Transcript World Bank Green Bond Symposium November 19, 2013

May 2014
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Table of contents
_________________________________
1.Background
2.Current status
3.Annex
• Our experience with green bonds
• Use of proceeds
• Project selection
• Investor reporting
• Second opinion
5
7
8
10
12
• Current status
• Next green bond transaction
• Benefits for investors & City of Gothenburg
• Possible green projects
14
15
16
18
• Financial information about the City of Gothenburg
24
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Table of contents
_________________________________
1.Background
2.Current status
3.Annex
• Our experience with green bonds
• Use of proceeds
• Project selection
• Investor reporting
• Second opinion
5
7
8
10
12
• Current status
• Next green bond transaction
• Benefits for investors & City of Gothenburg
• Possible green projects
14
15
16
18
• Financial information about the City of Gothenburg
24
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Our experience with
Green Bonds
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City of Gothenburg first city in the world to issue green bond
City of Gothenburg first in Nordics to issue green bond
According to the World Bank framework
September 2013
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Use of proceeds from the 1st green bond(SEK 500 mln)
Lackarebäck water treatment
and purification filters
Existing Stage 1 ( annex North ) keeps
the works being completed , while
installation / mounting of the VA process
equipment (pipes , pumps, carbon filters
and ultrafilters ) continues until mid2014. After that the commissioning of the
new processing plant parts. In Stage 2 (
annex South) is the concrete foundation
to be erected . The new standby power
and switchgear building is completed and
commissioned . Construction works is
broadly on schedule – with the
commissioning of Stage 1 in December
2014 and Phase 2 in October 2015.
Impacts:
GoBiGas
Electric cars
Introduction of electric vehicles is the focus of
Gatubolaget. In 2013, the company delivered
electric car # 100 to the city committee in
Angered. Thus, the City Council’s goal of 100
electric vehicles in the city by 2015 have
already been fulfilled. In connection with the
introduction of electric cars, Gatubolaget has
got four quick charger for electric cars, the
last of those coming into place in 2014.
Gatubolaget believes there is scope to
change most of the city’s passenger car fleet
to electric cars. Impacts:
•reduced use of fossil fuels
•Capacity increase by 40 %
•Socioeconomic gains in terms of lower
disease outbreaks which saves up to
GoBiGas project aims to gasify wood raw
material for the production of biogas that will be
distributed at existing gas grid . The project is
divided into two stages with a demonstration
plant as the first stage and then a commercial
facility that second stage . The first phase is
designed to produce 160 GWh / year , equivalent
to fuel to about 16 000 cars in years , and the
second phase is scheduled to produce 640 to
800 GWh / year. The project is run in close
collaboration with both academia ( Chalmers )
and suppliers ( Valmet on Lundbystrand ,
Gothenburg).
For GoBiGas project’s first phase started
excavation work in 2011 and installation in 2012.
The facility is now completed and commissioning
is underway. In 2014 , the plan is to get the
demonstration plant in continuous operation for
evaluating technology choices , function and
performance . In parallel with the execution, a
major focus was placed on participation in
various fora to improve the economic conditions
for the production of biogas.
290.000 days in productivity loss
between 2014-2038
Impacts:
300 mkr
•Socioeconomic gains in terms of cost
savings of 1.4 million hospital days
30 mkr
150 mkr
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When the plant is in full production, delivery will
be 800 – 1 000 GWh, equivalent to fuel for
between 80,000 to 100,000 cars.
Project
Selection
Process
City
Council
Final
Approval
Treasury
Departmen
t
City of
Gothenburg
Selection
Process
Policies &
Guidelines
Environmental
Department
Treasury and Environment Departments work
side-by-side in project selection process, thus
uniting the two areas in a way it hasn’t been done
before.
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Project portfolio
may include
Mitigation
•
mitigation of
