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

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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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U.S. retailers limit emergency contraception purchases

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Demand for morning after pills have led to retailers having to limit purchases

Amazon has limited sales of morning after pills as demand spikes following the U.S. Supreme Court ruling overturning Roe v. Wade.

There is now a limit of three Plan B units per week on emergency contraceptive pills sold through its website.

Other U.S. retailers are also capping purchases of emergency contraceptive pills like chain pharmacy, CVS and Walmart.

Plan B is an emergency contraceptive that can be taken within 72 hours after sex. It is a synthetic form of the hormone progestin which delays ovulation briefly and prevents pregnancy.

Demand has surged following last week’s U.S. Supreme Court ruling overturning Roe vs Wade, ending the constitutional right to have an abortion.

Since the reversal of Roe v Wade, women have tried to find ways to control their reproductive health, by stocking up on emergency contraception.

Social media is flooding with calls to stock up on Plan B in anticipation of possible restrictions on contraceptive pills.

Meanwhile, some US companies have committed to paying staff travel expenses for those wanting an abortion.

Katerina Kostakos contributed to this article.

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Chinese investment in Australia drops

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China’s investment in Australia has plunged to its lowest levels since 2007

A new report from KPMG and the University of Sydney shows Chinese companies invested U.S. $585 million in Australia last year, which is down from a peak of U.S $16.2 billion in 2008.

It comes as relations between the two nations remain sour. Australia has previously called for an independent review into the origins of Covid-19, and a ban on foreign interference.

But Chinese officials have responded with trade sanctions, which have affected Australian wine, seafood and coal exports.

Australia was once a large destination for Chinese investment. In fact, the two nations signed an historic Free Trade Agreement in 2015, with a key focus on economic growth and creating jobs.

Australia’s Prime Minister, Anthony Albanese says he will not make concessions to China. The newly-elected Albanese is in Europe for a series of talks with NATO leaders.

“The resistance of Ukraine has brought democratic nations closer together which have a shared commitment to rules-based, international order,” he says.

But Chinese officials believe it is irresponsible to place Ukraine and Taiwan in the same basket.

Chinese Foreign Ministry spokesman Zhao Lijian says “Taiwan is by no means Ukraine,” and labelled Albanese’s comments as “irresponsible”.

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Target offers support to employees seeking abortions

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Target will help its employees living in states where abortions are banned by funding their travel

The company sent a memo to employees via email with the new policy to be enacted in July.

Target’s Chief Human Resources Officer says “A few months ago, we started re-evaluating our benefits with the goal of understanding what it would look like if we broadened the travel reimbursement to any care that’s needed and covered – but not available in the team member’s community”.

She says “This effort became even more relevant as [Target] learned about the Supreme Court’s ruling on abortion, given that it would impact access to healthcare in some states”.

This all comes amid the reversal of Roe versus Wade removing abortion as a constitutional right within the U.S.

This has sparked a range of companies to provide similar benefits with Amazon also providing travel coverage for employees.

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