Corporate Issuer and Sustainable Issuer: Iberdrola
Greening the globe
For its successful global execution of a huge funding plan across its capital structure, all the way from new equity to senior bonds and loans via convertibles and hybrids, and almost exclusively in green format, Iberdrola is IFR’s Corporate Issuer and Sustainable Issuer of the Year.
For Spanish utility Iberdrola, 2025 was a year of “taking advantage of very good market windows” after defining the optimal products and cheapest channels to fund its significantly expanded capital expenditure plan, according to Ignacio Real de Asua, head of capital markets and financial risk management.
Announced at a capital markets day in September, the company’s 2025–28 strategic plan requires it to increase capex by 30% over the period. That translates to gross investments of €58bn, two-thirds of which will go into electricity networks – primarily in the UK and US.
Against this background, it sought – and attracted – investor and lender support in a striking range of instruments, putting its name to what Real de Asua called “many unique transactions” during the year. While the company’s first equity issue in more than 15 years stands out as a €5bn accelerated bookbuild in July that ranked as the EMEA region’s largest since compatriot Santander raised €7.5bn in January 2015, it was far from alone.
Iberdrola’s other landmark deals included the first hybrid bond under the new European Green Bond Standard, as well as the first EuGB to also align with the voluntary Green Bond Principles, administered by the International Capital Market Association, that many ESG bond mandates require.
The company furthered its standing as one of the very few issuers of green convertible bonds while also sourcing green funding from a broad range of channels. These included US private placements, Rule 144A issues and tax-exempt bonds and Brazilian debentures, plus loans from the UK National Wealth Fund and the European Investment Bank.
It also undertook a jumbo project financing in the UK and a multi-borrower sustainable syndicated credit.
Equity tests
Iberdrola’s surprise ABB in July was a significant test of equity capital markets. The fundraising came two months before the utility was due to detail its next three-year investment cycle. Nonetheless it ended 3.8 times covered.
The wall-cross was also smaller and quicker than expected, with a small group of investors contacted ahead of launch the next morning. An anchor order more than compensated for the Qatar Investment Authority not participating, despite its stake of more than 8%.
Iberdrola also renewed its commitment to green equity-linked issuance with its second non-dilutive green convertible bond in March, raising €400m. While the company is EMEA’s only issuer in the green NDCB niche, Europe has still only seen 11 green CBs in total.
The instrument provides full equity treatment but has to be aggressively priced to be cheaper than straight debt. The CBs are normal convertibles as far as bondholders are concerned, but Iberdrola purchased cash-settled call options matching those embedded in the bonds to remove the risk of dilution.
Proceeds were slated for eligible projects under its December 2023 green financing framework, to be externally reviewed by Moody’s. Iberdrola reports annually on its website on use of net proceeds, including lists of projects and fund allocation, impact reporting and assurance on compliance.
Iberdrola was able to capitalise on scarcity value to improve pricing, achieving a 1.5% coupon and an upsize from €375m with a strong long-only bid and a large anchor order at the top. It also capitalised on the dominance of investment-grade names in European equity-linked at the time.
Further comfort was provided with two-way adjustment for any dividends paid annually above €0.635.
Eight months later, the stock had risen 30% and above the €17.7406 conversion price, lifting the bond price to more than 110.
Deft timing
In the bond market, Iberdrola combined its leadership in ESG with a deftness on timing. Its hybrid in October, the first in EuGB format, illustrated this by coming in the wake of the company raising its 2025 earnings guidance. That led to a bump in the share price, and credit investors proved keen to get involved too.
The €1bn 3.75% perpetual non-call six bond pulled in books of more than €7.7bn, with demand holding steady even as leads narrowed pricing by 62.5bp from the starting level, with just a €100m drop from peak orders.
Iberdrola opened books on the hybrid issue at the 4.375% area. The scale of demand meant the deal, priced 12.5bp inside fair value at 3.75%, was upsized from a minimum €800m. There were 440 accounts in the book.
“The timing of the deal was determined by competitive rates and spread,” said Real de Asua, who added it “represents what Iberdrola is: it’s a special transaction from an execution point of view”.
The hybrid was Iberdrola’s second public euro bond transaction of the year following a €750m 10-year EuGB in May.
The earlier deal was the first corporate bond to meet both the EU GBS and ICMA's GBPs, said Guillermo Colino, head of debt capital markets at Iberdrola.
Like the hybrid, the senior deal’s timing was spot on. It landed at 110bp over mid-swaps, which was inside bankers’ estimates of fair value. Books had opened at plus 145bp area.
The backdrop had become more favourable for issuers following the strong volatility experienced after the Trump administration's tariff announcements in April. The more supportive environment created by subsequent falls in market rates and credit spreads was helped further by Iberdrola selecting a day with very little competing supply.
Diverse array
Iberdrola orchestrated an array of other mostly green financings from a host of counterparties during the year as it sought to diversify funding. Especially notable was a green loan of up to £600m from the UK’s National Wealth Fund, a new lender to the company. This facility, with an average life of 9.25 years, run alongside a 5.5-year average life green loan of up to €900m from a bank syndicate, with both financing eligible capex at subsidiary Scottish Power.
NWF’s lending has replaced that of the EIB in the UK since the UK left the European Union but Iberdrola also continued making use of the latter for its borrowing for green projects in the Baltic Sea, Brazil and Spain, closing five EIB loans totalling nearly €1.2bn in a variety of maturities and guarantee structures.
Also in the UK, the company assembled more than £3.6bn in project finance across as many as nine tranches for its joint venture with Masdar of the United Arab Emirates on the East Anglia Three offshore wind farm. The financing, from 23 banks and Denmark’s export credit agency EIFO, contributed 70% of the up to 1.4GW project’s financing and was 40% oversubscribed.
Similarly, Iberdrola’s new €2.5bn multi-borrower sustainable credit facility, which covers both the parent and its Avangrid US subsidiary while reducing the group’s overall liquidity demand by €900m, was 45% oversubscribed by a larger 32-bank syndicate. The facility’s key performance indicator linkers are its most competitive loans, according to Iberdrola.
In addition, the company harnessed a variety of market sectors to raise green debt for its Brazilian and US entities. In Brazil, its Elektro Redes, Neoenergia Celpe and Neoenergia Coelba units raised as much as R$3.3bn (US$620m) from institutional and retail-targeted issues of up to R$700m in both fixed and floating-rate structures that carried maturities out to 15 years.
In the US, its Central Maine Power, New York State Electric & Gas, Rochester Gas and Electric and United Illuminating entities raised just over US$1bn in 10 and 12-year green PPs, Rule 144A notes and tax-exempt bonds despite the country’s unconstructive environment around ESG issuance.