Shift to Cleaner Power Sparks Landmark Green Bond in Japan

By Ayai Tomisawa and Rie Morita (Bloomberg) — In Japan’s gusty northeast, a power company is looking to fund offshore wind projects with a landmark sale of green bonds that seeks to muscle in on the growing pool of money available for environmentally friendly investments.

Tohoku Electric Power Co. plans to price what would be the debut green note from a Japanese utility with its 5 billion yen ($46 million) offering of 10-year securities on Thursday.

The utility recently got certification from the Climate Bonds Initiative, an international not-for profit organization that created the first green-bond standard in 2010. Tohoku Electric Power officials said in an interview at the company’s headquarters in the northeastern city of Sendai that it did so to try to attract overseas investors.

“Green bonds would help attract investors who haven’t bought our bonds yet,” said Yasunori Majima, manager at the utility’s accounting and finance department, adding that it had received positive feedback from foreign asset managers.

Utilities have fallen behind in Japan’s surge toward feel-good investments because they are still largely reliant on coal generation, but the planned issuance highlights how the sector is taking steps to meet climate goals. Tokyo Electric Power Co. Holdings Inc., the utility behind the worst nuclear disaster since Chernobyl, is also considering funding renewable energy with green or sustainable debt.

While the utility sector is one of the biggest issuers of straight bonds in Japan, its absence in selling green notes made Tohoku Electric look to trailblazers in Europe such as French utility Engie SA and Italy’s Enel SpA.

“While the use of coal has been criticized by environmental groups, we also learned from overseas examples that utilities can issue green bonds as long as the use of proceeds is focused on green projects,” Majima said.

Tohoku Electric is seeking to finance seven wind farms and offshore wind projects in Akita, Aomori and Iwate prefectures, as well as a geothermal project in Indonesia. The moves toward green securities came after the utility decided in early 2019 to expand its renewables business, Majima said. 

Certification from the Climate Bonds Initiative “was not absolutely necessary, but we decided to get it to pursue greater transparency for our first green bonds,” Majima said.

While the company hasn’t made any decisions yet, “there’s a possibility that we will be selling green bonds regularly” going forward, he said.

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