Summary sheet
The operation concerns the purchase of publicly offered green bonds to finance the distribution network investments of Electricité de France (EDF), as indicated in EDF's green bond framework. In detail, this operation is a pilot product and an alternative instrument to a direct loan. The bond proceeds will be used to finance and refinance projects in line with the criteria of EIB's "Climate Action" and/or "Environmental Sustainability" objectives (CA&ES).
The operation is in line with EIB's lending priority objectives on Energy (Renewable Energy, Competitive and Secure Energy) as well as the transversal objectives on Climate Action (mitigation). The aim is to support EU's and France's renewable energy and greenhouse gas emission reduction goals. EDF will use the bond proceeds to finance a combination of EIB-eligible and non-EIB-eligible projects such as investments in electricity distribution networks, district heating, renewable generation (including wind, solar, geothermal or hydropower projects), district heating, district heating/cooling distribution, production of heat and/or power from bioenergy or waste heat and electricity storage (including pumped storage) mainly in the EU and EFTA, with some projects located in the US and UK, while a few in other countries. Projects located outside of the EU/EFTA will not be considered for EIB eligibility. Nuclear power will be excluded from the issuance.
The Project concerns standard electricity distribution network investments in a regulated natural monopoly. Some of the investments are expected to be in EIB Cohesion Priority Regions, supporting the strengthening of the EU's economic, social and territorial cohesion. The programme's overall economic viability is deemed good, and above the financial rate of return, thereby resulting in a good broader social benefit.
The EIB intervention is justified by the presence of certain
market failures that may result in sub-optimal investment. The Project will
enable the Promoter to meet the increase in demand and the requests for new
connections while maintaining or improving the reliability and quality of the
distribution network. Investments contribute to maintaining security of supply,
a public good. They also contribute to the integration of renewable generation
and to the electrification of the mobility sector, which results in lower
carbon and air pollution externalities. The French NECP, which foresees in that
context that the Promoter's annual investments would more than double between
2019 and 2028.
The Promoter has the necessary experience and capacity to manage
the implementation of the programme and operate the assets over the term of the
loan.
EIB's significant investment in the bond is expected to expand the issuer's green investor base, diversifying its funding sources. The operation is also expected to have a material signalling effect, as EIB's expertise and involvement in selected green bond issuances is expected to have a significant value for other investors. It is therefore expected to meet demand for labelled green products in the context of the development of Capital Market Union objectives. Furthermore, in a context on higher volatility on the bond market, EIB's investment in a bond issuance is expected to reduce the market gap and provide higher visibility on the success of the issuance, supporting the issuer in attracting long term financing from public debt markets for green investments.
This operation is intended to generate environmental benefits by supporting EU Taxonomy-aligned projects that help mitigate climate change. Most of the projects financed with the bond proceeds are expected to fall under Annex II of the environmental impact assessment (EIA) Directive 2011/92/EU, as amended by 2014/52/EU, requiring the competent authorities to determine whether an EIA is required. However, overhead transmission lines associated to the projects, or hydro power projects could fall under Annex I, requiring an EIA. The EIB will assess the capacity of EDF that the projects comply with the sector-relevant national and European environmental and biodiversity regulations based mostly on publicly available information. Environmental and social due diligence will focus on the capacity of the promoter to identify, assess, manage and monitor environmental, climate and social impacts and risks, and to ensure that underlying schemes comply with national and EU legislation as applicable, and with EIB Environmental and Social Standards (ESS) and relevant guidelines. This due diligence will be based on public and non-public information. In the project agreement, the EIB requires EDF to disclose Environmental and Social information for the ex-post review of compliance with EIB ESS for projects outside of the EU.
The promoter has to ensure that contracts for implementation of the underlying eligible project will be tendered in accordance with the applicable EU procurement legislation, i.e. Directives 2014/23/EU, 2014/24/EU or 2014/25/EU as well as Directive 92/13/EEC or Directive 89/665/EEC as applicable and interpreted by the Court of Justice of the EU, with publication of tender notices in the EU Official Journal, as and where required. For projects located outside of the EU, the Bank will require the promoter to ensure that the EIB Guide to Procurement (GtP) is complied with. In the project agreement, the Bank will require the Promoter to disclose information supporting compliance with EIB GtP for projects outside of the EU.