Greenvolt green bonds offer 3.2% after taxes and charges
Despite Portuguese renewable energy company Greenvolt’s green bond issues paying 4.65% per annum, small investors are not making more than 3.2% while the investment could even result in losses because of commission charges and taxes.
According to ECO online news, Greenvolt raised €150 million through five-year green bond issues, and now the renewables company led by João Manso Neto (pictured) is preparing to make a fresh issue of bonds.
A year ago, Greenvolt issued Greenvolt Green Bonds through a Public Subscription Offer (PSO) with a commitment to pay 5.2% per annum until 2027, and 4.65% per annum to 2029 in order to raise €75 million gross.
For the company’s coffers, this difference of 55 base points on coupon rate means a saving of €5,500 for each €1 million of financing, or a saving of around 10.6%. But for non-professional investor portfolios, the accounts are more complicated.
According to ECO’s calculations, based on the price from 13 financial entities appointed as brokers for the PSO, a minimum investment of €2,500 means an average net Internal Rate of Return (IRR) in taxes and charges of just 1.16% for small investors that do not have other bonds or securities in portfolios.
But if they do have shares or other bonds in their portfolios, the charges for holding these securities may be dissipated by other investments, and analysts even envisage that with the maximum amount permitted for new Greenvolt bonds, investors would have to settle for an average IRR of 3.17%.
The amount of taxes and bank charges on green bond issues is quite significant for small investors with the difference between what Greenvolt Green Bond 2029 pays out in interest (on coupon) annually and what the small bondholders actually get (after charges and taxes), which can vary on average between 25% and 75% of interest ending up in State coffers and banks.
Greenvolt is currently preparing for a takeover bid launched by US private equity firm Kohlberg Kravis Roberts (KKR) with consultant Ernst & Young Audit setting the minimum offset in the Public Acquisition Offer on Greenvolt.
On December 21, when the Public Acquisition Offer on Greenvolt’s corporate capital was announced, Greenvolt’s board considered the offer from KKR of €8.30 per share as “financially fair and advantageous” for implementing Greenvolt’s strategy, to prosecute its business plans, as well as those of its partners.
KKR is making an offer for a 100% control of the renewables company that has been valued at over €1.1Bn.
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