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Shift to cleaner power sparks Japan’s historic green bond sale

A power corporation in the gusty northeast of Japan is aiming to fund offshore wind projects with a historic sale of green bonds that seeks to muscle in on the growing pool of capital available for environmentally-sustainable investments.

Tohoku Electric Power Co. is preparing to price what would be the debut green note from a power utility with its ¥5 billion offerings of 10-year securities on Thursday.

Climate Bonds Initiative, an international nonprofit organisation that established the first green bond standard in 2010, recently certified the utility. In an interview at the company’s headquarters in Sendai, officials from Tohoku Electric Power officials said that it did this in an effort to try and attract overseas investors.

“Green bonds would help lure investors who have not yet purchased our bonds,” said Yasunori Majima, manager of the utility’s accounting and finance department, adding that it had received positive reviews from international asset managers.

In Japan’s surge toward feel-good investments, utilities have fallen behind as they are still overwhelmingly dependent on coal production, but the expected issuance highlights how the industry is taking action to achieve climate objectives. Tokyo Electric Power Company Holdings Inc., the utility behind the worst nuclear disaster since Chernobyl, also envisages funding renewable energy with green or sustainable debt.

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

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

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

While the company hasn’t made any decisions yet, he said, “there is a chance that we will periodically sell green bonds going forward.”

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