U-Ming: Sustainability-linked loan to support fleet renewal
Singapore-based Oversea-Chinese Banking Corporation (OCBC Bank) has extended a $70 million sustainability-linked loan with U-Ming Marine Transport Corporation, one of Taiwan’s largest listed bulk carrier companies.
This marks a first for both companies – the first sustainability-linked loan that OCBC Bank has extended to a Taiwanese company, and in U-Ming’s case, its first sustainability-linked loan outside of Taiwan.
As informed, the loan will be used to fund U-Ming’s fleet renewal plan which includes the construction of two new 210,000 dwt bulk carriers in China.
The units are due for delivery in the final quarter of 2022.
It was structured so that U-Ming will enjoy interest rate reductions if it meets pre-agreed targets in two areas:
- Reduction in emission intensity, by measuring U-Ming’s Fleet Annual Efficiency Ratio, derived by dividing a ship’s carbon emissions for a voyage by the product of its deadweight tonnage and the distance travelled. This target is aligned with the IMO’s targets to achieve a reduction in carbon intensity of international shipping by at least 40% by 2030, and 70% by 2050, compared to 2008.
- Achieve an annual increase in the proportion of U-Ming’s fleet which obtains a satisfactory emissions rating from RightShip, one of the world’s leading third party maritime due-diligence organisations.
The new vessels will be installed with MAN 6G70ME-C10.5 tier3 engines and be coated with ultra-low-friction paint.
Coupled with an optimized hull design, fuel consumption will be greatly reduced.
The vessels are also installed with a fleet safety management system (FSM) specifically designed by U-Ming which will improve operational efficiency, safety and damage control.
The sustainability targets are said to underscore U-Ming’s commitment to operate a fleet of high-performance, energy-saving vessels. U-Ming’s performance on these targets will be assessed by an external independent party.
The requirement to achieve an improved performance every year for the duration of the loan is also said to demonstrate U-Ming’s 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.
In structuring the sustainability-linked loan, U-Ming also engaged an external reviewer, DNV, to ensure the targets are aligned with the Sustainability-Linked Loan Principles 2021, and material to U-Ming’s business strategy.
“This sustainability linked loan from OCBC Bank further demonstrates U Ming’s long-term commitment to transforming our vessels into a modern, environmentally friendly fleet which fully complies with the IMO carbon reduction targets,” C.K. Ong, U Ming President, commented.
“Interest in the decarbonisation of shipping has been gaining momentum as the world acts towards achieving net-zero by 2050,” Elaine Lam, OCBC Bank’s Head of Global Corporate Banking, said.
“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.”
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