Notice

Category B project supported: SEAH EDG, UK

Published 7 December 2023

1. Project description

UK Export Finance (UKEF) has agreed to provide support to SeAH Wind Limited (the “Borrower”) in respect of working capital that will be applied to a specific UK-based development in Teesside, Redcar and Cleveland Borough Council, Northeast England. K2 has been appointed as construction manager, managing both the design consultants and the trade contractors who will be responsible for construction works.

The Project consists of the construction and operation of a monopile manufacturing facility and related office buildings (approximately 350,000 m2 excluding landscaping). The monopiles intend to be sold to the UK, US and Europe to create offshore wind farms. The Project is part of the South Industrial Zone (SIZ), itself part of the wider South Tees Development Corporation (STDC) Masterplan, Redcar. The area surrounding the Project site is industrial in character; the SIZ will host port-related uses, offshore energy industries, materials processing and manufacturing, and energy generation. The Project is the first and most advanced development in the SIZ.

The Project does not include any Associated Facilities.

Standard Chartered Bank and HSBC are the lending banks.

2. Project sector

The Project is in the renewable energy sector.

3. Project sponsors

The Project is being developed by SeAH Wind Limited.

4. UK exporters

K2 will be the principal contractor for the Project.

5. Export Credit Agent Bank

Standard Chartered Bank

6. Amount of UK Export Finance support

The total Export Development Guarantee (EDG) amount is £367 million, of which UKEF are providing a guarantee of c.£257 million.

7. OECD common approaches and Equator Principles

The EDG product does not fall under the scope of the 2012 (Revised 2016) OECD Common Approaches for Officially Supported Export Credits and Environmental and Social Due Diligence (the “OECD Common Approaches”). However, since 100% of UKEF financing will be used to develop a new facility with an identified location, the Project falls under the scope of the Equator Principles (2020). Accordingly, UKEF categorised the Project as a Category B, i.e. having environmental, social and human rights (ESHR) impacts that are site-specific, predominantly reversible, and for which mitigation measures are readily available, in accordance with the definition in the International Finance Corporation (IFC) Performance Standards (PS).

8. Environmental, social and human rights standards

Project related ESHR documentation was reviewed for alignment against the 2012 IFC PS on Environmental and Social Sustainability and the World Bank Group Environmental, Health and Safety (EHS) Guidelines.

The applicable IFC PS were:

  • PS1: Assessment and Management of Environmental and Social Risks and Impacts;
  • PS2: Labour and Working Conditions;
  • PS3: Resource Efficiency and Pollution Prevention;
  • PS4: Community Health, Safety and Security;
  • PS6: Biodiversity Conservation and Sustainable Management of Living Natural Resources; and
  • PS8: Cultural Heritage.

The applicable World Bank Group EHS Guidelines were:

  • General EHS Guidelines (2007); and
  • EHS Guidelines for Metal, Plastic, and Rubber Products Manufacturing (2007).

9. Nature of ESHR impacts

The review of potential ESHR risks and impacts took into account the following impacts, receptors and issues during the construction and operational phases of the Project:

  • Climate change;
  • Labour and working conditions, including occupational health and safety;
  • Management of third-party contractors and suppliers;
  • Grievance mechanisms;
  • Noise, vibrations, dust and air emissions;
  • Hazardous materials, waste and drainage management;
  • Water and energy resources;
  • Community engagement;
  • Community health, safety and security;
  • Emergency planning and response;
  • Traffic management;
  • Biodiversity; and
  • Cultural heritage.

10. Assessment of ESHR impacts

A review was undertaken in line with the requirements of the Equator Principles to identify potential ESHR risks and impacts of the Project and how these would be effectively managed.

The review included:

  • Desk-based review of Project-related documentation, including UK Planning Application environmental and social assessment documentation and submissions, and the Environmental and Social Management Plan;
  • A visit to the Project site; and
  • Follow-up interviews with relevant Project representatives.

The results of this review formed the basis for the evaluation of the Project’s alignment with relevant international standards, and recommendations for future compliance and monitoring.

11. Climate change considerations

UKEF considered the Project’s potential direct and indirect greenhouse gas (GHG) emissions and effects of climate change factors on the Project as part of its ESHR review.

Based on the estimates provided by SeAH, the GHG emissions for the Project during operations are not expected to exceed the 25,000 tonnes CO2 equivalent per annum threshold set out in IFC PS3 for Scope 1 and Scope 2 emissions. Estimated Scope 3 emissions related to the Project were not provided, but SeAH intends to appoint a consultant to assist them in calculating and reducing their GHG emissions. The Project’s upstream emissions during operations will mostly correspond to the purchase of steel; steelmaking being a very energy and material-intensive industry, the Project’s embedded GHG emissions are expected to be significant. It is expected that the presence of a new manufacturing facility will result in additional journeys to and from the area, and therefore associated Scope 3 emissions, however these are not anticipated to be significant. In addition, the end products that will be produced at the site will be used for the offshore wind industry, thus having an overall positive impact on climate change when utilised over a long time period.

The ESHR review revealed that the Project design has considered potential physical impacts of climate change such as floods.

12. Decision

Various actions have been agreed between the Project developers, operators, and parties involved in the financing, which are necessary to ensure the Project’s on-going alignment with international standards. Following agreement of these commitments, it was concluded that the Project should meet the relevant international standards over the Project cycle. UKEF has therefore decided to support the Project.

A condition of support is that the Project will be subject to environmental and social monitoring and reporting, to provide satisfaction that the Project is aligned with the relevant international standards throughout the duration of support.

UK Export Finance

December 2023