(Bloomberg) — Anglian Water Group Ltd is set to become the first UK water company to test the public debt markets since a summer in which the sector came under intense public criticism for chronic leaks and sewage discharged into the nation’s rivers and seas.
(Bloomberg) — Anglian Water Group Ltd is set to become the first UK water company to test the public debt markets since a summer in which the sector came under intense public criticism for chronic leaks and sewage discharged into the nation’s rivers and seas.
The company was due to start speaking to investors on Tuesday for a potential nine-year sustainability-linked bond, according to a person familiar with the matter, who asked not to be identified as they aren’t authorized to speak publicly. Proceeds from the offering, via the company’s finance arm, will be used to refinance existing debt and for general corporate purposes, the person said.
The bond sale is set to be the provider’s first foray into the public debt markets in over a year, according to data compiled by Bloomberg. Although the region covered by Anglian Water is not under a hosepipe ban, companies in England have stirred public anger by preventing people from watering their gardens and washing their cars, while the water providers themselves leak as much as three billion liters every day.
A drought has been officially declared across swathes of England and Wales after a period of below-average rainfall.
Utility giants also provoked criticism this summer when sewage ran into rivers and on to popular beaches following thunderstorms, a problem that also occurred frequently last year. Water companies’ environmental performance “was the worst we have seen it for years” in 2021, according to a report published in July by the Environment Agency.
UK water companies normally issue new bonds in the second half of the year, as firms return to debt markets after a summer slowdown. This year, investors are ready to demand higher yields, especially for providers lagging behind on their leakage targets.
Some water companies may look for alternative ways to raise money. Thames Water Utilities Ltd., the UK’s largest water company, is said to be exploring the sale of at least $150 million of debt in a privately arranged transaction, with others likely to follow suit.
By opting to sell a sustainability-linked bond (SLB) tied to its carbon emissions, Anglian might be able to get better terms from investors. SLBs have become a standout asset in a sluggish market for ethical debt, which includes green bonds that companies use to raise money for targeted spending on climate targets. Unlike social, sustainable and green bonds, the money raised from SLBs can be used for any corporate purpose.
Anglian Water’s targets include the reduction of the company’s operational and capital carbon emissions, according to its bond framework. However, an evaluation of the bond written by second-party provider DNV AS has no information on the company’s historical emissions. Still, on its previous SLB issuance in June 2021, which had similar carbon-related targets, the company managed to attract over £1.5 billion ($1.7 billion) of investor bids for a £300 million deal.
ICBC Standard Bank Plc, JPMorgan Chase & Co. and Lloyds Banking Group Plc are working on the Anglian Water deal, the person familiar said. A spokesperson didn’t immediately reply to a Bloomberg News emailed request for comment.
More stories like this are available on bloomberg.com
©2022 Bloomberg L.P.