climate change,
including
investments in lowcarbon and clean
technologies, such
as energy
efficiency and
renewable energy
programs and
projects
Adaptation
•
Sustainable
environment
•to a smaller extent (max
20%) projects which are
related to a sustainable
environment rather than
directly climate related.
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adaptation to
climate change,
including
investments in
climate-resilient
growth
Investor
reporting
•Web, finans.goteborg.se
•Annual investor letter
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Regular investor letter
Earmarked account
City of Gothenburg is committed to
provide an annual investor letter which
will be available on City of
Gothenburg’s website. The investor
letter will include a general summary
of City of Gothenburg’s Green Bond
development, a list of projects and a
selection of project examples.
An amount equal to the net proceeds of the issue
of the Notes will be credited to a special Budget
account that will support the City of
Gothenburg’s lending for Eligible Projects. So
long as the Notes are outstanding and the special
account has a positive balance, at the end of
every fiscal quarter, funds will be deducted from
the special account and added to the City of
Gothenburg’s lending pool in an amount equal to
all disbursements from that pool made during
such quarter in respect of Eligible Projects.
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Second
opinion
 Independent Research Center
associated with University of Oslo
 CICERO conducts research on and
provides information and advice
about national and international issues
related to climate change and climate
policy
“What’s considered green is different for everyone. Our investors need to be
comfortable…reaching out to Cicero is a great first step.”
-Stephen Liberatore, Managing Director at pension provider TIAA-Cref
“On behalf of our investors, we ask for a second opinion from an environmental specialist
called CICERO…we wanted to be sure that the right questions were asked...we also wanted to
make sure that the independence of the group that was raising the questions was secure.”
-Christopher Flensborg, Head of Sustainable Products and Product Development, SEB
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Table of contents
_________________________________
1.Background
2.Current status
3.Annex
• Our experience with green bonds
• Use of proceeds
• Project selection
• Investor reporting
• Second opinion
5
7
8
10
12
• Current status
• Next green bond transaction
• Benefits for investors & City of Gothenburg
• Possible green projects
14
15
16
18
• Financial information about the City of Gothenburg
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New, extended green bond framework
Framework linked to the City’s environmental
programme
Projects selected in accordance with long-term
environment goals
5 billion SEK
Continuity on the green bond market
One green transaction every year
•Transaction subject to market conditions and internal supply of projects
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Upcoming market transaction
•City of Gothenburg, Aaa/AA+
•Green bond
•Tenor: 5-7 years
•Volume: benchmark size
•FIX & FRN
•Transaction is subject to market conditions
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Investor benefits
•
City of Gothenburg Green Bonds support mitigation
and adaptation projects selected according to the
framework
•
Investors have an opportunity to invest in local
renewable energy, biogas, smart grids, and much more
•
Investors benefit from AA+/Aaa City of Gothenburg
rating and the City’s “due diligence” for projects
•
Investors are offered market return – no premium
charged for the “green element”
•
Project that might be funded through this green bond
issue are listed on next slides
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Benefits for City of
Gothenburg
•Diversify investor base for City of
Gothenburg funding
•Create awareness about:
•City of Gothenburg
•City’s climate efforts
•climate change and the need for actions
in all sectors
•Bringing together environment and finance
departments internally in organization for
better understanding of each others’ needs for
future collaborations
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Reduced Climate
Good-Quality
A Good Build
Impact
Groundwater
Environment
Zero
Eutrophication
Flourishing
Lakes
