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Announcement:

Moody's assigns Green Bond Assessment (GBA) of GB1 to Wuhan Metro's proposed green senior perpetual securities

 The document has been translated in other languages

20 Nov 2018

First GBA assigned to a Wuhan Metro green bond

New York, November 20, 2018 -- Moody's Investors Service has today assigned a Green Bond Assessment (GBA) of GB1 (Excellent) to the proposed green senior perpetual securities to be issued by Wuhan Metro Group Co., Ltd. (Wuhan Metro, A3 stable). The green senior unsecured perpetual securities will be issued in US dollars in benchmark size, and price in November. The securities were registered with the National Development and Reform Commission (NDRC) and will be listed on The Stock Exchange of Hong Kong Limited (SEHK).

"The GB1 assigned to Wuhan Metro's first offshore green bond reflects our expectation that proceeds will be exclusively allocated to eligible green projects consistent with the issuer's sustainability strategy of expanding access to low-carbon transport in the city," said Matthew Kuchtyak, a Moody's lead green bond analyst. "The green bond transaction is further supported by strong environmental governance and oversight practices, and a commitment to annual allocation and impact reporting until green bond proceeds are fully apportioned."

ASSESSMENT RATIONALE

Wuhan Metro will allocate proceeds from the green senior perpetual securities to a series of eligible projects consistent with the Green Bond Principles and the 2018 Green Bond Guidance of the NDRC. Eligible project categories include low carbon transportation, pollution prevention, energy efficiency and renewable energy. Wuhan Metro will likely use the majority of proceeds to finance or refinance investments toward the expansion of the metro system, including the construction of additional metro lines. At present, Wuhan Metro runs ten metro lines (Lines 1, 2, 3 (Phase 1), 4, 6 (Phase 1), 7 (Phase 1), 8 (Phase 1), 11 (East), 21 and the Airport Line), with a total length of approximately 288 kilometers (km). The company has another 6 metro lines with a total mileage of approximately 107 km under construction.

A dedicated green bond working group reviews potential green bond projects to ensure alignment with detailed eligibility criteria codified in the issuer's green bond framework. The green bond working group, which is comprised of senior members of the finance, treasury, investment management, operations, engineering and enterprise management teams, also reviews allocation of proceeds annually to ensure maximum allocation of green bond proceeds and to facilitate ongoing green bond reporting. Wuhan Metro mitigates environmental and social risks through a series of internal policies, as well as compliance with national policies and regulations that enforce sustainability considerations.

Wuhan Metro will deposit proceeds from each green bond it issues into its general funding account and earmark the proceeds pending allocation. Although Wuhan Metro does not have a formal separate green bond account, it will maintain a green bond register to track the use of proceeds. The green bond register will contain information for each green bond issued including details on the green bonds (ISIN, pricing date, maturity date, etc.), as well as information on the allocation of proceeds toward eligible green projects. Wuhan Metro has committed to allocate green bond proceeds within a short timeframe, given that many of the eligible green investments have already been identified. Any unallocated funds will be held in accordance with Wuhan Metro's normal liquidity management policy, such as in Notice Deposits.

Disclosure on the expected use of green bond proceeds is robust, with the green bond framework containing clear green project eligibility criteria, including descriptions of the environmental benefits anticipated for each of the project types. Wuhan Metro has provided detail on the various metro lines deemed eligible for green bond funding, along with the expected date of operation and total investment expected per line.

Wuhan Metro will publish an annual green bond report as long as bond proceeds remain unallocated. The green bond report will contain both allocation and impact reporting. Allocation reporting will cover the aggregate amount allocated to various eligible green categories, the amount of unallocated funds and examples of projects financed with green bond proceeds. Impact reporting will use a variety of metrics depending on the eligible green category, including kilometers of tracks built and the number of passengers for low carbon transport, number of noise barriers installed for pollution prevention projects, and the amount of energy saved and installed renewable energy production capacity for energy efficiency and renewable energy projects. We note that impact reporting is not expected to contain information on greenhouse gas emissions reduced or avoided or the reduction of air pollutants, as recommended by the Green Bond Principles, which constitutes a slight weakness.

Established in 2000, Wuhan Metro is mandated by the Wuhan City Government as the sole platform to own and operate the metro system in Wuhan, the capital city of the Hubei Province in China. The company also engages in primary land development, property development and investment, advertising and retail, and telecommunications network leasing.

The principal methodology used in this analysis was Green Bonds Assessment (GBA) published in March 2016. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on www.moodys.com for the most updated credit rating action information and rating history.

Matthew Kuchtyak
Analyst
Infrastructure Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Jim Hempstead
MD - Utilities
Infrastructure Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

No Related Data.
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