Management Discussion & Analysis FORWARD TOGETHER 18 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. The average co-investment for the Group was 7.4% as of 30 June 2023. This meaningfully enhances the Group's tangible return on equity while maintaining sufficient funding capacity across the Group. Debt Maturity Profile (US$ million) As of 30 June 2023 2026 and beyond 335 936 810 3,548 2023 2024 2025 6% 17% 14% 63% Total bank and other borrowings as of 30 June 2023 remained flat at US$5.6 billion (31 December 2022: US$5.5 billion). Net debt was US$4.5 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. As of 30 June 2023, 90% of total debt maturing in year 2023 has been refinanced. In 1H2023, 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. • In June 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. As of 30 June 2023, the Group’s weighted interest rate was 5.6%; and 19% of the Group's borrowings was on fixed rate while the remaining 81% was on floating rate basis. The Group's weighted average debt maturity was approximately 5.3 years as of 30 June 2023 (31 December 2022: 5.1 years). The Group continues to stay focussed 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 now has US$3.0 billion of cash and loan drawdown capacity that is sufficient to cover the Group’s aggregate loan repayments for the next three years without any further asset recycling or non-core divestments. 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 via project and corporate level. Operating and development activities of each country are funded mainly through project level debts and operating income that are in their respective local currencies. At corporate level, the Group currently funds some of its investments through corporate borrowings in the currency of the country in which the investment is located. The Group continues to closely monitor the interest and exchange rates movements and evaluate such impact to its portfolio. The Group continues to assess the use of financial derivatives as additional tools when appropriate to manage foreign currency and interest rate exposures.
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