Keppel refinances Singapore cogen plant with sustainability-linked loan
Deal first of its kind for company and local energy sector
1 Jul 2020 | Michael Marray

Keppel Infrastructure Trust (KIT) and Keppel Energy (KE) have refinanced their gas-fired cogeneration power plant in Singapore with a S$700 million (US$504 million) sustainability-linked loan from DBS Bank and OCBC Bank.

The seven-year loan is KIT and KE’s debut in the sustainability-linked loan market. DBS and OCBC acted as joint lenders and sustainability co-ordinators for the transaction, which was signed on June 24.

The loan is linked to carbon emission targets for the Keppel Merlimau Cogen Plant, which is a 1,300 megawatt combined-cycle gas turbine power plant that has been operational since 2007.

The 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.

"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 [environment, social and governance] targets are met, while financing the development and implementation of less carbon intensive energy solutions", says Hong Teck Khiam, head of power and utilities, institutional banking, at DBS.

Elaine Lam, OCBC’s head of global corporate banking, notes that not only is it one of the largest sustainability-linked loans to date, but it‘s also the first for Singapore’s energy sector. "We are confident that this transaction will pave the way for more energy players to step forward.”

The Keppel Merlimau Cogen Plant was the first independent power project to enter the Singapore electricity market after the National Electricity Market of Singapore opened for trading in January 2003. 

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