And Streams
Sustainable
Forests
Clean Air
A Rich
Diversity of
Natural
Acidification
Only
A Non-Toxic
Environment
Plant and
Animal Life
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A Balanced
Marine
Environment
A Varied Agricultural
Landscape and
Thriving Wetlands
1
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Possible Green Projects
Electricity
• Quiet, emission-free, fuel-efficient electric
buses from Volvo
• Electric buss line between Johanneberg
Science Park and Lindholmen Science Park
• Project includes future stop solutions, ITS
solutions, security concepts, green depot and
energy Solutions
• Testing and demonstrating new ways to use
public transport
• Start 2015
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Possible Green Projects
•Solar energy in-house
•Low-energy buildings only
•Only sustainable materials used in
constructions
•Energy-neutral buildings
•Energy generating buildings to come
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Possible Green Projects
•”Westra pier”electrical efficiency
•Teknikcollege Lindholmen- Environmentally certified
building
•Inre sannegårde - disposal
•Kajskjul 113- Energy efficiency, waste management,
water.
•Climate Improvement Program 141: an - Energy
efficiency.
•Lindholmshamnen and housing Götaverksgatan bk 10.7
million - Urban planning, waste management, energy
efficiency, water supply.
•Disposal plant at Western Eriksbergsvägen-Disposal.
•Stop for electric bus - Transport.
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Possible Green Projects
•Gryaab’s nitrogen treatment
•Post-denitrification project
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Table of contents
_________________________________
1.Background
2.Current status
3.Annex
• Our experience with green bonds
• Use of proceeds
• Project selection
• Investor reporting
• Second opinion
5
7
8
10
12
• Current status
• Next green bond transaction
• Benefits for investors & City of Gothenburg
• Possible green projects
14
15
16
18
• Financial information about the City of Gothenburg
24
23
Annex
Financial information
about the
City of Gothenburg
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Key characteristics
City of Gothenburg
In brief
Sweden
Employees
48 000
Inhabitants
526 054
Size
Second largest city in Sweden
Turnover
SEK 48,0 bn
Debt portfolio
SEK 38,6 bn
Ratings
Aaa (2006) / AA+ (2007)
Major Sectors
Machinery, Automotive, Shipping and
Pharmaceuticals
Large companies
Volvo Cars, Volvo Trucks, SKF, Ericsson,
Astrazeneca, SCA Hygiene Products, Stena
Groupe
City of
Gothenburg
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Responsibilities
The municipalities are legally or contractually responsible for example:
Childcare and preschools
Primary and secondary education
Care of the elderly and disabled
Social services
Water supply and sewerage
Infrastructure, traffic, public transport
Plan and environmental issues
Rescue services and emergency preparedness.
Other services provided on a voluntary basis include for example:
Culture and Leisure services
Housing
Industrial and commercial services.
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City of Gothenburg – capital market presence
Financial infrastructure
Debt portfolio
City of Gothenburg
Framework
Outstanding
EMTN
EUR 3000M
EUR 2000M
Green Bonds
SEK 2000M
SEK 500M
CP
SEK 3000M
-
ECP
USD 500M
-
Credit facilities
SEK 9000m
-
Kommuninvest
-
SEK 1300m
Framtiden
Framework
Outstanding
SEK 21.8bn /USD 3.3bn equivalent
Kommuninvest; 1,3
Others; 1
EIB; 3,9
Framtiden; 14,5
Chart
EMTN; 17,9
Total 38,6 SEK bn
Group maturity profile(SEKbn)
10
9
8
7
Framtiden
6
MTN
SEK 10000M
SEK 6200M
Staden
5
4
CP
SEK 4000M
SEK 2700M
3
2
Bank loans
-
SEK 5200M
1
0
2014
2015
2016
2017
2018
2019
2020
2021
>2021
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Public ratings
Standard & Poor’s and Moody’s
AA+
AA+ since 2007, stable outlook
 Predictable and supportive institutional framework
 Dynamic local economy with solid growth prospects
 Very positive financial management
 Sound budgetary flexibility due to a high share of
modifiable revenues
 Robust liquidity position
÷
÷
Increasing deficits after capital accounts, owing to
higher investments.
Potential risks in an adverse scenario, given the very
large, albeit mainly self-supporting, group of
municipal companies.
Release calendar for rating reports:
•
March 21
•
September 19
AAA
AAA since 2006, stable outlook

