In August 2023 E.ON sold two green bonds and said the market had let it prefund much of its 2024 borrowing. Five months later it was back with two more, worth $1.64 billion together. Two months after that it sold another pair. The question is why a company that had already raised its money kept raising it.
Key takeaways
- E.ON issued two green bonds of $820.51 million each on 8 January 2024, a combined $1.64 billion, one maturing on 15 January 2031 with a 3.375 percent coupon and one maturing on 15 January 2036 with a 3.750 percent coupon.
- The January 2024 E.ON green bonds drew a combined order book of more than about $5 billion, roughly three times the amount issued, with Barclays, ING, SMBC and Societe Generale as active bookrunners.
- Proceeds of E.ON's January 2024 green bonds can finance or refinance electricity distribution networks, wind, solar, bioenergy and hydrogen assets, on-site heating and cooling solutions, and electric vehicle charging infrastructure in Europe.
- E.ON's August 2023 green bond issue of about $1.6 billion, split into two tranches of $816.71 million, allowed the company to significantly prefund its financing needs for fiscal year 2024, according to Leap's record.
- Enerdatics records six E.ON bond tranches between August 2023 and March 2024 totalling about $5.23 billion, the most of any issuer among 33 bond financings by European companies in that period.
What did E.ON actually sell in January 2024?
It sold the same amount twice at two different lengths. A tranche is one slice of a bond issue with its own maturity and coupon, and issuing two at once lets a borrower spread its repayments across different years while reaching investors who prefer shorter or longer paper.
E.ON's two slices are identical in size, one running seven years from issue and the other twelve. The longer one pays three eighths of a percentage point more each year. That gap is the price of asking investors to wait an extra five years for their money back, and it is modest. Investors put in orders for about three times what was on offer.
Both slices are green bonds. A green bond is ordinary debt with one extra promise: the borrower commits to spend an amount equal to the proceeds on assets that meet a published list of environmental criteria. The money is not ring-fenced in a separate account. What the investor gets is a reporting obligation and a narrower definition of what counts.
What does the money pay for under E.ON's green rules?
Grids come first, which is easy to miss in a headline about renewables. E.ON's framework lists four categories, and the first is electricity distribution. It carries a test that the others do not.
A distribution project qualifies only if more than 67 percent of the newly connected generation it enables meets a threshold of 100 grams of carbon dioxide equivalent per kilowatt hour over a rolling five-year period, or if the grid's average emissions are already below that threshold. In plain terms, a cable counts as green when most of what it connects is clean. The rule lets E.ON put network spending inside a green bond without pretending that copper and transformers generate anything.
The other categories are wind, solar, bioenergy and hydrogen assets; on-site heating, cooling and cogeneration solutions for businesses and cities; and electric vehicle charging. Leap's record states that E.ON intends to install 30,000 charging points across Europe by 2025 and to invest about $33 billion in the energy transition by 2027.
Why issue again when 2024 was already prefunded?
Because prefunding one year does not fund the plan behind it. The August 2023 record is explicit that E.ON used a favourable market to cover much of its 2024 need, and that its 2023 need had been met by about $1.8 billion of bonds sold in January 2023. The issuer is moving a year ahead of its own spending, not catching up with it.
The August record also shows how large that spending is. It cites network investment of €500 million to €700 million a year on average from 2023 to 2027 to enable the connection of 183 GW of renewable capacity by 2030. It cites network reinforcement of about $1.5 billion to $1.7 billion a year, and a further $1 billion to $1.3 billion a year on other initiatives. Those include connecting a roughly 1.6 GW Intel chip factory, a roughly 250 MW Northvolt battery factory and a roughly 240 MW Shell electrolyser.
Set against a programme of that size, $1.64 billion is one instalment. The pattern across the three issues is a borrower that treats the bond market as a standing facility and returns whenever demand is strong, rather than one raising capital for a single project.
Demand did strengthen. The August 2023 pair drew a peak order book of about $4.6 billion against about $1.63 billion issued. The January 2024 pair drew more than about $5 billion against $1.64 billion. In March 2024 E.ON sold an eight-year bond of about $871 million at 3.5 percent and a 20-year bond of about $1.09 billion at 4.125 percent, and the combined order book reached about $7.6 billion, close to four times the amount issued.
Enerdatics records six E.ON bond tranches between August 2023 and March 2024, totalling about $5.23 billion. Across the 33 bond financings by European companies that Leap logs from July 2023 to June 2024, that is more tranches than any other issuer and about 22 percent of the $23.6 billion raised. Statkraft is next with four tranches, and EnBW follows with three. Only KfW, at about $3.17 billion, raised more in a single record than E.ON's January pair combined.
What does the deal signal for European utility funding?
It signals that green labels have become the default for grid-heavy utilities rather than a premium product. E.ON's framework was written to admit network spending, and network spending is where most of its capital goes. EnBW in Germany, ESB in Ireland and Terna, the Italian grid operator, sold green paper on the same logic in the same period.
It also signals that investors were willing to lend to European utilities for long periods. The longest tranche of the January issue runs to 2036, and E.ON followed it with a 20-year bond within weeks. The rise in order book cover across the three issues, from under three times to almost four, suggests that appetite for this kind of paper was growing rather than being exhausted.
The figure to watch is not the coupon on any one bond but the spacing between them. A borrower that comes back every two or three months is telling the market its funding need is continuous. For E.ON, that need is set by the grid connections it has committed to deliver, and those run to 2030.
Frequently asked questions
How much did E.ON raise in its January 2024 green bonds? E.ON raised $1.64 billion across two green bonds of $820.51 million each, issued on 8 January 2024. One matures in January 2031 with a 3.375 percent coupon and the other in January 2036 with a 3.750 percent coupon.
What can E.ON spend the green bond proceeds on? Proceeds can finance or refinance electricity distribution networks that meet an emissions test, wind, solar, bioenergy and hydrogen assets, on-site heating and cooling solutions, and electric vehicle charging infrastructure.
How often did E.ON issue bonds in 2023 and 2024? Enerdatics records E.ON bond pairs in August 2023, January 2024 and March 2024, six tranches totalling about $5.23 billion, the most of any European issuer in Leap from July 2023 to June 2024.
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