China Resources Materials Tech, a Hong Kong-listed cement, clinker and concrete supplier under state-owned China Resources Group, issued a Rmb1 billion ($138.2 million) tranche of unsecured sustainability-linked medium-term notes, maturing in three years, starting from April 22.
The issuing interest rate was finalised at 2.44%, with an oversubscription of Rmb5.14 billion from 24 institutional investors on the China Interbank Bond Market (CIBM), mostly from Chinese banks. Proceeds raised were Rmb1.21 billion from 12 investors, according to public announcements.
The Agricultural Bank of China (ABC) acted as lead underwriter and bookrunner of the transaction, with Bank of China (BOC) and China Merchants Bank (CMB) as joint underwriters. The issuance is classified as a panda bond because CR Materials Tech is incorporated in the Cayman Islands.
All proceeds from the issuance will be channelled to repay the issuer’s and its affiliates’ outstanding debts onshore, according to a disclosure at Shanghai Clearing House.
This marks the second sustainability-linked panda bond issuance onshore in the Chinese market, after a Rmb1 billion similar issuance from Singapore-headquartered global real asset manager CapitaLand Investment in March.
Targets
A key performance indicator (KPI) of CR Materials Tech issuance was selected to reflect energy efficiency levels in the firm’s clinker production process. The measurement takes reference to a benchmark efficiency level of 100 kilograms of coal consumption per tonne of production, from guidelines on decarbonisation of high-energy sectors issued by the National Development and Reform Commission (NDRC) in 2022.
Cement and clinker production accounts for around 83% of CR Materials Tech’s revenue, reaching HK$33.5 billion ($4.28 billion) in the latest financial year, which ended December 31, 2023. The firm was producing 63.6 million tonnes of clinker annually, as of the end of 2022.
Sustainability performance targets (SPTs) were set as no less than 23% of clinker produced meeting the benchmark energy efficiency level in 2024, which will be a 5.19% rise from that recorded in 2022, if achieved. Technologies to be adopted include oxygen-enriched combustion, alternative fuel adoption and solar energy trial at certain production sites.
A failure to meet the targets, if revealed by a third-party assessment scheduled before April 30, 2025, will lead to a 10-basis-point increase in the coupon rate during the third year of interest accrual, as agreed under the sustainability-linked arrangements.
The firm has registered a total issuing quota of Rmb15 billion with regulators for this sustainability-linked facility. Sources said that it is unclear whether the issuer will pursue further issuances in the near future.
CR Materials Tech did not respond to FA's request for comment.
