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Sembcorp Marine cinches SGD 500 million DBS Bank sustainability-linked loan

05 Mar 2021

DBS Bank on Thursday (4 March) said offshore, marine, and energy solutions company Sembcorp Marine Ltd has secured a sustainability-linked financing facility which references the Singapore Overnight Rate Average (SORA) from DBS Bank, through its wholly owned subsidiary, Sembcorp Marine Financial Services Pte. Ltd.

This SGD 500 million (USD 373.4 million) facility is believed to be the first SORA-based sustainability-linked loan for the maritime industry. The loan’s interest rate comprises two components: (1) a compounded daily SORA rate calculated in arrears, and (2) an applicable margin.

The loan features interest rate discounts linked to pre-determined Environmental, Social and Governance (ESG) targets. As these ESG targets are achieved, Sembcorp Marine will enjoy savings in borrowing costs.

“The inclusion of green financing dovetails with our strategic transformation and pivot since 2015 to provide innovative engineering solutions to the global offshore & marine and energy industries, with a keen focus on cleaner, greener and renewable energy solutions,” said William Goh, Sembcorp Marine’s Group Finance Director.

“This sustainability-linked financing complements our ongoing efforts to proactively manage the environmental impact of our business.” 

“As a purpose-driven bank, we believe financial institutions have a strategic and pivotal role to play in proactively supporting industries working towards a lower-carbon future. We remain dedicated and committed in helping our clients navigate and structure their sustainability roadmaps – as the journey is different from corporate to corporate, and from industry to industry,” added Dorian Delteil, DBS’ Head of Oil and Gas. 

“Every transitional step will contribute to making an important difference, and we strive to continue engaging with like-minded clients, such as Sembcorp Marine, in making the shift towards more sustainable operations and working towards achieving a net zero emissions economy.”

In 2019, approximately SGD 530 million of Sembcorp Marine’s projects were related to green solutions including scrubber and ballast water management system retrofits, and gas and renewable energy projects.

Sembcorp Marine also introduced more green features in its operations and replaced its grid-supplied electricity with clean energy harnessed from the solar-roof installed at its steel fabrication facility at its Tuas Boulevard Yard.

To increase its support for businesses seeking to achieve their sustainability ambitions, DBS said it has committed to finance SGD 50 billion in renewable, clean-energy and green projects by 2024, more than doubling its earlier target of SGD 20 billion.

With the impending discontinuation of interest rate benchmarks such as the London Inter-bank Offered Rate (LIBOR) and Swap Offer Rate (SOR), DBS has been partnering its clients to achieve a smooth and seamless transition to alternative Risk Free Benchmark Rates (RFRs).

DBS has closed more than SGD 1 billion in loans referencing the RFRs in 2020 and along the way, broke new grounds such as the first SORA club loan coupled with a cross currency swap and Singapore’s first business property mortgage loan referencing SORA.

“We are glad to play our part in supporting the transition of the industry benchmark from SOR to SORA. Receiving interest cost savings through meeting our ESG targets is a practical and tangible way by the financial community to acknowledge the efforts and milestones of our sustainability journey,” added Goh. 

The ESG targets in this facility are aligned with Sembcorp Marine’s performance targets set out in the Group’s Sustainability Report, noted the company.

Photo credit: Sembcorp Marine
Published: 5 March, 2021

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