KiwiRail wins world 1st green loan certification for battery-powered ferries

New Zealand state-owned company KiwiRail has secured a $350m loan facility to finance the purchase of two new battery-powered ferries.

The new ferries are being built by South Korean shipyard Hyundai Mipo Dockyard. The first is scheduled for delivery in 2025 and the second in 2026.

The loan will be “the first in the world” to be certified by the Climate Bond Initiative (CBI). The Climate Bonds Standard and Certification Scheme  is used globally by bond issuers, governments, investors and financial markets to prioritise investments which genuinely contribute to addressing climate change. 

The scheme uses rigorous scientific criteria to label bonds, loans and other debt instruments to ensure they are consistent with the goals of the Paris Climate Agreement.

To gain CBI certification, KiwiRail had to demonstrate the efficiency of fuel and propulsion systems in achieving zero carbon emissions by 2050.

“Once Interislander’s three old ferries are phased out, the new ferries will achieve a 40 per cent reduction in Interislander’s carbon emissions by operating on a combination of diesel, battery and shore power. From the start, 30 per cent of each crossing, including port time, will be battery and shore powered,” KiwiRail Group Chief Executive Greg Miller emphasized.

“Through smart design of the hull and machinery space, the new ferries have been future-proofed to allow us to increase battery use over time so we can run entirely on battery and shore power, or to use other low-carbon fuel sources as they become commercially available and have a reliable supply line.”

The improved and optimised hull design is expected to achieve energy reduction of more than 50 percent lower than the maximum allowed in the Marlborough Sounds, which means less energy will be needed to power the ferries.

“Rapid decarbonisation of transport is vital for emissions reduction, with shipping being a critical part of the sector. This world first Certification for shipping by KiwiRail and their partners marks the adoption of international best practice for green finance,” Climate Bonds Initiative CEO Sean Kidney commented.

KiwiRail’s debt facility to support its $550 million ship purchase is financed by its banking partners, Westpac NZ (Facility Agent), Société Générale (Green Loan Coordinator), Bank of America and National Australia Bank.

The purchase of the ferries is part of a $1.45 billion investment program which will also see redevelopment at the port in Wellington and Waitohi Picton.