Smart solution
Smart utility infrastructure business Intellihub’s debut green loan of A$1.45bn-equivalent (US$1.06bn) stood out most for its innovation, complexity and successful syndication in a highly competitive market for financings tied to environmental, social and governance metrics.
The borrowing for the company, which is controlled by Australian private equity firm Pacific Equity Partners, became the world’s first green loan to receive electric grid and storage certification under the Climate Bonds Initiative’s standard, a new sector guidance introduced in August 2021.
It is the largest green loan for a non-property borrower from Australia and New Zealand and also the second-largest green loan from Australasia.
The deal’s alignment with the Climate Bond Taxonomy Energy category and the electrical grids and storage criteria ensures Intellihub’s activities are consistent with the goals of the Paris Agreement. Throughout the term of the loan, which will fund the rollout of smart meters to measure energy consumption, the borrower will submit reports that show proceeds are being used to provide products and services that have a genuine impact in mitigating and adapting to climate change.
EY provided a second-party opinion on the borrower’s sustainable finance framework, and the deal’s electrical grids and storage criteria are aligned with the Green Loan Principles and relevant United Nations Sustainable Development Goals.
Syndication, which closed in March after being launched in November 2021, drew eight lenders, in addition to two banks that joined prior to launch and the five mandated lead arrangers, bookrunners and underwriters – ANZ (sole green loan coordinator), Credit Agricole, MUFG, National Australia Bank and Sumitomo Mitsui Banking Corp.
Ten banks out of the 15-strong syndicate were first-time lenders to Intellihub, demonstrating the deal’s ability to attract liquidity despite the higher gearing and the relatively tight pricing.
At A$1.45bn, the size of the borrowing was significantly larger than Intellihub’s previous loans. Pacific Equity Partners obtained a A$270m five-year financing in 2018 for the acquisition of Intellihub, which was subsequently increased to A$468m in 2019 and A$576m in 2020.
While the debt multiples increased, the pricing on the green loan was more in line with infrastructure financings in Australia, rather than leveraged loans, which added challenges to distribution. The five-year loan offered an interest margin of 160bp over BBSY/BKBM for Australian and Kiwi dollars, respectively.
During the syndication period a parallel sale process saw Brookfield Infrastructure becoming a strategic investor in the company alongside PEP’s Secure Asset Fund, but this did not disrupt the deal.
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