Latvenergo AS will issue green bonds with the highest category shading from CICERO

Within the framework of the borrowed capital attracting plan, Latvenergo AS plans to issue green bonds with the nominal value of up to 200 million euros. According to the strategic objectives of Latvenergo Group, the attracted funds will be invested in implementation of environment-friendly investment projects. The independent research center CICERO Shades of Green has rated the updated Latvenergo AS green bonds framework as Dark green, which is the highest category shading in CICERO’s methodology.

Continuing the successfully commenced issues of bonds, Latvenergo AS will issue green bonds with the total nominal value of up to 200 million euros. Last time, Latvenergo AS issued green bonds in 2015 and 2016 with the total nominal value of 100 million euros.

In order to issue green bonds, a green bond framework is required, where the company indicates groups of projects, where proceeds will be invested, the procedure of selection of projects, management of proceeds and reporting procedure. The updated green bond framework in all material respects is similar to the previous Latvenergo AS green bond framework approved in 2015. Minor changes have been made to eligible project categories, as well as a commitment by Latvenergo AS internal audit has been included to review the compliance of management of proceeds and selection of eligible projects to provisions of the green bond framework. The assessment of the updated green bond framework was carried out by the independent research center CICERO Shades of Green, assigning the highest category shading – Dark green. That indicates the compliance of the planned projects with long-term environmental protection and climate change mitigation objectives, as well as good governance and transparency.

“Sustainability and environmental responsibility are at the core of the Group and that has been proven by green bonds issued in 2015 and 2016, which were also rated as Dark green. We have not halted our green growth, moreover – the strategic objective of Latvenergo is development of use of renewable resources, for example, by continuing the ambitious reconstruction of hydropower plants or developing wind and solar power generation. Latvenergo green bond offer has been prepared for those, who just like us care for the environment and its preservation for future generations. The offer is aimed more than anything else at safe and sustainable future,” tells Guntars Baļčūns, Member of the Management Board of Latvenergo AS.

The strategy of Latvenergo Group is in line with Latvian and EU activities for the achievement of climate targets. The EU has set the achievement of climate neutrality by 2050 as one of its objectives. Latvenergo Group is already one of the greenest electricity generators in Europe. The Group is making targeted investments to develop a zero-emission and low-emission generation portfolio and contribute to climate change mitigation. This corresponds to the main requirement for green bonds – to use the attracted funds only in environment-friendly projects.

CICERO positively assesses the planned distribution of proceeds from bonds among various projects. Up to 50% of proceeds from bonds are planned to be allocated for reconstruction of hydropower plants on the river Daugava, which in addition to an increase in their capacity and efficiency will reduce the Group's impact on climate change, because each megawatt-hour produced using renewable resources reduces CO2 emissions. Up to 50% of proceeds are planned to be allocated for improvement of the distribution network to promote high-quality and reliable electricity supply, to reduce the frequency and duration of interruptions in electricity supply and to ensure efficient management of electricity networks. And up to 1% is planned to be invested in biological diversity preservation projects, including replenishing of fish stocks, protection of white stork, cleaning of salmon spawning rivers and similar environmental projects. CICERO also notes as a positive factor that the Group considers the risks that increase along with climate change, and has already implemented measures to mitigate these risks, as well as the fact that Latvenergo has actively engaged in development of the National Adaptation Plan. CICERO emphasizes that Latvenergo has set a strategic objective to increase the share of the renewable energy in the total amount of generated electricity.

Latvenergo AS Green Bond Framework and CICERO Shades of Green opinion is attached in the appendix.

Green Bond Framework

CICERO Shades of Green opinion