STRENGTH IN UNITY 32 Capital Management ESR adopts a proactive and disciplined capital management approach, and regularly review its debt maturity profile and liquidity position. The Group maintains a well-capitalised balance sheet, and actively diversifies its funding sources through a combination of facilities with both local and international banks, and capital market issuances in optimising its costs of debt. ESR continues to be disciplined in executing its capital recycling programme, and prudently redeploying capital to support growth. The Group continues to actively leverage its fund management platform to unlock value and generate higher recurring fund management fees. This meaningfully enhances the Group's tangible return on equity while maintaining sufficient funding capacity across the Group. Total bank and other borrowings as of 31 December 2023 were US$6.0 billion (31 December 2022: US$5.5 billion). Net debt was US$5.0 billion compared to US$3.7 billion as of 31 December 2022 mainly due to lower cash balance arising from the Group’s ongoing fundings to its investments. In FY2023, the Group continues to expand and diversify its funding and capital structure, which is crucial for fuelling the Group’s long-term growth: • ESR received an investment grade first-time "AA-" rating with a stable outlook form the Japan Credit Rating Agency, Ltd in March 2023; • Received AAA (Stable Outlook) from China Chengxin International Credit Rating Co., Ltd., one of the top rating agencies in Mainland China in September 2023; • In July 2023, ESR debuted a total of JPY30 billion through two series of Japanese Yen denominated fixed rate notes: (i) JPY20 billion 1.163% fixed rate notes due 2026; and (ii) JPY10 billion 1.682% fixed rate notes due 2030, each under the US$2,000,000,000 Multicurrency Debt Issuance Programme; • Closed JPY30 billion of Japanese Yen-denominated, fixed rate bonds in July 2023, resulting in a better-optimised debt currency profile with USD-denominated loans reduced to 17% of total debt as at end 2023, thereby reducing weighted average interest cost by 30 basis points from 5.6% in 1H2023 to 5.3% for FY2023. Debt Maturity Profile (US$ million) As of 31 December 2023 2024 2025 2026 2027 and beyond 900 15% 533 9% 1,234 21% 3,313 55% As of 31 December 2023, the Group’s weighted interest rate was 5.3%; and 11% of the Group's borrowings was on fixed rate while the remaining 89% was on floating rate basis. The Group's weighted average debt maturity was approximately 5.2 years as of 31 December 2023 (31 December 2022: 5.1 years). The Group continues to stay focused on its capital recycling strategy with proactive and disciplined capital management. It regularly reviews its debt maturity profiles and refinancing ahead of maturity ensuring a well-capitalised balance sheet is maintained to meet the Group’s short-term obligations, ongoing developments, and investments opportunities. ESR Group has ample liquidity with US$2.5 billion of cash and loan drawdown capacity. Furthermore, during the year, the Group successfully diversified its funding sources through the US$1.2 billion multi-currency revolving credit facility secured with various foreign banks. While Gearing as at 31 December 2023 was 30.7%, it is expected to reduce once the previously announced transactions in 2023 are completed, with proceeds applied towards debt repayment. The Group is expected to reduce its Gearing over the medium term toward the low end of its Gearing target of 20–30%. The Group has exposures to foreign exchange rate fluctuations primarily from its investments and income from its subsidiaries, associates and joint ventures, including Greater China, Japan, South Korea, Australia, Singapore and India. The Group manages and minimises its foreign currency exposures by natural hedges using various currencies at project and corporate level.
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