Pan-Asian energy and sustainable solutions provider Sembcorp Industries has raised Singapore-dollar 675 million in a sustainability-linked bond (SLB) issue, in which IFC poured S$150 million, the firm said on Wednesday. "Sembcorp, through its wholly-owned subsidiary Sembcorp Financial Services Pte Ltd, priced its inaugural SLB today, anchored by an investment of S$150 million from IFC. It also marks IFC's first investment globally as an investor in a SLB," the firm said in a statement.
Sembcorp's SLB is the first issuance by an energy company in Southeast Asia and the region's largest such issuance to date. Unlike traditional green bonds, SLBs involve issuers pledging to improve their performance against tailor-made ESG (environmental, social and governance) targets.
"The ten-and-a-half-year Singapore dollar bond at a coupon rate of 2.66 per cent sets a new pricing benchmark for Sembcorp, strongly supported by high quality institutional investors," it said. Net proceeds from the SLB will be used for the purposes of financing the general corporate working capital requirements of the company and its subsidiaries, refinancing the Group's existing debt and/or financing or refinancing of the renewable energy, or potentially, other sustainable projects.
Sembcorp has more than 3.3 gigawatts (GW) of renewable energy capacity comprising solar, wind and energy storage solutions in key markets such as Singapore, China, India, UK and Vietnam, with a target to quadruple its installed renewable energy capacity to 10 GW by 2025 from 2.6 GW in 2020. "Sustainability is Sembcorp's business, and we are fully committed to transforming our portfolio from brown to green," said Wong Kim Yin, Group President and CEO of Sembcorp Industries.
"The issuance of our inaugural SLB underscores this commitment. We are heartened that IFC has chosen our issuance to be its first investment in a SLB globally. Their support validates our strategy and spurs us on in our drive toward supporting the global energy transition and a low-carbon economy," he added. The interest rate of the SLB will be subject to a step-up margin of 0.25 per cent from the first interest payment date on or after April 1, 2026 if the stated SPT of greenhouse gas emissions intensity reduction to 0.40 tonnes of carbon dioxide equivalent per megawatt hour (tCO2e/MWh) or lower is not achieved by December 31, 2025.
"Sustainable growth, decarbonisation, and energy security are key themes for both developed and emerging markets globally, but they should not be seen as mutually exclusive," said Alfonso Garcia Mora, IFC Vice President for Asia and the Pacific. Besides being aligned with the Paris Agreement, the investment from IFC is also in keeping with the World Bank Group's Climate Change Action Plan (CCAP) (2021-2025).Under this plan, IFC has committed to align all new real sector operations with the objectives of the Paris Agreement by July 1, 2025 and set the target of reaching 35 per cent financing for climate on average over the next five years. In addition, IFC will intensify its efforts to create bankable investment opportunities and to mobilise private financing towards decarbonising key sectors as outlined in the CCAP.