Ontario to Issue Green Bonds Within Months, Finance Chief Says

Ontario will issue the first Green bond from a Canadian province in the second quarter, the financing chief for the province said today.

Gadi Mayman, chief executive officer of the Ontario Financing Authority, said the province has met with its 12 regular underwriters of Canadian dollar bonds and has asked for assessments of the environment projects the bond will fund.

“We expect to do it in the next couple of months depending on market conditions,” Mayman said in the province’s budget lock-up today. “We are working internally to gather all the projects it will be financing.”

Ontario Premier Kathleen Wynne unveiled plans to sell Green bonds in October to tap a global market that Toronto-Dominion Bank estimates at $95 trillion. The debt is similar to traditional bonds, except that their proceeds are exclusively used to finance approved environmental projects.

The first Green bond will target a size of C$500 million or less, Mayman said, and will be re-opened throughout the year. The securities will have a shorter maturity than Ontario’s average term of 13.6 years, he said.

“The Green bond market globally tends to be three to seven years -- that’s where the demand is best,” Mayman said.

Foreign Currencies

In addition to Green bonds, Ontario is considering tapping foreign currency-bonds issued in euros, Japanese yen, Swiss francs, Australian dollars and U.K. pounds. The province is targeting 30 percent of its planned C$35 billion issuance to overseas markets. It completed 82 percent of C$36 billion of bond sales in Canadian dollars in the year ended in March, more than it set out in the 2013-14 budget.

Canada’s largest provincial borrower extended its debt maturities to almost 14 years from eight years in 2009 as interest rates fell to historic lows.

“We’ve really extended the average term of our debt and the purpose of that is to protect ourselves for when rates rise,” Mayman said. “We don’t expect rates to rise quickly from here but if they do we have the flexibility to shorten the term of our debt.”

Green bonds are used by governments, private corporations, banks and international financing institutions such as the World Bank to support environmental investment on a large scale, especially capital-intensive infrastructure such as wind and solar energy.

Massachusetts said in June 2013 it was the first U.S. state to issue such securities to fund environmental projects when it sold $100 million of the debt.

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