Russell McVeagh Assists On World-first Green Loan Certification

Published: Wed 22 Sep 2021 05:13 PM
KiwiRail's $350m loan facility to finance the purchase of two new rail enabled Cook Strait ferries has become the first shipping loan in the world to be certified under the Climate Bonds Initiative (CBI)'s framework.
Russell McVeagh partnered with Ernst & Young (Richard Wallace & Mike Isles) to guide KiwiRail through the legal aspects of the green loan framework and implementation, which involved KiwiRail demonstrating a clear path for fuel and propulsion systems achieving zero carbon emissions by 2050, and supporting both KiwiRail and New Zealand Government objectives.
Russell McVeagh Banking & Finance partner John Powell said, "Undergoing the certification process has assisted with considerations on how KiwiRail's assets will stay aligned with a trajectory to zero-emissions by 2050, and provided greater transparency, while mitigating the climate risks that could affect asset valuations.
KiwiRail has set a wider industry benchmark that will help to drive further climate-aligned investments – they are leading the world in sustainable shipping and transportation.”
CBI's Shipping Criteria is recognised globally, and formally launched last year, marking a turning point in best practice for low carbon and climate resilient investments in the shipping industry. The Climate Bonds Standard and Certification Scheme more broadly is used by bond issuers, governments, investors and financial markets to prioritise investments which genuinely contribute to addressing climate change, and applying rigorous scientific criteria to label bonds, loans and other debt instruments to ensure consistency with the Paris Climate Agreement's goals.
KiwiRail's green loan financing follows on from the signing of a NZ$551m binding contract earlier this year with Korean shipyard Hyundai Mipo Dockyard for the delivery of the two state-of-the-art ferries, with the first arriving in 2025 and the second in 2026. Russell McVeagh's team, led by partners Mei Fern Johnson and John Powell, assisted KiwiRail on the development of its procurement strategy for this project, in addition to the financing aspects. The ferries' purchase is part of a $1.45 billion investment programme which will also see redevelopment at the ports in Wellington and Waitohi Picton.
Powell and team have also recently advised on two other significant green finance transactions, assisting Summerset and ANZ and National Australia Bank (as arrangers of Kathmandu's facility) to complete two separate Sustainability Linked Loans (SLL) which commit the borrowers to key environmental, social and/or governance (ESG) targets. These SLLs have been two of the largest in the New Zealand market to date.

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