The European Commission has today issued €6 billion of NextGenerationEU green bonds in its fourth syndicated transaction for 2023. The single tranche transaction was executed via a tap of the green bond due on 4 February 2048.
Investors demonstrated a strong interest in the transaction, which was over 12 times oversubscribed.
The Commission plans to fund 30% of its NextGenerationEU recovery programme by issuing NextGenerationEU green bonds. This will make the Commission the largest green bonds issuer in the world.
Today’s transaction brings the total volume of NextGenerationEU green bonds issued to date at €42.5 billion. The proceeds of these bonds will be used to finance green projects from the Member States’ national Recovery and Resilience plans (RRPs) – the roadmaps to spending under NextGenerationEU. The pool of eligible expenditure for NextGeneratoinEU green bonds under Member States’ RRPs currently stands at €187 billion, with the amount due to increase as further requests for financing are still being submitted.
With today’s transaction, the Commission has raised €39.4 billion out of its overall €80 billion funding target for the first half of 2023, or 49% of the total. Out of the €80 billion funding target, some €70 billion will be directed to the NextGenerationEU recovery programme, and around €10 billion to the Macro-Financial Assistance+ programme for Ukraine.
A detailed overview of the planned transactions under the unified funding approach for the first half of 2023 is available in the EU funding plan.
The European Commission is borrowing on international capital markets on behalf of the European Union and disbursing the funds to Member States and third countries under various borrowing programmes.
Its largest programme is NextGenerationEU, whose objective is to support Europe’s recovery from the coronavirus pandemic with up to around €800 billion in investments in Europe’s sustainability, digital solutions and resilience. To date around €144 billion has already been disbursed to EU countries under the Recovery and Resilience Facility. Further support has been provided to other EU programmes benefitting from NextGenerationEU funding.
Out of the funds paid to Member States under the Recovery and Resilience Facility to date, €21.4 billion have been reported as eligible for green bond financing.
Under the NextGenerationEU green bond programme, expenditures are being confirmed as eligible for funding via green bonds ex-post, after EU countries have demonstrated what the funds have been used for.
Real time information about the eligible and allocated expenditure is available in the real time NextGenerationEU green bond dashboard. A further reporting tool under the programme is the allocation report, whose first edition was published in the autumn of 2022. The first impact report to assess the climate impact from projects funded by NextGeneratioEU green bonds will be released later in 2023.
Today’s bond syndication
NextGenerationEU green bond
Due on 4 February 2048, this bond carries a coupon of 2.625% and came at a re-offer yield of 3.348% equivalent to a price of 87.930. The spread to mid-swap is +68 bps, which is equivalent to +98.8 bps over the Bund due in August 2046 and +13.9bps over the OAT due in May 2048.
The final order book was of over €73 billion.
The joint lead managers of this transaction were Bank of America, Deutsche Bank, JP Morgan, Nomura and Nordea.