Masdar’s second green bond raises $1bn amid strong demand

Green energy firm Masdar has raised $1bn in its second green bond issuance which was heavily oversubscribed, indicating strong institutional demand to fund the energy transition in emerging markets.

Masdar reported strong institutional demand for its second fundraiser, which was more than 4.6 times oversubscribed with 70% of the investors representing institutional backers and 30% investors from the MENA region. The clean energy company is since 2022 jointly owned by Abu Dhabi's National Oil Company ADNOC, Abu Dhabi gas company TAQA and Abu Dhabi sovereign wealth fund Mudabala as the kingdom aims to diversify its income streams. As of 2022, the oil and gas trade accounted for nearly half of the nation's GDP.

The bond issuance has been divided into two tranches of $500m each with tenors of 5 and 10 years offering coupons of 4.875% and 5.25% respectively.

This is the second fundraiser aimed at funding Masdar’s goal of expanding its renewable energy portfolio to 100GW by 2030. A previous bond issuance had already raised $750m on the International Securities Market of the London Stock Exchange last year.

The second issuance was rated AA- by Fitch and A2 by Moody’s. Fitch recently upgraded Masdar's credit rating one notch to 'AA-', reflecting a stable outlook.

Proceeds from the bond will fund Masdar’s equity commitments to new greenfield renewable energy projects, particularly in developing economies. This stands in contrast to global green bond market flows, which so far remain heavily concentrated in developed markets.

Mohamed Jameel Al Ramahi, CEO of Masdar, said: “The funds will be pivotal in advancing our ambitious portfolio of renewable energy projects, further cementing our role as a key player in supporting an equitable energy transition by increasing energy access in emerging markets and the Global South.”

Green bond issuance has surged since the introduction of Central Bank rate hikes from 2021 on. However, the global green bond market is so far heavily dominated by European issuers, which account for more than half of the overall market and more than two thirds of projects funded are also in developed economies, according to data by the Climate Bonds initiative.