EDF galvanises nuclear green bonds

4 min read
Julian Lewis

EDF has become the first issuer to harness last week’s hard-fought inclusion of nuclear power in the European Union’s taxonomy of sustainable activities and will use a new green financing framework to support nearly €8bn of annual nuclear spending.

France is to renationalise the giant utility later this year after March’s €3bn rights issue failed to shore up its balance sheet.

To avoid losing investor support for its non-nuclear green financing, which now also includes its electricity distribution activity, EDF will effectively operate two parallel green programmes.

“EDF shall identify at issuance if it intends to finance nuclear power generation with the proceeds of a given bond, or if nuclear power generation shall not be financed with such proceeds,” it said in an investor presentation.

“That's based on feedback we've had from our investor partners,” said Matthew Reed, head of development, sustainable finance at EDF. “We understand that a certain number have different policies related to nuclear exclusionary criteria and so we've tried to set that up in order to adapt.”

Even so, it reckons that a majority of investors will accept nuclear green bonds. “There’s a receptivity to this,” Reed said, citing growing efforts by institutions to offer taxonomy-aligned funds under Article 8 and Article 9 of the EU’s Sustainable Finance Disclosure Regulation.

EDF’s claim echoes recent research by Natixis.

The company also emphasises that nuclear projects financed under the framework will align with all the taxonomy’s applicable screening criteria, including "Do No Significant Harm" and minimum social safeguards.

Reed declined to specify when the first issues will emerge under the framework but said “this is the framework that's going to apply”.

EDF identified €18bn in taxonomy-eligible capital and operating expenditure last year. Nuclear spending accounted for some €8bn of this, comprising €4.4bn of capex and €3.5bn of opex.

No UK for now

EDF, a sustainable finance pioneer that has issued green bonds since 2013, has racked up as much as €10bn in green and social bonds, and all its 2021 bond issues were green or social.

To avoid double-counting, projects funded under its social bond programme will not be eligible under the new framework.

The programme will also not fund EDF’s nuclear programme in the UK. Nuclear activities outside the EU are not taxonomy-eligible.

But once the UK confirms its taxonomy, “it’s certainly not inconceivable that we would look to the criteria of that and consider integrating it”, Reed said.

EDF’s Sizewell C project, in which it is an 80% owner alongside China General Nuclear Power, has said previously that it would consider issuing ESG debt.

Nuclear power accounted for almost 80% of EDF’s 523.7TWh of electricity generation in 2021. With hydro power and other renewable production contributing another 13%, that means its carbon intensity is around a fifth of the average European utility.

EDF’s move follows the landmark nuclear green bond issued by Canada’s Bruce Power in November. Cicero Shades of Green, which provides a second-party opinion on the new framework, also provided Bruce Power’s SPO.

Besides green bonds (including subordinated hybrid debt), EDF’s framework will accommodate green commercial paper and green repo.

Reed declined to discuss the firm’s CP plan. Last year, French rail operator SNCF pioneered a use-of-proceeds version of green CP to fund its opex.

EDF traded its first green repo last year and has been active in the International Capital Market Association working group on the product. “It’s something we’re looking at closely,” Reed said.