Client stories

Iberdrola electrifies investors with €2 billion green hybrid bonds

Iberdrola sets the pace for energy transition

With over 170 years of history, Spanish utility company Iberdrola is a global energy leader, the number one producer of wind power and one of the world's biggest electricity utilities in terms of market capitalisation.

In November 2020, the company, one of the Top 20 sustainable companies in the annual Corporate Knights index, announced a €75 billion investment plan for an ambitious green transition programme. Projects include smart grids, the development of renewable energy generation and a wide range of initiatives that improve energy efficiency.

So far, the company has increased its installed capacity free of emissions to exceed 35,000 MW, 76% of the total own capacity. Although the emissions per kWh generated are already more than 40% below the average for the European electricity sector, Iberdrola has set the goal to reach carbon neutrality by 2050.


Soaring investor demand helps Iberdrola to achieve competitive pricing

To raise further funding for the green projects in its pipeline, the Spanish energy utility, which issued its first green bonds in 2014, turned again to NatWest to support with a €2 billion dual tranche green hybrid bond.

As well as securing investor money for its green projects, the hybrid bond helps increase the company's financial flexibility and secure funding for its capital-intensive green transition programme.


Hybrids offer incentives for issuers and investors

While most of the hybrid bond transactions have been in the European utilities and telecommunications sectors hybrid bonds offer a number of benefits for any company: Firstly, rating agencies typically rank hybrids as half equity, because hybrid bonds combine the characteristics of both debt and equity; this can help companies to alleviate pressures to their credit ratings, versus if they issued a “straight-forward” bond. Secondly, for tax purposes hybrids can be treated as debt, 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. 


NatWest Group continues to be a leading player in the hybrid market as a trusted adviser

Commenting on Iberdrola’s green hybrid issuance, Alexandra Miani, Managing Director, Corporate Financing and Risk Solutions, at Natwest, said: “We’re delighted to have supported Iberdrola with this successful transaction, which marks our fourth deal with our customer within 12 months. The hybrid mandate also recognises our ‘Second Most Impressive Bank for Corporate Hybrid Capital’ 2020 Global Capital Bond Award’

Dr Arthur Krebbers, Head of Sustainable Finance, Corporates at NatWest, said “Sustainability is of paramount importance to NatWest, and we continue to support those on their journeys towards sustainable operations and those, such as Iberdrola, helping others to become more sustainable.”

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