Cadent has revealed plans to issue a 12-year €500 million bond to fund its iron mains replacement programme.
The company said it will be the first “transition bond” – a new type intended to help organisations decarbonise their operations – to be issued in the UK.
The proceeds will be used to fund the replacement of old irons mains with new plastic pipes, work which gas distribution networks are required to undertake as part of the Iron Mains Risk Reduction Programme.
Although the programme is driven by safety concerns, Cadent said it will also reduce methane leakages and allow the pipes to carry low-carbon hydrogen in future. Iron pipes are susceptible to a phenomenon known as embrittlement, whereby hydrogen molecules are absorbed into the pipes, making them weaker. Plastic pipes do not suffer from this issue.
Cadent chief financial officer Steve Hurrell said: “Cadent is delighted to be the first UK business to issue a transition bond. This type of financing has an important role to play in fostering the transition to a low-carbon economy.”
BNP Paribas is one of four banks enlisted to arrange the bond. It’s global head of sustainable finance and solutions, Delphine Queniart, said: “Transition bonds are a vital tool in supporting the shift towards a low carbon economy, and they create a tangible decarbonisation roadmap for meeting the Paris agreement.
“As a bank committed to climate action, BNP Paribas is particularly proud to be working with Cadent in creating their transition bond framework and launching the UK’s first ever and ground-breaking benchmark transition bond.”
Cadent said the bond will also be the first it issues to fund specific activities rather than the company as a whole.