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Post Market Wrap | Fortescue raises US$1.5b, including US$800m Green Bonds



This Post Market Wrap is presented by KOSEC – Kodari Securities

  • Proceeds (US$700M) to fund Iron Bridge magnetite project & (US$800M) to fund Eligible Green Projects.     
  • Green Bonds provide investors with same security, liquidity and credit risk as corporate bonds.
  • Green Bonds are used to finance renewable energy, pollution prevention, land management, clean transportation and wastewater management projects.
  • Global banks, mutual funds and pension funds seeking to meet their corporate social responsibility obligations to their constituents, are among Green Bond investors.

Fortescue Metals Group Ltd (‘Fortescue‘ or the ‘Group‘) is Australia’s third-largest iron ore producer, conducting its operations in the Pilbara region of Western Australia, from three mining hubs that are supported by fully integrated rail and seaport facilities located at Port Headland. These facilities are complemented by a tug fleet and eight purpose-built 260,000 tonne capacity Fortescue Ore Carriers. 

The Group has recently embarked on a decarbonisation strategy and is progressing to become an integrated player in the renewables and green resources sector, on a global scale. It is currently developing a global portfolio of renewable energy and green hydrogen projects. The strategy seeks to use 100 percent renewable energy to produce green electricity, green hydrogen, green ammonia and other green industrial products, to de-carbonise the steel, power generation and transport industries. This strategy is in support of Fortescue’s stated intention to achieve carbon neutrality in its own operations by 2030 and in its customers’ operations by 2040.

US$1500 million Corporate Bond Offering

Fortescue has raised US$1500 million across two tranches to fund its ongoing growth initiatives, including the Iron Bridge growth project and its Eligible Green Projects.  One tranche of the bond issue, for US$800 million, are Green Bonds. The remaining US$700 million tranche are senior corporate bonds. The Green Bonds have a ten-year term and pay an interest rate of 6.125 percent while the remaining bond tranche has an eight-year term and will pay 5.875 percent per annum. The issue was launched by Fortescue on 6 April and closed fully subscribed on the following day. 

The senior corporate bonds will be applied to Fortescue’s Iron Bridge project, which will be one of the world’s most efficient and technologically advanced magnetite producers. Magnetite is an essential component for steel manufacture. The Green Bonds will be used to finance Fortescue’s Eligible Green Projects. These projects are outlined in the Group’s Sustainability Financing Framework, which describes Fortescue’s decarbonisation initiatives. These include renewable energy, energy efficiency, storage, clean sea and coastal freight transport initiatives. One such initiative is the 150MW solar generation component of the Pilbara Energy Connect Project. 

What are Green Bonds?

Green Bonds are identical to corporate bonds in that they are backed by the Issuer’s entire balance sheet and are priced accordingly. This is a significant point because it ensures that a Green Bond provides investors with the same security, liquidity and credit risk, meaning they offer similar yields, credit ratings and return profiles, to other fixed income investments. The only difference is Green Bonds fund projects that are making a tangible and measurable impact in the effort to address the environmental challenges brought on by the effect of climate change. Green bonds are commonly used to finance energy efficiency projects, renewable energy. pollution prevention and control projects, natural resources and land management projects, clean transportation projects and wastewater and water management projects.

This is the investor appeal of Green Bonds to institutional investors including banks, mutual funds, pension funds, and some hedge funds, seeking to meet their corporate social responsibility obligations to their constituents.   

Looking Ahead

The significance of this successful bond issuance program is that it demonstrates the continuing institutional investor support for Fortescue’s decarbonisation strategy.

This investor support combined with Fortescue’s strong balance sheet leaves the Group well placed to rapidly advance its portfolio of green energy projects and decarbonisation technologies that benefit shareholders as well as the planet.

This Post Market Wrap is presented by Kodari Securities, written by Michael Kodari, CEO at KOSEC.

