[Exclusive] Korea Hydro & Nuclear Power Issues First Domestic 'Green Bond'... 120 Billion Won Scale

KHNP Issues '120 Billion Won' Green Bonds... Maturity Segmented from 3 to 30 Years
First Domestic Green Bond Issuance... Case Utilizing K-Taxonomy
Plans Investment in Renewables... 'Nuclear Green Bonds' Also Expected to Be Issued

A view of Shin Hanul Units 1 and 2 located in Uljin, Gyeongbuk.
Photo by Asia Economy DB

[Asia Economy Sejong=Reporter Lee Jun-hyung] Korea Hydro & Nuclear Power (KHNP) is confirmed to be planning the issuance of green bonds worth 120 billion KRW. This will be the first time KHNP issues green bonds domestically. Since the government included nuclear power generation in the ‘Korean Green Taxonomy (K-Taxonomy),’ it is expected that KHNP’s issuance of green bonds will increase.

According to the compilation of reports on the 25th, KHNP plans to issue green bonds worth 120 billion KRW as early as the end of this month using the K-Taxonomy. The maturity of the bonds is segmented from a minimum of 3 years to a maximum of 30 years. KHNP will adjust the maturity and the amount per maturity considering the corporate bond market conditions. The interest rate will be determined by reflecting the existing yield of government bonds on the day before issuance plus the underwriting institution’s spread.

First Domestic Green Bonds...‘K-Taxonomy’ as the Background

KHNP plans to file a bulk report on the scale and timing of the green bond issuance to the Financial Services Commission within this week. The bulk reporting system is a system that can only be used by companies that frequently issue corporate bonds such as banks and subsidiaries of Korea Electric Power Corporation. Utilizing the bulk reporting system exempts the obligation of demand forecasting.

This is KHNP’s second issuance of green bonds. Green bonds are bonds issued to raise funds for investment in eco-friendly projects such as renewable energy. Previously, KHNP issued green bonds worth 600 million USD (863 billion KRW) with a 5-year maturity in the overseas market in 2018. However, KHNP has not yet issued green bonds domestically.

The reason KHNP is issuing green bonds domestically for the first time lies in the K-Taxonomy. The K-Taxonomy is a system that classifies green economic activities such as eco-friendly and low-carbon activities. If classified as a green economic activity under the K-Taxonomy, financial benefits such as low-interest green bond issuance can be received. KHNP has participated in the K-Taxonomy pilot project led by the Ministry of Environment since the first half of this year. This project aims to establish a foundation for the green finance system using the K-Taxonomy draft.

Possible Nuclear Power Funding...Concerns over ‘Financial Congestion’

The funds raised through this green bond issuance will be invested in renewable energy such as solar power generation and pumped-storage power plants, not nuclear power plants. This is because the green bonds themselves were created based on the K-Taxonomy draft established at the end of last year without including nuclear power. However, since the government included nuclear power in the revised K-Taxonomy announced last month, the issuance of ‘nuclear power green bonds’ is expected soon.

The variable is the rapidly freezing corporate bond market recently. There are concerns that the domestic liquidity crunch may also affect KHNP. If the ‘financial congestion’ phenomenon, where cash flow in the bond market shrinks, continues for a long time, it will inevitably cause difficulties in raising funds for future nuclear power plant construction.

Meanwhile, to stabilize the bond market, the government launched a liquidity supply program worth ‘50 trillion KRW + α (alpha)’ on the 24th. Accordingly, the government is establishing a 20 trillion KRW bond market stabilization fund (Bond Stabilization Fund) and doubling the purchase scale of corporate bonds and commercial papers (CP) by policy financial institutions such as KDB Industrial Bank from the existing 8 trillion KRW to 16 trillion KRW.

This content was produced with the assistance of AI translation services.