KIT, Keppel Energy bag S$700m sustainability-linked loan from DBS, OCBC

KEPPEL Infrastructure Trust (KIT) and Keppel Energy - a wholly-owned subsidiary of Keppel Infrastructure Holdings - have obtained a seven-year S$700 million sustainability-linked loan from DBS Bank and OCBC Bank.

This is one of the largest sustainability-linked loans in Singapore, as well as the first such loan for Singapore's energy sector and for KIT and Keppel Energy, according to a joint media statement on Wednesday by the four parties.

DBS and OCBC acted as joint lenders and sustainability coordinators for the transaction.

The loan is linked to carbon emission targets for KIT and Keppel Energy's jointly owned gas-fired co-generation plant, Keppel Merlimau Cogen Plant.

These targets include benchmarking of the plant's carbon emissions intensity against national indices, and demonstrating continuous improvement in the plant's carbon emissions intensity. If these pre-set targets are met, the interest rate on the loan will be subsequently reduced on a tiered basis.

KIT said the carbon emission targets will strengthen its sustainability efforts, which have seen many of the trust's businesses and assets incorporating technologies to support sustainable urban infrastructure. Key initiatives so far have included the implementation of a water management plan at City Gas, as well as the development of a smart chemical handling system at the Keppel Merlimau Cogen Plant to reduce staff exposure to chemicals.

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Matthew Pollard, chief executive of the trust's manager, said sustainability is an essential part of KIT's strategy and operations. He added that the loan facility will help KIT "proactively drive best-in-class practices and support the performance" of the Keppel Merlimau Cogen Plant.

Meanwhile, Janice Bong, general manager for energy infrastructure at Keppel Infrastructure, said the group is committed to reducing its environmental impact and the carbon footprint of its operations.

She added: "As owners and operators of Keppel Merlimau Cogen, we are constantly looking for ways to optimise operations so that the plant minimises its carbon emissions."

OCBC Bank's head of global corporate banking Elaine Lam noted the growing interest in sustainable finance from increasingly diverse industries, adding that the latest transaction is set to pave the way for more energy players to step forward.

Hong Teck Khiam, DBS Bank's head of power and utilities, institutional banking, said the "landmark transaction" marks an important step towards building a clean, affordable and reliable energy future in Singapore by providing interest savings when pre-agreed environmental, social, and governance targets are met, while financing the development and implementation of less carbon-intensive energy solutions.

The loan is not expected to have a material impact on the net tangible assets or earnings per share of Keppel Corporation or KIT for the current financial year.

KIT holds a 51 per cent stake in Keppel Merlimau Cogen Plant, while Keppel Energy holds the other 49 per cent. Keppel Energy's parent, Keppel Infrastructure, is also KIT's sponsor.

Units of KIT ended Tuesday at 54 Singapore cents, up 0.5 cent or 0.9 per cent. Shares of Keppel Corp closed flat at S$6.04.