KHI opts for sustainable financing as it eyes large LH2 carrier by 2026

Japanese shipbuilder Kawasaki Heavy Industries (KHI) has established the Sustainability Linked Loan Framework Template and in accordance with the principles, set future targets regarding the establishment of a hydrogen supply chain.

As explained, the template was established in accordance with the Sustainability Linked Loan Principles drawn up by the Loan Market Association and the “Green Loan and Sustainability Linked Loan Guidelines” issued by the Ministry of the Environment, Government of Japan.

The Loan Market Association was established in 1996 to improve liquidity, efficiency and transparency in the primary and secondary syndicated loan markets in Europe, the Middle East and Africa.

For the template, Kawasaki has obtained a third-party opinion from Japan Credit Rating Agency,

Furthermore, the firm has inked loan agreements with four lenders by using the template. Lenders that have entered into agreements with KHi include: Meiji Yasuda Life Insurance Company, Nippon Life Insurance Company, the Norinchukin Bank, and Sumitomo Mitsui Banking Corporation.

Under the template, KHI has set a number of sustainability performance targets connected to the creation of a hydrogen supply chain. Specifically, the company wants to work on the commercialization of the construction of the first large liquefied hydrogen carrier by 2026. The firm has already obtained an approval in principle (AiP) for the design of the vessel from compatriot classification society ClassNK.

What is more, in May last year, ClassNK issued AiP for the design of the cargo containment system (CCS) with a capacity of 40,000 cbm class per tank developed by Kawasaki for use on a large liquefied hydrogen carrier.

The other target set under the new template is transporting capability of 225,000 tons/year or more of liquefied hydrogen to Japan by 2031. Hydrogen is expected to be used as a clean energy source to realize a decarbonized society as its burning does not emit CO2.

“By utilizing the Template, Kawasaki will not only promote its own sustainable finance initiatives, but also contribute to the promotion of sustainable finance in the loan market by reducing the burden of preparing each own framework,” KHI noted.

Moreover, Kawasaki has set a sustainable finance target in its “Group Vision 2030” for 50 per cent of its long-term debt in FY2030 and 100 per cent in FY2050. The establishment of the hydrogen supply chain is seen as one of the priority fields in its “Group Vision 2030”, and also essential for the sustainable growth of Kawasaki and the achievement of carbon neutrality in Japan, according to KHI.

In the past, the Japanese firm worked with Iwatani Corporation, Shell Japan, J-POWER, Marubeni, ENEOS, and Kawasaki Kisen Kaisha to develop technologies to produce and transport large volumes of liquefied hydrogen, conducting demonstration tests between Japan and Australia. These processes are to establish processes around the safe loading, offloading, and storage of hydrogen.

Suiso Frontier, the world’s first liquefied hydrogen (LH2) carrier designed and constructed by KHI, completed its maiden voyage in April this year. The demonstration voyage proved that an international LH2 supply chain is possible. Therefore, this voyage marked a significant step toward the use of hydrogen as a new, clean energy source.