China Construction Bank (New Zealand) contributes to a $850 million NZD syndicated sustainability-linked loan to Contact Energy for refinancing purposes and to support its investment programme

Project narrative

Between or before the fiscal year between July 1, 2020 and June 30, 2021, a syndicate of five banks — including China Construction Bank (New Zealand) Limited (CCB NZ) — entered into a $305 million NZD syndicated bank facilities agreement with Contact Energy Limited — a New Zealand electricity generator and electricity and gas retailer — for general corporate purposes. This debt carried a maturity period greater than three years. CCB NZ committed $60 million NZD. Record ID#100315 captures its contribution. In addition to CCB NZ, the following lenders committed the respective amounts to the loan syndicate: Australia and New Zealand Banking Group (ANZ) committed $65 million NZD, Bank of New Zealand (BNZ) committed $50 million NZD, Commonwealth Bank of Australia (CBA) committed $60 million NZD, and Mizuho Bank committed $70 million NZD). In June 2021, the five lenders converted their $305 million NZD bank facilities to Contact Energy into sustainability-linked loans (SLLs), bringing all of Contact Energy's borrowings into SLL-frameworks. The loans remained for the borrower to use for general corporate purposes. The conversion brought the loans into Contact Energy's Green Borrowing Programme and were tied to its environmental, social, and governance (ESG) performance, including having 95% renewable generation by 2025. If Contact Energy met these targets, the interest rates would decrease; if it failed to meet them, the interest rates would rise. This was reportedly the largest conversion of existing loans into SLLs in New Zealand and was claimed to be the largest SLL in New Zealand. Then, in December 2022, a syndicate of seven banks — including CCB NZ — entered into a $850 million NZD syndicated sustainability-linked facility agreement with Contact Energy Limited for refinancing purposes and to support its investment programme. This loan carried a floating interest rate. $150 million NZD was maturing between 1 and 2 years; $350 million NZD was maturing between 2 and 3 years; and $350 million NZD was maturing between 3 years. As an SLL, this loan feature ESG-related metrics based on carbon reduction targets from Science Based Targets Initiative (more than its current targets), renewable generation (more than what it had already announced), and broad-based sustainability performance; if the borrower met these targets, the loan's pricing would ratchet. The proceeds were to be used by the borrower to replace (refinance) existing bilateral facilities and to support the borrower's investment programme. Record ID#104901 captures CCB NZ's contribution. In addition to CCB NZ, the following lenders contributed to the loan syndicate: ANZ Bank New Zealand Limited, Westpac New Zealand Limited (WNZL), Bank of New Zealand (BNZ), Commonwealth Bank of Australia (CBA), Mizuho Bank, Ltd., and MUFG Bank, Ltd.. ANZ New Zealand and Westpac New Zealand served as joint lead arrangers and bookrunners. Westpac served as sole sustainability coordinator. CCB NZ, BNZ, CBA, Mizuho, and MUFG served as lead arrangers. During the 2023 fiscal year, Contact met the sustainability performance targets of the loan and saw the maximum pricing discount.