Enel SLBs: update on 2023 observation date

8 minute read

Enel, an Italian utility company, is the largest issuer of Sustainability-Linked Bonds (SLBs), with nearly four times more volume than Chile, which is in second place.

As it has been using this structure since 2019, four bonds have already met their Sustainability Performance Targets (SPTs), and a further ten bonds have their observation date at the end of this year. The KPI in question is to reduce Scope 1 emissions intensity for power generation to 148 gCO2e/kWh.

There has been a shift in trajectory driven by policy changes. The invasion of Ukraine has left European governments unwilling to transition to gas, and so extended the life of coal generation assets. This should not be viewed as a shift in sustainability strategy from Enel, but rather a bump in the road driven by exogenous factors.

Our analysis concludes it is highly unlikely that Enel will achieve its SPT at the end of 2023, and it is therefore likely that the ten bonds in question, with total notional of $10.8bn, will pay a step-up coupon. This would be the largest step-up coupon paid in the SLB market to date.