Nuclear powerhouse
Electricite de France bolstered its position as a global issuer in a challenging year that was marred by heightened interest rate volatility. The French utility diversified its investor base with successful transactions in six currencies, while bringing innovation through a US dollar hybrid bond and a euro green bond. EDF is IFR's Corporate Issuer of the Year.
2023 turned into a big year for Electricite de France. After kicking off in January with a European offering in four tranches that included its first sterling bond in nine years, EDF later made its return to the US dollar market, as well as the yen and Swiss franc markets, after relatively long absences.
Diversifying funding sources, which also included Canadian dollars as well as its core euro market, was key for the company in 2023 as it sought to refinance short-term debt in the bond market and raise funds for capital expenditure.
"We achieved large diversification across currencies by re-engaging with investors from November 2022 through global roadshows. This allowed us to raise big amounts of funds and we intend to remain active and predictable, in terms of our funding plans, in all currencies," said Bernard Descreux, director of financing in group treasury at EDF.
The company raised nearly US$10bn-equivalent in 2023 while also stretching its tenors to up to 30 years in its senior funding, going long in the sterling, US dollar and Canadian dollar markets. Its US dollar visit in May was the first in that market in more than four years, while its visit to the yen market in June was its first Samurai bond since January 2017. Its deal in the Swiss franc market was its first since October 2016.
While the euro, US dollar and sterling markets are EDF’s core currencies for issuance, it will look at others if they make sense, as it did last year. But whichever market it turns to, pricing levels have to work. “We are very opportunistic and it depends on where we see our curve and our levels,” said Pascal Martinetto, head of EDF's financial markets division.
The sheer scale of funding is an achievement for EDF, which had to navigate tricky issuance windows due to the rate-hiking cycle, and also because it faces a substantial capital investment programme over the coming years. Moody's estimates the spending to amount to €20bn–€25bn annually through 2025 as the company maintains and upgrades its distribution network and nuclear fleet in France.
Apart from gaining size and tapping different sources of demand, EDF also stayed innovative by printing, in June, the first Yankee hybrid that does not feature a coupon step-up. While a non-step structure is considered as standard in the US, EDF's success with its US$1.5bn perpetual non-call 10-year bond opened up opportunities for other European corporates to follow.
Demand exceeded US$10.25bn for the deal, which gave the issuer more financial flexibility compared to its euro subordinated issues with step-ups. The trade also came just months after the controversial writedown of Credit Suisse's AT1 stack in March, though the structure itself is akin to a bank AT1.
“We told investors they could have a sort of AT1 without the regulatory risk of an AT1. We used that as an argument,” said Descreux.
EDF was at the forefront in the ESG market too, becoming in November the first European issuer of a green bond in which proceeds can be used towards nuclear power projects. “There was no negative pushback from investors; it was a success. We hope some other issuers do the same in the European market,” said Descreux. The renationalised utility’s €1bn green bond due June 2027 drew orders of as much as €3.3bn.
EDF added nuclear to its framework within days of its inclusion in the EU Taxonomy but had only launched a nuclear green loan, while none of its subsequent green bonds included nuclear until the November deal. The company wanted to be as transparent as possible with investors, who spoke highly of its level of disclosure.
"We've made it clear to investors that we will always clarify whether a green bond will be used for nuclear use of proceeds or for other projects and investors really appreciated it, though, of course not all ESG funds bought the bonds."
For Descreux, EDF’s successful issuance is a result of hard work, which he hopes will continue to pay off. “We plan to build regular, long-term relations with investors across different currencies to become a high single-digit-billion issuer every year in size in the coming years.”
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