French international bank BNP Paribas has executed a green repurchase agreement (repo) transaction with state-owned utility company Électricité de France (EDF).
The two companies have worked jointly to structure and execute a green repurchase agreement by a corporate issuer.
The green repo instrument enables EDF to draw financing from BNP Paribas against individual green assets as they are originated.
Under its green repo programme, EDF will apply a use of a proceeds approach identical to that set out in its ‘Green Framework’ to finance green assets.
EDF believes that its green repo programme will complement its green bond programme, which requires a larger pool of pre-originated assets.
The first project to be financed under the green repo programme is ‘Big Beau Solar’. Developed by EDF Renewables in California, it combines 165MW of solar generation and 40MW of battery storage.
How the repo will work
EDF will collateralise the repo with its liquid bond holdings to reduce the financing cost of the project.
The proceeds of this new financing structure, in which BNP Paribas is the sole arranger and counterparty, will be used to finance or refinance projects adhering to green financing principles, guidelines, and standards, as set forth in EDF’s 2020 ‘Green Bond Framework’.
As a green bond issuer since 2013, EDF was among the first utility companies to set a target to achieve net zero by 2050.
Sam Crawford, head of secured funding structuring for Europe, the Middle East, and Africa at BNP Paribas, said: “By taking a green repo to the corporate world, we believe that a new market standard for ESG secured financing and investment is on the rise.
“We are closely working together with our peers and industry groups to develop a framework for the repo market to assist more issuers, both institutional and corporate, to access these new instruments”.
What is a green repo?
A green repo is a complementary green refinancing tool to a green bond, which allows an issuer to immediately refinance green assets/projects and finance them on a short-term to medium-term between two green bond issuances.
Bernard Descreux, group treasurer at EDF SA, said:
“The repo facility provides access to an efficient cost of financing as we originate and ramp up green assets ahead of future green bond issuances.”
BNP Paribas has now closed green repo transactions in Asia, America, and Europe, and is working towards establishing a new green repo market standard.