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By Robert Hogg
Dec 12 (IFR) - The Republic of Poland has started marketing the first Green bond issue from a sovereign, setting a new milestone for the asset-class that has been growing steadily over recent years.
The move to make market history comes despite the coal-dependent nation dragging its feet over the Paris climate agreement, which was ratified by the European Union in October, and aims to slash greenhouse gas emissions by shifting away from fossil fuels.
The country, which relied on coal for 92% of its energy generation in 2011 according to IEA data, is marketing its credentials as a leader in Green bonds.
Poland has started marketing the five-year euro benchmark Green bond at 60bp area over mid-swaps.
“It seems to me that fair value is around 35bp over mid-swaps,” said a banker away from the deal. “Therefore it looks like a new issue premium around 25bp which is high.”
“In the Green bond space, bank and agency issuers have been paying new issue premiums between 0-5bp. As the first sovereign to test the market, I think Poland could end up paying a new issue premium around 10bp.”
The net proceeds of the issue will be used as per Poland’s Green bond framework, in line with the 2016 ICMA Green bond principles. Sustainalytics have provided a second party opinion.
The Reg S trade is expected to price on Monday. HSBC is Green structuring adviser, as well as a bookrunner along with JP Morgan and PKO Bank Polski.
Poland is rated A2/BBB+/A- (negative/stable/stable). (Reporting by Robert Hogg, editing by Helene Durand)