The Mercury NZ Ltd (ASX: MCY) share price is on the rise today after the company issued 200 million new green bonds. The gas and electricity company’s share price reached an intraday high of $5.81 this morning, up 3.75%. It has since dropped back and is currently trading at $5.68, up 1.43% for the day so far.
So, what are green bonds and why have they boosted the Mercury Energy share price?
Let’s dive deeper into the mystery of green bonds.
Could green bonds be the future of environmentally friendly investing?
Green bonds are pretty much the same as normal bonds. The only difference is that a green bond must be certified by the Climate Bonds Initiative (CBI), with at least 95% of the proceeds going towards climate-friendly projects.
The major benefit for environmentally conscience investors is that they can be assured their bonds are going towards financing eco-friendly projects, while still having their investment backed by the issuer’s entire balance sheet. It’s a relatively low-risk way of investing ethically (although no investment is ever risk free).
More about Mercury Energy’s new green bonds
Mercury announced its intention to issue green bonds before the market opened on 15 March. Over the following two trading days, the company’s share price launched by more than 8%. On 19 March, the company announced the interest rate that would apply to the bonds. The second piece of news was met with another, though much smaller, share price gain of 2%.
Today’s news is that the company has officially issued the bonds to those who subscribed.
The green bonds issued by Mercury have been earmarked to fund the company’s renewable energy projects. Mercury didn’t mention whether these would be new or existing projects.
Mercury states that 100% of the energy it provides is renewable. Thus, the raised capital has the potential to go towards the company’s hydro, solar, wind or geothermal initiatives. Or, possibly something else entirely.
Each bond will set back an investor NZ$1. Mercury intends to raise NZ$200 million.
Not all willing investors were able to grab themselves a green bond. Mercury reserved them for clients of the Joint Lead Managers, NZX participants and other approved financial intermediaries.
The bonds are 5.5 year, unsecured, unsubordinated fixed rate green bonds, with an interest rate of 2.16% per annum.
Mercury share price snapshot
The Mercury share price is up 42% over the last 12 months, but it has dropped 10.69% year to date.
Mercury has a market capitalisation of around $7.6 billion, with approximately 1.3 billion shares outstanding.
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More reading
- 3 attractive ASX shares currently in a dip
- Why the Mercury (ASX:MCY) share price is surging today
Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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