21 September, 2021
KiwiRail’s $350m loan facility to finance the purchase of two new Interislander ferries has become the first shipping loan 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.
KiwiRail Group Chief Executive Greg Miller says he is delighted by the CBI certification which is further endorsement of KiwiRail’s commitment to hitting its carbon emissions reductions targets.
To gain CBI certification, KiwiRail demonstrated a clear path for fuel and propulsion systems achieving zero carbon emissions by 2050, which supports KiwiRail and the New Zealand Government’s objectives.
“The new ferries themselves are a huge leap forward in design, efficiency and comfort,” Mr Miller says.
“These ferries are making a 50-year advance in technology. We’re going from ferries which are well over 20 years old, to state-of-the-art, future-proofed ferries which will last 30 years, and carbon emissions reduction has been a big part of the design.
“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.
“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.
“Reducing fuel consumption will have financial benefits, as well as environmental. Our energy bill is around $80m a year and is rising, so investing in low-carbon assets like the new ferries will be good for KiwiRail and the environment,” Mr Miller says.
The improved and optimised hull design has resulted in wake energy reduction of more than 50 per cent lower than the maximum allowed in the Marlborough Sounds, and means less energy is needed to power the ferries. The use of azimuth thrusters means the ferries are highly manouverable, which improves safety and reliability.
Climate Bonds Initiative CEO Sean Kidney welcomes KiwiRail’s ship loan achieving certification.
"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 and they are to be congratulated."
"KiwiRail and their partners have taken a leadership position in the shipping industry. This initial Certification signals a turning point for operators and investors, opening new pathways for capex and investment in mitigating emissions from global shipping."
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 new ferries are being built by Korean shipyard Hyundai Mipo Dockyard. The first arrives in 2025 and the second in 2026, to allow for a smooth transition.
“Achieving this certification has taken a lot of work, starting with the Naval Architect OSK-ShipTech’s initial future-proofed design work for the new ferries and investigations into green fuel sources including future carbon emission reduction modelling. Ernst & Young and Russell McVeagh, alongside our banking partners, have worked with us to achieve this world first,” Mr Miller says.
The purchase of the ferries is part of a $1.45 billion investment programme which will also see redevelopment at the port in Wellington and Waitohi Picton.