Thu, Nov 09, 2017 - Page 10 News List

Eco-friendly policies spur S Korea green bond sales

Bloomberg

South Korean borrowers are slowly getting on board the global expansion trend in green bond issuance after the new government pushed for environmentally friendly policies.

Korea Electric Power Corp will be meeting with investors in the US, Europe and Asia next week for a potential short to intermediate-maturity dollar-denominated green notes, according to person familiar with the matter.

Three other issuers, including a US unit of Korean Air Lines Co, have this year sold such debt used for projects aimed at benefiting the environment.

That compares with two last year, and none in 2015 and 2014.

The almost US$700 million in Korean green note offerings so far this year is still only a small fraction of the global total of US$92.7 billion, a market that has expanded 45 percent this year.

Issuance in the Asian nation is likely to pick up in step with the government’s eco-friendly policies and global increase in demand for such notes, said Yoon Hee-sung, treasurer at Export-Import Bank of Korea (KEXIM), which sold the first green bond by a South Korean issuer in 2013.

“More [South] Korean companies are expected to consider issuing green bonds,” said June Won, managing director of capital markets origination at Citigroup Global Markets Korea Securities, the top arranger of South Korean offshore bonds.

South Korean President Moon Jae-in, who was elected in May, has pledged to phase out nuclear energy and increase the use of renewable energy.

Environmental issues have become an increasing source of concern for South Koreans.

More than half of the people in a Seoul survey said they experienced health damage due to ultrafine dust that blows in from China, including respiratory disease and eye and skin problems, according to a statement in May by the Korean Federation for Environmental Movement, a non-governmental organization.

Korea Electric Power’s planned bond sale would be its first offshore since 2014, Bloomberg-compiled data show.

State-owned companies’ issuance decreased after they were ordered by former South Korean president Park Geun-hye to stop using debt to balance their books.

Hanjin International Corp, the Korean Air unit, sold US$300 million of green notes in September guaranteed by KEXIM.

The proceeds are to refinance costs associated with the construction of the Wilshire Grand Center in Los Angeles that was built using eco-friendly techniques and materials.

KEXIM sold 6.3 billion Indian rupees (US$97 million) of green bonds in July, while Korea Development Bank sold US$300 million of such notes in June in its debut sale of the debt.

HSBC Holdings PLC expects global green bond sales to rise as much as 44 percent next year, making the total outstanding amount as big as US$463 billion by the end of next year, analysts led by Michael Ridley wrote in a note dated Tuesday.

Total issuance next year is seen at US$140 billion to US$180 billion, Ridley wrote.

“With more people valuing the environment and quality of life, sustainability financing such as green finance and social bonds will likely grow further in [South] Korea,” Yoon said.

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