S$700 million sustainability-linked loan is one of the largest in Singapore to date

Keppel Infrastructure Trust (“KIT”) and Keppel Energy Pte. Ltd. (“KE”), through a joint venture^[1], have secured a 7-year S$700 million sustainability-linked loan from DBS Bank and OCBC Bank for its jointly owned gas-fired co-generation plant, Keppel Merlimau Cogen Plant.

One of the largest sustainability-linked loans in Singapore, the transaction also marks KIT and KE’s maiden sustainability-linked loan and is the first such loan for Singapore’s energy sector to date.

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

The loan is linked to carbon emission targets for Keppel Merlimau Cogen Plant. These targets include benchmarking of the plant’s carbon emissions intensity against national indices, as well as demonstrating continuous improvement in the plant’s carbon emissions intensity. If these pre-set targets are met, the interest rate on the facility will be subsequently reduced on a tiered basis.  

This strengthens KIT’s sustainability efforts, where many of the Trust’s businesses and assets across its portfolio have already incorporated best-in-class technologies to support sustainable urban infrastructure. Key initiatives include the implementation of a water management plan at City Gas that reduced water consumption by up to 13% in 2019, the introduction of the use of drones for equipment inspection at selected Ixom HoldCo Pty Ltd (Ixom) facilities, improving efficiency and safety levels, and the development of a smart chemical handling system at Keppel Merlimau Cogen Plant, which reduced staff exposure to chemicals.

Mr Matthew Pollard, CEO of Keppel Infrastructure Fund Management, the Trustee-Manager of KIT, said, “Sustainability is an essential part of the Trust’s strategy and operations. Beyond adopting high environmental, health and safety standards for the businesses and assets in our portfolio, we are also strengthening our commitment to sustainability through financing. This loan facility will help us to proactively drive best-in-class practices and support the performance of Keppel Merlimau Cogen Plant as we build a sustainable future together with our stakeholders.”

Ms Janice Bong, General Manager (Energy Infrastructure) of Keppel Infrastructure, the parent company of KE, said, “Keppel is committed to reducing our environmental impact by focusing on enhancing efficiency and reducing the carbon footprint of our operations. 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, while ensuring reliable power generation for Singaporeans.”

Ms Elaine Lam, Head, Global Corporate Banking, OCBC Bank, said, “We are proud to support Keppel Infrastructure Trust and Keppel Energy on its maiden sustainability-linked loan, which is ground-breaking on many fronts. Not only is it one of the largest sustainability-linked loan to date, but it is also the first for Singapore’s energy sector. We are excited by the growing interest in sustainable finance from increasingly diverse industries. With Keppel Infrastructure Trust’s strong leadership in the energy sector and commitment to continuously improve the efficiency of their existing infrastructure, we are confident that this transaction will pave the way for more energy players to step forward.”

Mr Hong Teck Khiam, Head of Power and Utilities, Institutional Banking, DBS Bank, said, “With responsible banking as one of the key tenets of our sustainability strategy, DBS is heartened to support Keppel Infrastructure Trust and Keppel Energy in this landmark transaction which demonstrates the Singapore energy sector’s transition towards a low-carbon economy. The transaction also marks an important step towards building a clean, affordable and reliable energy future in Singapore by providing interest savings when pre-agreed ESG targets are met, while financing the development and implementation of less carbon intensive energy solutions.”

The above transaction is not expected to have a material impact on the net tangible assets or earnings per share of Keppel Corporation Limited and Keppel Infrastructure Trust for the current financial year.