Singapore-based OCBC Bank has extended a $70m sustainability-linked loan to Taiwan’s largest bulk carrier company U-Ming Marine Transport for its fleet renewal plan.
The loan, structured so that U-Ming will enjoy interest rate reductions if it meets pre-agreed emissions targets, will fund new vessels that include two 210,000-dwt bulkers being built in China.
The targets call for U-Ming to cut its fleet’s emission intensity and increase the proportion of its fleer which obtains a satisfactory emissions rating from vessel rating agency RightShip.
U-Ming’s emission intensity will rated by measuring its fleet’s Annual Efficiency Ratio. The AER is derived by dividing a ship’s carbon emissions for a voyage by the product of its deadweight tonnage and the distance travelled.
The company has a fleet of 66 vessels in operation, under construction, joint ventures and ship management services. They have a total deadweight of 8.25m dwt.
The new vessels, due for delivery in the last quarter of 2022, will have MAN 6G70ME-C10.5 tier3 engines and be coated with ultra-low-friction paint.
Coupled with an optimised hull design, U-Ming said “fuel consumption will be greatly reduced”.
The loan is OCBC Bank’s first sustainability-linked loan to a Taiwanese company. It is also U-Ming’s first sustainability-linked loan outside of Taiwan.
The emission intensity reduction target is aligned with the IMO’s aims for shipping to achieve a reduction in carbon intensity of at least 40% by 2030, and 70% by 2050, compared to 2008.
U-Ming said the requirement for improved performance every year of the loan demonstrates its “commitment to continually strive for better sustainability outcomes and is in line with the bank’s desire to partner and incentivise its clients to work towards more robust environmental, social and governance standards”.
External reviewer, DNV has been engaged to ensure the targets are aligned with the Sustainability-Linked Loan Principles 2021.
U-Ming president CK Ong said the sustainability linked loan “further demonstrates U-Ming’s long-term commitment to transforming our vessels into a modern, environmentally friendly fleet.
“We know this is something our own customers want to see and so we are working with them to ensure we are making continuous progress towards achieving this,” he added.
OCBC Bank’s head of global corporate banking, Elaine Lam said Interest in the decarbonisation of shipping is gaining momentum as the world acts towards achieving net-zero emissions by 2050.
“This sustainability-linked loan with U-Ming is pegged to clear emissions targets that will help realise this vision, and it demonstrates OCBC’s commitment as a signatory to the Poseidon Principles,” she said.