Track record of balanced budgets

Rigorous budget controls

Solid financial position with a very low, though increasing
net debt burden as the bulk of the city’s debt is related to what
to date have been on aggregate self-supporting companies
Downside risks
÷
A loosening of the prudent budget discipline, resulting in a
large increase of expenditures, and negative operating
margins in combination with a high level of debt-financed
investments could put pressure on the rating.
÷
Significant weakening of the importance of local government
and consensus with the central government, regarding the
delivery of public services, or a downgrade of the sovereign
rating could place the rating under pressure.
Release calendar for rating reports:
•
August 15
•
December 12
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Market activities 2014
Bonds or CP?
CHF, EUR,
USD?
Autumn
2014
SEK 1.7 mdr
Redemptions 200 mkr
Green Bond
May/June
2014
March 2014
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Corporate structure of City of Gothenburg
Göteborgs
Stadshus AB
Regional
companies
Internal service companies
Gatubolaget
Renova
Gryaab
Kommunleasing
Upphandlingsbolag
et
Temporary
European Office
Grefab
Boplats
Göta Lejon
Göteborg Energi
Framtiden
HIGAB
BRG
Gbg & Co
Gbg Energi Nät
FordonsGas
Poseidon
Älvab
Lindholmen ScP
Kommunintresse
nt
Partille Energi
Lerum Energi
Familjebostäder
Scandinavium
Falbygdens
Energi
Svenska
EnergiAskor
Johanneberg
ScP
Gårdstensbost.
Göteborgslokaler
Ale Energi
Skövde Biogas
Bostadsbolaget
Gbg Tekninska
College
Gbg Energi
Gasnät
Gastekniskt
Center
Egnahem
Cityflygplatsen i
Gbg
Sörred Energi
Sävsjö Biogas
Rysåsens
fastigh.
UNO
GoBiGas
EFO
Störningsjouren
Lidköping
Biogas
Gbg Energi
Backa
Parkeringsbolaget
Gbg Energi
DinEl
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Gbg Hamn
Gbg
Spårvägar
Scanport
Insurance
Buss
Gbg & Co
Träffpunkt
Gbg Stuveri
Trafikantservice
Got Event
Scandinavia
n Distripoint
Spårvagn
Liseberg
Stadsteatern
Gbg Port
Operation
Structure of public sector spending
City of Gothenburg
Spending – City Of Gothenburg
Key focus areas

Healthcare

Childcare

Municipal housing

Care for the elderly and disabled

Schooling for children and youth

Law, order and security

Sanitation and waste management

Energy supply

Water supply and sweage

Construction issues

Infrastructure
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Constitutional system
Central Government
Local Government
30% of public sector spending
70% of public sector spending
International Debt
Markets
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Strong institutional framework
According to the Swedish Bankruptcy Act a local government cannot be declared bankrupt since they do not fulfil the
criteria of being insolvent. This is due to the fact that the local governments have the constitutional right to levy taxes. The
Swedish Court has stated that the local governments in Sweden are not covered by the Bankruptcy Act. (RH 1996:75). This
view is supported by the Swedish legal doctrine.
Requirement for sound
financial management
Balanced budget
requirement
Local government
financing principle
Financial equalisation
 Local governments must
work according to a sound
financial management
 Annual local government
budgets should normally be
in balance, imbalances must
be restored within 3 years
 If the government alters the
tasks of local governments,
the governments must also
neutralise their financial
effect
 Imbalances between local
governments are equalised
annually through income
and cost equalisation
schemes
 Law: “Kommunallagen
chap. 8 §2(1991:900)”
 Law: “Kommunallagen
chap. 8 §4-5 (1991:900)”
 Approved by the
government and in force
since 1972.
 Law: “Lagen (2004:773) om
kommunalkekonomisk
utjämning
Financial prudence explains Sweden’s strong public finances and low levels of public debt
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Investor relations
http://finans.goteborg.se
Göteborgs Stad och miljö:
Link
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Contacts
Investor relations
Mr. Magnus Borelius
Head of Group Treasury
Tel: +46 31 368 00 23
[email protected]
se.linkedin.com/in/magnusborelius
Funding
Mr. Danijel Afolter
Portfolio Manager
Tel: +46 31 368 06 04
[email protected]
se.linkedin.com/in/dafolter
Ms. Frida Svensson
Portfolio Manager
Tel: +46 31 368 04 67
[email protected]
http://finans.goteborg.se
Bloomberg ticker: GOTA Govt
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