CGN issues long-term green bonds

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中广核发行长期绿色债券

China General Nuclear Power Corporation (CGN) recently successfully issued multi-tranche long-term green bonds via CGNPC International, which marks the first successful issuance of such US dollar bonds with a maturity of 30 years multi-tranche by a Chinese clean energy company.

King & Wood Mallesons (KWM) advised CGN on the issuance, which includes US$500 million 3.875% guaranteed bonds due 2023, US$100 million 4.8% guaranteed bonds due 2048, and €500 million (US$570 million) 2% guaranteed bonds due 2025, under the laws of Mainland China and Hong Kong.

The transaction involved close collaboration between KWM’s Hong Kong and Shenzhen offices. Zhou Hao, one of the lead partners of the Hong Kong team, told China Business Law Journal that the key issue for lawyers was to address the issuer’s concerns regarding investors’ demand for long-term bonds, which involved giving more weight to market trends and ensuring the offering-related information was adequate for investors to assess their investment.

周浩-ZHOU-HAO-金杜律师事务所-King-&-Wood-Mallesons
Zhou Hao

“This was particularly important,” he said, “considering investors tend to regard that locking into long-term bonds entails taking on significant interest rate and inflation risks.”

According to Zhou, green bond volume from Chinese issuers this year has continued last year’s upward trend, given China’s focus on a more environmentally sustainable economy and green bonds’ high interest among investors.

“Although financial institutions still account for the largest portion of issuances, CGN’s successful repeat issuance [of green bonds] demonstrates the increasing diversity of Chinese green bond issuers and that renewable energy remains the largest issuing sector,” said Zhou. “[We] foresee an increasing interest in this financial product from both the investors and the issuers.”

The issuance is CGN’s second to comply with the Green Bond Principles 2018 of the International Capital Market Association. Zhou said there were past concerns regarding a proportion of green bonds from Chinese companies not being aligned with international green bond standards, and insufficient information on use of proceeds.

“Potential Chinese issuers should, with assistance of international counsel and advisers, familiarize themselves with the international green bond standards and requirements, which in some ways may differ from PRC domestic practice, and be more prudent in understanding the key issues affecting investors’ demand, and exercise care in addressing disclosure and transparency.”

The KWM Hong Kong team was led by partners Zhou and Michael Lu, and supported by counsel Cynthia Tan and associate He Luning. The PRC team was led by Shenzhen-based partner Pan Yujia who was supported by Yao Tingting, Yang Ying and Cai Yingxuan.