Wales & West Utilities signs £125m sustainability-linked loan

The company has tied its loan to key targets, including reducing the amount of natural gas leakage from the gas network by at least 28% by the end of 2026

The utility company has replaced an existing £125m credit facility with a new sustainability-linked one of the same value. The credit facility is linked to a selection of ESG targets through contractually embedded key performance indicators. Lloyds Bank acted as Sustainability Coordinator for the transaction.

Wales & West Utilities looks after the gas network for 7.5 million people and helps to connect new homes and businesses to the network and handles upgrades to ensure it is fit for the future.

The company has tied its loan to key targets, including reducing the amount of natural gas leakage from the gas network by at least 28% by the end of 2026, while also preparing it to transport green gas like hydrogen and biomethane. The company is also aiming for an average of less than10 hours ‘off-gas’ per property if gas supplies to homes and businesses are interrupted in an unplanned way.

The company is also investing £400m to work towards delivering the ambition of a Net Zero-ready gas network by 2035. The company has 46 power stations connected to its network, which it claims supports renewable power generation, and 20 green gas sites that provide power to 180,000 homes. The network also provides buses with green fuel.

Wales & West Utilities’ director of finance and IT, Neil Henson said: “At Wales & West Utilities, we’re committed to delivering for the communities that we serve. Preparing the gas network to transport green gas like hydrogen and biomethane, reducing gas leakage and carbon emissions, keeping unplanned interruptions to a minimum and continuing to improve the customer experience: this ESG-linked finance facility is the first major step we have taken to align our capital structure to our ESG ambitions.

“We’re proud to be part of the first sustainability-linked revolving credit facility in the gas distribution sector, which will support the delivery of what our customers and stakeholders want and need.”

Loan growth

Sustainability-linked loans are helping bridge the historic communications gap between sustainability and finance, as explained by Holcim’s chief sustainability officer Magali Anderson and chief financial officer Géraldine Picaud.

Back in 2020, the world’s largest cement manufacturer, Holcim, priced an €850m bond linked to its sustainability targets.

Holcim is one of many firms to have ventured down the route of linking sustainability performance to financial implications. The likes of Kingfisher, Kingspan, AB InBev, Thai Union and Tesco, which is now also supporting suppliers to follow suit, have all announced similar loans.