Case Study Of China Three Gorges Group’s Green Exchangeable Bond "G Three Gorges EB1"

In recent years,the country has been paying more and more attention to green development and has continuously introduced various policies to support economic transformation and upgrading to green.China’s green bond market is running well under the support of a series of policies,and the issuing entities,issuing types and issuing scale are increasing.However,the proportion of green bonds in the issuance scale of the whole bond market is only 0.98% at present,and the scale advantage of ordinary bonds is still prominent,which does not match with the increasing demand for green financing at present,and the activity of green bond issuers needs to be further improved.As a non-listed company,China Three Gorges Group creatively issued the first green exchangeable bond in China in April 2019,providing a demonstration role for other non-listed companies participating in green projects to innovate financing methods by issuing green exchangeable bonds.This paper selects the first domestic green exchangeable bond "G Three Gorges EB1" issued by China Three Gorges Corporation as the research object.Combining the relevant literature from home and abroad,the paper firstly introduces the operating conditions of the financing companies,the basic information of the bond issuance,special terms,the use of raised funds and green factor certification,etc.,and also expounds the issuance process and stock exchange of "G Three Gorges EB1".Secondly,the article conducts an in-depth study on the reasons for the issuance of this bond,the reasons for the smooth issuance,the effect of issuance,and the problems and causes of the issuance.Finally,this paper summarizes the enlightenment of the issuance of green exchangeable bonds,and puts forward relevant suggestions,in order to provide some reference for enterprises with green bond issuance capabilities and conditions to issue green bonds for financing.The following conclusions are drawn from the analysis:(1)Three Gorges Group’s motivations for issuing the bonds are: to meet the special needs of project funds,and to fill the funding gap for green projects with longer construction periods by issuing bonds with longer durations;to reduce the financing cost of the company,as the green exchangeable bonds have a lower interest rate compared with other types of financing and have a stronger cost advantage;to achieve a steady reduction in the stock holdings,and through the reasonable and flexible setting of the issuance terms of the bonds,investors are encouraged to exchange shares to achieve the purpose of reducing stock holdings;to build a good green reputation,to display the company’s measures to actively implement the green development strategy with the innovative issuance of green bond integration products,and to enhance the green image in the hearts of investors.(2)Reasons for the smooth issuance of the bonds: support from national policies;good operating conditions of the company;reasonable and flexible bond issuance terms.(3)Benefits from the issuance of bonds: after the issuance of green bonds,the debt structure and solvency of CTG have been improved;the issuance of bonds has brought a certain positive impact on the stock price of the target company in the short time;the green projects invested by the green bonds can to improve the environment.(4)Problems and causes of this bond issuance: The green assessment verification report was not disclosed,mainly because the green bond information disclosure mechanism was not perfect,and CTG took advantage of the loopholes in the current green bond information disclosure mechanism;the environmental benefit target certification was not perfect,mainly due to the lack of professionalism of the third-party certification agency hired by China Three Gorges Corporation.Finally,on the basis of the above conclusions,the case insights are summarised and suggestions are made for enterprises to seize the national policy dividend in a timely manner,set reasonable terms for bond issuance and strengthen bond information disclosure,and for regulators to improve the green bond information disclosure mechanism and raise the access threshold for third-party certification bodies.