Georgia Power recently announced that it is issuing $1.5 billion in senior unsecured bonds aimed at supporting racial equality, economic opportunity and environmental sustainability.
According to a May 6 statement from the Atlanta-based utility, $800 million of the bonds were the first-ever Equality Progress Sustainability bonds issued by a corporate borrower, and at least half of the net proceeds from these EPSB bonds will be spent primarily supporting minority and women-owned suppliers.
Bonds are one of the many ways large companies, like utilities, pay for their operations. When Georgia Power issues bonds, the buyers invest in the company, which in turn will repay the bond amount with interest. In this case, buyers focused on environmental issues and supporting Georgia Power’s sustainability will be the market for these bonds.
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Companies that could benefit from bond funds could be anything from vegetation management companies, which trim trees to maintain Georgia Power’s system, to vendors who sell cables or companies that maintain generators, a said Aaron Abramovitz, chief financial officer of Georgia Power.
“It’s really a long-standing kind of commitment for Georgia Power Company. In 1978, we were one of the first utilities to implement a supplier diversity program or initiative,” Abramovitz said.
Currently, Abramovitz said, about 25% of Georgia Power’s spending goes to various businesses, whether they’re owned by women, minorities or even veterans. Georgia Power aims to reach that 30% by 2025.
Because the companies that receive the proceeds are large and varied, there are no special eligibility requirements they must meet to receive bond funds. Abramovitz said there are certifications that Georgia Power seeks to help certify that companies meet the criteria for bond funds, such as certification that a company is run by women.
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For companies that are close to meeting the criteria for an ESPB bond, but don’t have the right certification or documentation, Abramovitz said Georgia Power will help.
The money is not allocated directly to any particular company, but instead goes into a general fund, Abramovitz said. However, an important aspect of the ESPB bond process is ensuring that proceeds will go where Georgia Power claims it will.
For liability reasons, Georgia Power contracted an independent contractor, Deloitte, to perform the audits and report on how much money was allocated to which companies so shareholders, bond buyers and the company could track the money. Deloitte is also Georgia Power’s regular auditor for its financial statements.
Georgia Power previously issued bonds to invest in solar energy projects. Southern Company, the parent company of Georgia Power, has issued 11 ESG bonds since 2015.
What differentiates ESPB bonds from what Georgia Power has done before is the focus on the social aspect of “environment, social and government”. Abramovitz said that in the past, ESG bonds tended to be broader, and all sorts of activities like investing in renewable energy or making a sustainability effort could qualify a company to use bond proceeds. The ESPB bond, on the other hand, is more targeted and has a required percentage to go to minority or women-owned businesses.