South Korea’s state-run Korea Hydro & Nuclear Power Co. (KHNP) successfully raised $600 million in five-year green bonds, the largest offering by domestic power companies, amid overwhelming response to underscore appetite for Korean quasi-sovereign debt amid eased geopolitical risk.

According to sources from the investment banking industry on Thursday, the five-year green-specific bonds were issued at a coupon yield of 3.75 percent, 112.5 basis points above the five-year U.S. Treasury yield. The spread was 27.5 basis points lower than its initial guidance thanks to overwhelming demand of $2.27 billion from 125 institutional investors during the book-building session on Wednesday.

The debts received Aa2 rating from global credit rating agency Moody’s and AA from S&P. Book runners included BNP Paribas, Citigroup Global Markets Securities, JP Morgan, UBS, HSBC and Korea Development Bank.

Green bond is part of environment, social, and governance (ESG) bonds issued to finance projects that serve the public interests, and its proceeds must be used for environmentally-friendly projects. The demand for ESG bonds is on the steady increase as many countries are seeking eco-friendly and social policies.

In South Korea, state-run Industrial Bank of Korea (IBK) is set to hold a book-building session to issue the country’s first social bonds, and Korea Land & Housing Corp. (LH) also plans to issue social bonds to finance its construction projects

By Ko Min-suh and Choi Mira

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