Telefónica has recently announced the successful placement of a green bond valued at €1,750 million. Demand for the bond was high, with a combined oversubscription tripling the original offer, hinting at the high interest that investors have in the telecommunication giant’s environmental initiatives.
The issuance was divided into two tranches. The first one, an 8-year €1,000 million transaction, experienced vigorous reception from institutional investors, with around 85% of investors being international. Given that the book reached €3,000 million, Telefónica decided to increase the initial target from €750 to €1,000 million. This robust demand also resulted in improvement of the conditions, with a spread contracting from 135bp to 105bp and a final coupon rate set at 3.698%.
The second tranche was a €750 million bond with a life of 12 years. Again, international investors dominated, making up 95% of the investors. The strong demand led to an improved spread – from 165bp to 135bp. The final coupon rate settled at 4.055%. The closing and final settlement of the transaction will occur on January 24th.
This new green bond marks a promising start for Telefónica’s financing in the new year. This follows a fruitful 2023 that saw the company introduce three green bonds, totaling €2.6 billion, underlining Telefónica’s commitment to sustainable financing.
Telefónica’s funding strategy places it among the leading issuers in the global telco sector. The current green bond issuance is aligned with the company’s goal of having roughly 40% of total funding tied to ESG criteria by 2026. The primary aim is to integrate environmental and financial sustainability.
The funds from this green bond will primarily be dedicated to projects aimed at transforming and modernizing both fixed and mobile telecommunication networks, pursuant to Telefónica’s Sustainable Financing Framework. The goals of these projects involve improving energy efficiency and potentially funding Telefónica’s Renewable Energy Plan. Additional green initiatives may include creating digital products and services that conserve energy and natural resources.
After the projects are chosen and started, Telefónica plans to disclose yearly details regarding their environmental impact. Important metrics will include energy consumption per petabyte of data traffic, energy savings, and CO2 emissions avoided.
Telefónica has maintained a proactive stance towards sustainable financing since publishing its first Sustainable Financing Framework in 2018. The framework has been updated over time to keep stride with market best practices and investor expectations, with the most recent update coming in July 2023.
