Downer has secured the project with a $276.7 million syndicated Green Bank Guarantee facility, the first such standalone facility in Australia, which gives assurance to the Queensland Government that the work will be completed. Downer’s Green Bank Guarantee facility is also the first such facility to be aligned to the 2023 update of the Green Loan Principles from the Asia Pacific Loan Markets Association.
“Sustainable finance instruments like Downer’s Green Bank Guarantee facility have a critical role to play in facilitating big infrastructure projects that form the foundations of our future net zero economy. That’s why CBA is incredibly proud to work with Downer on this innovative sustainable finance solution that recognises the green credentials achieved by the electrification of the underlying project while providing assurance to the Queensland Government,” said Deborah Leerhsen, Executive General Manager Global Client Solutions at Commonwealth Bank.
“Transportation accounts for around one fifth of Australia’s emissions, so shifting to fully electric passenger trains to reduce our carbon dioxide emissions will advance Australia towards its net zero by 2050 target,” Ms Leerhsen said.
The innovative transaction builds on Downer’s longstanding commitment to sustainability. An early supporter of sustainable finance in Australia, Downer issued a sustainability-linked loan in 2020 when only a handful of other companies had tapped that market.
“Downer is proud of its reputation as an innovator in working with partners on sustainable financing solutions for its projects,” said Downer Group Chief Executive Officer Peter Tompkins.
“This facility is another important demonstration of Downer’s commitment to decarbonisation and the value we can bring to our customers.
“Downer has a critical role to play in the transition to a low-carbon future. We have the unique skillsets, expertise and experience to help our customers’ journeys towards achieving their net zero commitments – and we look forward to delivering a number of energy efficiency solutions across the QTMP project.”
Companies use these Bank Guarantees, also referred to as performance bonds, to give their customers assurance that contracted work will be completed. In the event the company is unable to deliver its contractual obligations, the Bank providing the guarantee will pay a pre-agreed amount to the customer to allow it cover its additional costs.
A Bank Guarantee facility qualifies as Green when the underlying project it supports provides clear environmental benefits and meets green criteria as defined by Market Principles. The electric trains and associated manufacturing and maintenance facilities that underpin Downer’s QTMP project qualify as Green under the APLMA Green Loan Principles’ (GLPs) “Clean Transportation” criteria, which is defined as electric modes of transport that advance the economy’s transition to a net zero future.
DNV has provided a Second Party Opinion confirming the alignment of the structure to the GLPs.
The Green Bank Guarantees will be managed by Downer under its newly established Green Finance Framework, detailing its alignment to the GLPs and why bank guarantee facilities are essential for future low-carbon large-scale infrastructure projects, such as the QTMP.
Downer will manage and report on the Green Bank Guarantees issued under the Framework to ensure it continue to align with the GLPs. In the event that the Guarantees are called and the facility is converted to a loan, the loan will be managed as a Green Loan due to its continued alignment to the GLPs.
Commonwealth Bank served as Sole Green Coordinator on this transaction, which included a syndicate other banks.
Following the award of the Queensland Train Manufacturing Program Design, Build and Maintain contract, Downer will manage the largest rail fleet in NSW, Queensland and Victoria.