"Michael Kodari is one of the world's most consistent, top performing investor. A philanthropist and one of the prominent experts of the financial markets, he has been referred to as ‘the brightest 21st century entrepreneur in wealth management' by CNBC Asia and featured on Forbes. Featured on TV as the "Money Expert", on the weekly Sunday program "Elevator Pitch", he is recognised internationally by governments as he was the guest of honour for the event "Inside China's Future", chosen by the Chinese government from the funds management industry, attended by industry leaders, when they arrived in Sydney Australia, on April 2014. Michael and George Soros were the only two financiers in the world invited and chosen by the Chinese government to provide advice, and their expertise on Chinese government asset allocation offshore. With a strong background in funds management and stockbroking, Michael has worked with some of the most successful investors and consulted to leading financial institutions. He was the youngest person ever to appear on the expert panel for Fox, Sky News Business Channel at the age of 25 where he demonstrated his skillset across a 3 year period forming the most consistent track record and getting all his predictions right over that period. Michael writes for key financial publications, is regularly interviewed by various media and conducts conferences around the world."

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Tech layoffs reach their highest point in over 20 years



There have been over 130,000 layoffs across the technology sector in the last five months

The technology sector was billed as the most exciting industry to work in.

Big offices, big dreams, big money were all part of the parcel for many companies attracting staff.

As many organisations caught onto the momentum of the pandemic, the same energy has not been particularly met on the other side.

Thousands of workers have since been laid off as the good times stopped rolling.

In fact, the technology sector’s layoffs are the highest since the dotcom bubble burst 22 years ago.

The BT Group is one of the latest companies cutting staff.

Fifty-five thousand have lost their jobs as part of a corporate restructure.

CEO Philip Jansen will freeze his £1.1 million salary until he retires, according to reports from Sky News.

The ground is also shifting as artificial intelligence takes hold and the economy worsens.

BT Group said it is laying off 11,000 staff because of the increased capacity for artificial intelligence in the workplace.

At the same time, companies like Apple and Goldman Sachs are among those restricting or banning the use of tools like ChatGPT amid privacy or data concerns.

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Big tech crackdown on employees using ChatGPT



Apple and Samsung are among companies restricting or banning the use of ChatGPT

Some of the world’s largest technology companies, including Apple and Amazon have banned or restricted OpenAI’s ChatGPT.

The tool relies on artificial intelligence to produce responses to prompts entered by users.

However, major brands remain concerned around the privacy risks because of the data ChatGPT uses to improve its accuracy.

Samsung has previously reported employees unintentionally leaking confidential internal source code and meeting recordings through ChatGPT.

Meanwhile, Apple has banned the web-platform over concerns surrounding data leaks.

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Can Linda Yaccarino save Twitter’s falling ad sales?



Linda Yaccarino has officially taken over as Chief Executive Officer at Twitter

Linda Yaccarino was once the head of NBC Universal’s advertising and partnerships team.

Her appointment follows a Twitter poll where Musk asked users to vote on whether he should resign.

At the time, 57.5 per cent voted ‘yes’.

Twitter is undergoing a transformation, including addressing concerns around rising hate speech and disinformation on the platform.

Mr Musk said Yaccarino is the perfect person for the job.

“I think Linda’s going to do a great job running Twitter. I’ll provide guidance on technology development.

“Twitter has released more changes in the last six months than it has in the last six years.”

Twitter said it has taken down over 6 million pieces of content in the first half of 2022, before the platform was acquired over by billionaire Elon Musk.

Benjamin Powers is a technology reporter at The Messenger, who said the platform has some issues to address.

“It’s unclear how much he’ll [Musk] be stepping back.”

The New York Times reports advertising revenue attracted US$88 million from 1 April to the first week of May—a decrease of 59 per cent from a year earlier.

“I think the big problem is revenue. The pullback is that they’ve lost about 58 per cent of advertising revenue, which is huge for a company like Twitter.

“The subscription business, which involves getting a blue check, you pay $8 a month, really hasn’t kept up with that dynamic,” he said.

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