Client stories

EDF becomes first corporate to issue a Euro Social Hybrid Bond

Building a net-zero energy future, to help save the planet and drive wellbeing and economic development

EDF Group is an integrated electricity company, active in all areas of the business: generation, transmission, distribution, energy supply and trading, energy services. A global leader in low carbon energies, the Group has developed a diversified generation mix based on nuclear power, hydropower, new renewable energies and thermal energy, supplying energy and services to approximately 37.9 million customers in the countries it operates. The utility company is pushing ahead with its CSR Commitments according to the 4 challenges of its “Raison d’être”: carbon neutrality, planet resources perseveration, wellbeing & solidarity, and responsible development.

In the UK, EDF is Britain’s biggest generator of zero carbon electricity, and it is helping its partners build some of Britain's biggest batteries to help the National Grid stay balanced. Around a fifth of the UK's electricity is generated by EDF’s eight nuclear power stations, and the firm  is playing a key role in the development of nuclear sites such as Sizewell C and Bradwell BHinkley Point C, which will provide low-carbon electricity to meet 7% of the UK demand.

Furthermore, in order to help the UK achieve net zero, EDF is investing in research into electric heat and low carbon hydrogen generation.

EDF achieves a double world’s first : 1st social bond issued by a utility company, and 1st social hybrid by a corporate issuer

Following the publication of its Social Bond Framework mid-May this year – for which ratings agency S & P provided a Second Party Opinion (SPO) - and a series of accompanying investor calls, EDF announced an inaugural Social Hybrid Bond in Euro, having chosen NatWest as Active Joint Bookrunner for its transaction.

EDF garnered strong investor demand right after order books opened, and off the back of this strong momentum EDF opted for a final size of EUR 1.25bn at a coupon of 2.625%, representing the lowest hybrid coupon ever achieved by EDF and highlighting investors’ confidence in the quality of EDF’s credit and ESG roadmap.

With this transaction, which saw investors from the UK & Ireland and France taking nearly half of the allocation, EDF achieved a double world’s first: it is the first benchmark issue of social bonds by a utility company and the first benchmark issue of social hybrid bonds by a corporate issuer. EDF also moved up from 3rd to 2nd place in the global top 10 hybrid issuers by volume.

The energy company will use the proceeds raised through the Social Hybrid Notes for the financing of eligible projects outlined in its Social Bond framework, including any capital expenditure engaged by EDF Group and contracted with SMEs such as EDF suppliers and providers that contribute to the development or maintenance of EDF group’s power generation or distribution assets in Europe and in the United Kingdom. As such, the bond proceeds also support job security.

The company’s Social Bond Framework aligns its sustainable finance activities with its Corporate Social Responsibility strategy, which focuses on the wellbeing and responsible development of local areas and industrial sectors.

Hybrids offer incentives for issuers and investors

Most of the hybrid bonds issuances have been in the European utilities and telecommunications sectors as structural changes in those sectors are putting additional pressure on corporate credit quality, which hybrid capital helps to alleviate. How? Rating agencies typically rank hybrids as half equity because hybrid bonds combine the characteristics of both debt and equity. On the other hand, for tax purposes hybrids are treated as bonds, so the interest costs are tax deductible. Furthermore, the comparatively higher yields of hybrid bonds appeal to investors, in particular in the current ultra-low interest rate environment, and their hybrid nature means that they attract credit investors and equity investors alike – helping companies to access new investors and grow their investor base. 

Driving development of zero-carbon power generation

Jean de Saint Basile, Country Head & Head of Corporate Coverage, NatWest, commented on the transaction: “We’re delighted to have supported our customer with this debut Social Hybrid Bond and congratulate EDF to have become the first utility company to do so. This transaction also highlights how EDF is embedding sustainability across its capital structure – including hybrid, bonds, and loans. Sustainability is of paramount importance to NatWest, and we continue to support those on their journeys towards sustainable operations such as EDF.”

Dr Arthur Krebbers, Head of Sustainable Finance Corporates, NatWest: “The subordinated sustainable debt market is an important pillar of sustainable finance overall, and we welcome pioneers such as EDF helping to grow this asset class as well as raising awareness. The strong investor demand highlights the ongoing interest in socially focused frameworks and issuances from Corporates.”

Xavier Girre, Group Senior Executive Vice-President, Group Finance, EDF, commented: “We are very pleased with the investor support we received for our inaugural Social Hybrid Bonds. This successful issuance means we can now focus on investing the new funding to further develop our zero-carbon power generation, and in doing so help develop whole regions.”

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