By David Pendered
Georgia Power has raised about $742 million through a sustainability bond. Proceeds are to be spent on projects that align with the growing demand by institutional investors that utilities seek to reduce emissions of greenhouse gases.
Georgia Power intends to spend the money on expanding its solar portfolio. In addition, the spending is to target “diverse and small business suppliers,” according to a Feb. 26 statement announcing that day’s sale of the bond.
Sustainability bonds are viewed as a wave of the future. They serve as common ground for companies in search of money and investors looking to place their money in a socially responsible fund. Moody’s delivered a succinct description in a Feb. 4 research announcement that predicted a 32% increase this year in the sustainability sector:
- “Sustainability-linked bonds have strong growth potential, as they allow issuers to maintain the flexibility of general corporate purposes borrowing while potentially still appealing to sustainability-minded investors.”
Georgia Power reported the bond is the first sustainability bond to be issued by a U.S. utility. Moody’s rated the bonds Baa1 with a stable outlook, according to Georgia Power. The bond rating is medium grade and subject to moderate credit risk, according to Moody’s rating scale.
Georgia Power’s parent, the Southern Co., set the stage for the bond issuance with its Sustainable Financing Framework, released Jan. 4. The framework calls for spending to align with one of the United Nation’s Sustainable Development Goals.
Southern announced in 2020 a goal of net zero GHG emissions by 2050. In its federal financial report for 2020, released Feb. 18, Southern reported that “system management expects to achieve sustained GHG emissions reductions of at least 50% as early as 2025,” using 2007 as the baseline.
Dan Tucker, Georgia Power’s executive vice president, chief financial officer, and treasurer made the following observation about the sustainability bond:
- “The sustainability bond issued today is aligned with our ongoing commitment to building a clean and sustainable energy future for Georgia Power customers and the state. By allocating the proceeds of this bond to fund our social, environmental and renewable initiatives, the company is able to secure benefits for all customers that will last for up to 30 years by way of long-term, low-cost financing.”
The stakes are rising quickly in the energy sector for companies to reduce GHG emissions. In addition to investors, the Biden administration is expected to press for sustainable finance and investment, according to Moody’s Feb. 4 announcement.
In December, the nation’s third-largest public pension fund announced that in five years it will begin selling shares in companies that don’t meet “minimum standards” in transitioning to net zero GHG emissions by 2040. The New York State Common Retirement Fund was valued at an estimated $226 billion, according to a Dec. 9 statement in which the state comptroller observed:
- “We continue to assess energy sector companies in our portfolio for their future ability to provide investment returns in light of the global consensus on climate change. Those that fail to meet our minimum standards may be removed from our portfolio. Divestment is a last resort, but it is an investment tool we can apply to companies that consistently put our investment’s long-term value at risk.”
