As a country still reliant on coal for energy production, decarbonisation in Czech Republic is meaningful. Use of SLBs by ČEZ improves accountability for achieving its targeted reductions.
The latest bond is linked again to the 2030 target, which is aligned to 2°C reduction. There is 2033 target, aligned to 1.5°C, which may be used in the future for longer dated issuance.
Interestingly all the SLBs use the same payment structure, of 0.75% premium payment. This means the longer bonds should have similar option values, which suggests the new bond may soon converge in pricing. For the shorter bond, where 2024 reporting will give guidance on the likelihood of achieving the 2025 target, this structure may increase price volatility.
