The UK Municipal Bonds Agency (UKMBA) has announced the issue of its first green bond – believed to be in the region of £250m to £400m – in what could be one of the largest municipal bond issues for many years.
The 45-year weighted average-life bond will be issued on behalf of the North London Waste Authority (NLWA) to help rebuild a waste-to-energy plant in Edmonton. It is part of a wider £1.2bn renewable energy programme – the North London Heat and Power Project – and follows a £280m loan from the PWLB in December 2021.
A source close to the latest deal told Room151 that the issue would go ahead if investor feedback suggests suitable pricing can be agreed the week beginning 7 February. Three banks are acting as joint lead managers – HSBC, Barclays and Bank of America.
The source said that the bond complies with the requirements of the Climate Bond Initiative’s criteria for waste-to-energy plants. “It will have an efficiency rating of 25% or more and will be supplying electricity and heat to the surrounding area using cutting-edge technology for a waste-to-energy plant.”
Separately, the UKMBA has published its Sustainable Finance Framework, which sets out its criteria for green, social and sustainable bonds.
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PFM, the managed service provider to UKMBA, will oversee the bond issue, which could be of equivalent value to the bonds issued by Lancashire County Council in February 2020 and Aberdeen City Council in October 2016 (see table below).
On 31 January, Moody’s assigned an A1 issuer rating and an a3 baseline credit assessment to NLWA. Moody’s said this reflected NLWA’s “strong and supportive institutional framework” and “the economic and fiscal strength of the constituent LAs”.
Jon Rowney, the London Borough of Camden’s s151 officer and financial adviser to the NLWA, set out the rationale for a municipal bond issuance in a December 2021 report. The report said that subject to a favourable credit rating, working with the UKMBA offered three distinct advantages over borrowing from the PWLB. These were the ability to “sculpt the repayments” in line with the project’s needs, the ability to “defer part of the finance” and reduce the cost of carry, and, lastly, the potential advantages of price.
NLWA manages waste transportation and disposal on behalf of seven London boroughs – Barnet, Camden, Enfield, Hackney, Haringey, Islington and Waltham Forest. In total, the boroughs collect nearly 820,000 tonnes of waste and recycling each year, of which 675,000 tonnes come from households.
A brief history of local government and transport authority bond issuance since 2000
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