Shipowners wary of the capex needed to comply with IMO’s 2020 sulphur cap may be able to use sustainable financing known as ‘green loans’, which has been pioneered in Singapore
Such financing is made available exclusively for projects that meet certain environmental criteria set out in a code that requires investments to be both sustainable and environmentally positive. In the maritime arena, attempts at emissions reduction may qualify for such funding.
In December 2018, Singapore-based Quantum Pacific Shipping (QPS) booked a US$40M green loan – the first issued in the Asia Pacific region – to fund the purchase and installation of exhaust-gas cleaning systems, or scrubbers, on its fleet.
The loan, arranged on Quantum Pacific’s behalf by its management company Eastern Pacific, highlights the rush by shipowners to install exhaust gas cleaning systems ahead of IMO’s emissions regulations in 2020.
In the case of Quantum Pacific, lender BNP Paribas said it made the loan only after a rigorous third-party assessment by Vigeo Eiris, a group that analyses the environmental and sustainable credentials of companies. Law firm Watson Farley Williams advised BNP Paribas in connection with the loan.
A Green Loan Framework was prepared in conjunction with the bilateral green loan, and the framework was developed in alignment with the Green Loan Principles published in March 2018 by the EMEA Loan Market Association and the Asia Pacific Loan Market Association.
The loan is to finance the cost of purchasing and installing marine exhaust gas cleaning systems for 16 vessels in the QPS fleet, which comprises more than 120 container vessels, bulk and ore carriers, crude, chemicals and gas tankers, and pure car truck carriers.
BNP Paribas' head for southeast Asia and chief executive for Singapore, Joris Dierckx, said “As a bank that connects corporates with sustainable finance, BNP Paribas is pleased to provide this green loan to Quantum Pacific Shipping – the first green loan issued to a shipping company in Asia Pacific.
“The rigorous structuring and approval process undertaken for the green loan – along with the high level of assurance expressed by Vigeo Eiris for both the holding company and loan – underscore Eastern Pacific Shipping’s strong environmental and social commitments.
“By combining our expertise as a top shipping bank and a leader in sustainable finance and investment globally, we’re happy to play our part in helping our clients strengthen their commitment to the environment”
Eastern Pacific chief executive Cyril Ducau said “We strive to be the shipping industry’s provider of choice for safe and efficient transportation.
“This means that instead of taking a wait-and-see approach towards environmental regulations, we pro-actively identify and make timely commitments to green initiatives that reduce the environmental impact wherever we operate.
“We are pleased to receive this green loan as it validates our position in this area.”
The news followed an announcement by the Norwegian Export Credit Guarantee Agency (GIEK), which is backing a US$72M loan facility from KfW IPEX-Bank for QPS to purchase scrubbers from Norway-based Clean Marine. Both GIEK and KfW IPEX-Bank were represented by Stephenson Harwood, Singapore for the loan documentation.
The 176,943 dwt Capesize bulk carrier Mount Faber was announced as the first vessel to be fitted with a scrubber following the loan in January 2019.