PPC: Coal decommissioning success impacts SLBs

7 minute read

PPC, a Greek utility, has issued two Sustainability-Linked Bonds (SLBs), with targets linked to absolute Scope 1 emissions. The shorter bond missed its target at the end of 2022, and is now paying a 50bp step-up coupon. In Jan 2024 PPC announced strong coal decommissioning, which makes it significantly more likely to achieve its 2023 SLB target.

PPC is the largest electricity supplier in Greece, and still operates several coal power plants. Its decarbonisation strategy was thrown off-track due to energy security concerns, and this caused it to miss its 2022 SLB target.

On 24 Jan 2024 it held a capital market day, with some reporting on 2023 performance. This included confirmation that 0.5GW of coal-generation capacity was closed in 2023, re-starting its decarbonisation trajectory after a one-year delay.

Reporting was insufficient to confirm meeting the 2023 SLB target, however it looks more likely. This should translate into a lower probability of the SLB paying a step-up coupon, and therefore a widening of the bond spread.

Since the announcement the PPC bond curve has flattened, which seems counterintuitive. We conclude the market may not yet have digested this information.

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