Anglian Water launches new financial framework to issue net-zero based green bonds aligned to new carbon targets

The Anglian Water Group is once again making financial history today, as it becomes the first ever  utility company to publish a sustainability linked bond framework to enable it to launch green bonds connected directly to achieving its interim carbon targets by 2025. 
 
The company is committing to reduce capital carbon by 65 per cent from a 2010 baseline, and operational carbon by 30% from 2019/20 levels, by 2025. Building on its strong track record of utilising green finance, Anglian will be able to raise net zero bonds aligned directly with achieving these tougher targets. 
 
These are the most stretching targets yet from any water company in the UK, as the industry became the first sector worldwide to work collaboratively on a roadmap to reach net zero within the decade. Anglian will be the first utility company in the UK to link these targets specifically to a bond to allow it to raise funds at a more competitive rate, and will mark the final stage in the company’s three-year journey to embed wider purpose at the core of the business. 
 
Operating in one of the driest, yet fastest-growing parts of the UK means long-term access to secure water supplies is one of the most pressing challenges Anglian faces. The bond, worth £250million, will be ploughed, ultimately, into capital investment schemes that will ensure future resilience for the east of England  in the face of climate change and a rapidly growing population. 
 
CEO for Anglian Water, Peter Simpson said: 
 
“This framework further amplifies our commitment to the environment and the reduction of our carbon footprint. Linking it directly to Anglian Water delivering these tough carbon targets demonstrates how determined we are as a responsible business to take the steps we need to invest in resilience for our region in the most sustainable way.  
 
“Funds raised will enable us to address the three-fold challenges of water scarcity, climate change and environmental protection in the face of a growing population, but it also represents the pinnacle in responsible financing.” 
 

Transparency and clarity of its financial structures; putting purpose at the heart

In 2018, the water company set out to simplify its financial structures to improve transparency, trust and customer confidence and solidified its commitment to put wider public purpose at the heart of the business. Anglian Water:

·       Became the first in the industry to remove its Cayman Island company from its financial structure, which was set up to enable structural changes in 2002, although was never used to raise debt

·       Committed to reduce dividends through to 2025, resulting in a significant reduction in the company’s level of debt and gearing

·       Became the first utility to issue a Sterling Green Bond, to finance its entire capital programme sustainably. By at the end of 2020 Anglian Water had funded a staggering 850 capital investment projects through financing from Green Bonds totalling £876 million.

·       Announced fundamental changes to its Articles of Association – a legally binding document which governs how the business will be run. These changes formally put wider public interest at the heart of the business

·       Outlined its unwavering commitment to the environment and local communities in the publication of its sister documents – ‘Green Recovery Plan’ and ‘Plan for Community Recovery.’
 
Underpinning the sustainability bonds will be another stage in ensuring transparency across the business -  a new, financial structure for the AWG group which  enables further reduction in the gearing of  Anglian Water in order to maintain its solid investment grade credit ratings in the interest of customers and investors, the environment, and the long-term viability of the business. 
 
Peter continued: “Our continuous drive to offer value for money for customers and deliver environmental benefits is made possible by investor confidence in our strong financial structure and commitment to sustainable ways of working. 
 
“The creation of a more transparent financing model marks the conclusion of a period of work to embed public interest at the business which began three years ago. This is the final step in achieving a strong and resilient structure for a purpose-led company​, which will allow us to borrow at the most competitive rates to finance investments for the long-term benefit of our customers and our region.”