New Ultra Large Container Ships to be Built According to Green Financial Principals

SOUTH KOREA – CHINA – GERMANY – Shipbuilders worldwide have these days to make their products as eco-friendly as possible and the latest order from Hapag Lloyd, the world's fifth largest container line, is no exception.

The German box carrier has concluded two debut transactions according to the Green Loan Principles of the Loan Market Association (LMA), while DNV has provided a second party opinion to confirm compliance with the requirements as an independent expert. The transactions are associated with the financing of six ultra-large 23,500 TEU container ships, which were ordered in December 2020. Shaun Walden, Project Director, Sustainability and ESG Services, DNV observed:

“We were very pleased to have been asked by Hapag-Lloyd to offer our independent expertise to assess whether the vessels meet the Green Loan criteria. This is a ground-breaking deal that shows that the industry can move towards greater sustainability hand-in-hand with improved commercial performance of the asset."

The decarbonisation of the world economy is the major challenge of the coming decades and these deals evidence that pressure is escalating on all sectors, from regulators, financiers, customers and the general public, for ship owners and operators to reduce emissions into both air and water. In this case the funding for the new build ships comes from a diverse range of lenders.

The syndicated green loan is in the amount of $417 million with a 12-year maturity and will be used to finance three of the six container ships on order. The credit facility is being backed by the Korea Trade Insurance Corporation (K-SURE), and the syndicate consists of 11 banks. KfW IPEX-Bank and BNP Paribas were in charge of structuring and coordinating the transaction.

The lease financing for the remaining three new builds is in the amount of $472 million, has a maturity of 17 years plus construction-phase financing, and has been structured by the Industrial and Commercial Bank of China Leasing (ICBC Leasing). Mark Frese, Chief Financial Officer of Hapag-Lloyd commented:

“Our first green financings are a major milestone for us, as we are breaking new ground in the container shipping segment by financing new building projects geared towards sustainability. The transactions will help us to modernise our fleet while further reducing our CO₂ footprint at the same time. In addition to enjoying our constructive collaboration with DNV on this project, it was also very helpful, especially with regard to the formal requirements for preparing a secondary opinion and the technical specifications of the vessels.”

Thanks to their fuel-efficient high-pressure dual-fuel engines, the new ships will be able to reduce CO₂ emissions by approximately 15 to 25%. This means that in addition to the requirements of the LMA’s Green Loan Principles, the ships will also satisfy the EU Taxonomy’s technical screening criteria for sea and coastal freight water transport. The state-of-the-art vessels are being built in South Korea and are scheduled to be delivered in 2023. Jan-Henrik Hübner, Global Head of Shipping Advisory Practice at DNV Maritime concluded:

“Based on their hydrodynamic optimisation, very efficient main and auxiliary engines and use of LNG as their main fuel, these vessels can meet all the criteria required. Furthermore, with the ability to run on bio- and synthetic-LNG once these fuels become more widely available, they offer an example of how vessels can reduce carbon intensity now, while being ready to move to a lower or zero carbon future.”

Photo: An idea of the size of the new vessels can be gauged by the shot of the MV Salahuddin in Rotterdam this month, a mere 15,000 TEU vessel!