Enbridge sale of sustainable bonds causes `greenium' to double

Pipeline giant Enbridge Inc. said it doubled the price advantage — known as greenium — it got by selling its first sustainability-linked bonds in Canadian dollars compared to a similar transaction in the U.S. market three months ago.

The firm sold $1.1 billion of 12-year sustainability-linked bonds at 165 basis points over government securities, or around 10 basis points tighter than where the company's comparable conventional bond would have been priced Friday, according to vice-president of Treasury Max Chan.

That compares to a sustainability-linked bond sale in June when the Calgary-based company issued US$1 billion of similar duration notes, which priced five basis points tighter than where its regular debt would have sold at that time, he said.

The greenium “was truly outstanding,” Chan said Friday. “Investors have been very, very hungry and eager to deploy capital here.”

Sustainability-linked bonds generally penalize issuers with higher borrowing costs if they don't meet certain environmental, social and governance metrics. If the borrower meets or exceeds targets, coupons remain unchanged. In contrast to green bonds, companies can use deal proceeds as part of their general funding plans. Sustainability-linked bonds are still a relatively small portion of total ESG bond issuance.

With the Enbridge deal, SLB sales have reached US$58 billion, according to data. That's equivalent to less than 10 per cent of sales of sustainable bonds worldwide.

Friday's Enbridge deal got orders for around 3.4 times the deal amount from 82 investors, said Chan. Enbridge also sold $400 million of conventional bonds maturing in 30 years, which got an order book equal to more than twice the issue size after 44 investors took part in the transaction.

“We think that the asset class is permanent,” said Chan referring to SLBS. “It's a tool that we would use on a reasonably regular basis ...”

Separately, Enbridge got an order to pay US$3.32 million for failing to follow environmental laws while doing work on its Line 3 pipeline replacement, according to a release on the Minnesota Department of Natural Resources website.

Enbridge said it's committed to a “corrective action” plan.