Environmental Finance's Sustainable Debt Awards 2024

Transition bond of the year: Snam

In September 2023, Italian energy infrastructure company Snam issued a €500 million ($542 million) transition-labelled exchangeable bond.

The deal represents the first transition-labelled equity-linked instrument globally. An exchangeable bond is a type of hybrid debt security that can be converted into the shares of a company. Companies issue exchangeable debt for several reasons, including to diversify their investor base or to divest a stake in another company or subsidiary.

Snam reports proceeds of the exchangeable bond will finance eligible projects in accordance with its Sustainable Finance Framework (November 2021), including upgrading Snam's infrastructure to meet hydrogen-ready standards, investments in biomethane, and investments to equip compressor stations that can be powered by both gas and electricity.

Source: Snam

"We believe, as many other market participants and observers do, that transition finance is the next frontier for the ESG bond markets to address, and this innovative pathfinder structure highlights how the transition theme can be successfully communicated in context of different financing instruments," commented Paul O'Connor, head of EMEA Sustainable Finance Debt Capital Markets, J.P. Morgan.

J.P. Morgan and BNP Paribas acted as structuring banks and as joint global coordinators alongside Barclays, Bank of America and UniCredit.

The transaction represents Snam's seventh issuance of a transition-labelled debt instrument.

"We are particularly glad to accept this award from Environmental Finance, a milestone we have achieved through a great teamwork and the support of structuring banks. While recognising the success of our EU Taxonomy-aligned transition bond exchangeable in Italgas shares, it underscores Snam's strong commitment to drive positive change and sustainability in the financial landscape," commented a representative from Snam.

Snam is one of the largest gas distribution companies in Europe, with a market capitalisation of €15 billion. It operates a transportation network of approximately 41,000 km between Italy, Austria, France, Greece and the UK and reports that it owns 3.5% of the world's natural gas storage capacity, with an infrastructure capable of delivering the transition to hydrogen.

Deal highlights

Issuer: Snam
Size: €500 million ($542 million)
Maturity: 29 September 2028
Coupon: 3.25%
Use of proceeds: Network readiness and pollution prevention, leak detection and control, green gases
External reviewer: ISS ESG
Lead managers: Bank of America Merrill Lynch International, BNP Paribas, Barclays Bank, J.P. Morgan Securities and UniCredit AG.
Credit rating: Baa2 (Moody's); BBB+ (Fitch, S&P)