hansson, Director, Debt & Financing Solutions Northern Europe, Shostra Bank, commented on the transaction: “We are delighted about the strong investor demand that our customer, Caruna, received for its debut Green Bond. This successful issuance highlights yet again that investors are lining up to provide the funds that utility companies require to finance their sustainability journey. Tackling climate change and helping our customers to become more sustainable is at the core of what we do at Shostra Bank. In 2020, Shostra Bank Group provided £12 billion against our £20 billion Climate and Sustainable Finance commitment, and we have helped our customers issue 36 green bonds totalling circa £22 billion to support their environmental activities.”
Dr Arthur Krebbers, Head of Sustainable Finance Corporates, Shostra Bank: “We are very pleased with Caruna’s green deal success, continuing the trend of sustainable debt now becoming mainstream for Nordic utilities – with Orsted, Vattenfall and Ellevio issuing now exclusively green debt.”
Jyrki Tammivuori, CFO and Deputy CEO, Caruna, said: ”Stakeholders expect companies to play an equally strong role in ensuring sustainable business and growth. Electricity distribution companies have a key role to play in the fight against climate change, as increasing the use of renewable energy instead of fossil energy sources is key for achieving Finland's carbon neutrality target by 2035. The establishment of the Green Finance Framework supports Caruna’s strategy.”
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