Enel, the Italian electrician, issued a $1.5bn loan in 2019 at 5 years with a coupon of 2.65%, or 5 basis points (0.05%) below its reference curve. In the event that Enel is unable to increase the share of renewable energy from 45.9% to 55% by 2021, the coupon would be increased by 25 basis points from 2022 to 2024, representing an additional cost of

$11.25 million for Enel. If Enel benefits from this 0.05% reduction in the cost of its borrowing, who bears this reduction in interest rates?

Why?

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