Keynote: Credendo’s Jijakli on transition strategy

TXF: Credendo was at the forefront of announcing its strategy on renewables at COP26. What is your policy regarding public support for the energy transition from fossil fuels to clean energy?

Nabil Jijakli (NJ): Industry and companies hate uncertainty. We all remember the COP26 statement in November 2021 requesting the end of public support for fossil fuels by 1 January 2023. This very simple sentence raised a lot of questions and was open to interpretation.

 At Credendo, we decided to set up a roadmap. What was very important in our policy was already in the title: ‘Credendo policy regarding public support for the energy transition from fossil fuel energy to clean energy.’ The word transition is essential, because transition needs time. We based our policy on a scientific study from the International Energy Agency, Net Zero by 2050, A roadmap for the global energy sector, with a very clear statement that first of all consumption of gas and oil will reduce progressively.

 As a consequence, there is no need to develop new oil and gas fields. But in the meantime, existing fields needed to be used and production still needed to be developed.

We published our policy on 15 July 2022, and it came into force on 1 January this year. We do not support any coal industry, new or old. For us that was not an issue because, unlike, for instance, Poland, we do not use coal anymore.

 

TXF: What about oil and gas transition?

NJ: For oil and gas, we stopped supporting new production and exploration of any new fields. In the meantime, we still support the industry for midstream and downstream under certain conditions. First, it has to be a field that has been exploited fully before the end of 2021, which allows a kind of transition period. Secondly, it has to comply with a certain number of conditions, in order to comply with the objective of 1.5 degree warming and with the fact that it will not slow down the transition of the country itself.

 Of course, this happens under ESG procedures. As an ECA, we always make a deep analysis of the impact on the environment, but also the social impact of each and every project. If those ESG conditions are met, we are still able to cover existing fields. Our policy covers the fossil fuel sector, but not other sectors, even those using fossil fuel energy to a high degree – for instance the transport or chemicals sector. They are out of the scope of our policy.

 In the past six months, we have had to decline some proposals, which could be painful for exporters. On the other hand, you can see a shift in our portfolio, which is good news. Two years ago, oil and gas was the third biggest sector in our portfolio and now it has become the sixth, and that was before the implementation of this policy. Transition really is the key word. We need time.

 

TXF: What green packages does Credendo have on offer – what’s the uptake been like and how are you approaching the market with them?

 NJ: Our policy is a ‘body with two legs’. The first one we discussed was the policy with restrictions and obligations, the end of supporting some transactions. On the other hand, we really felt the need to have some incentives, which is what the Credendo Green Package is about. The name is clear, it’s a package combining the most favorable terms and conditions of our products. The sum of all those advantages is the Credenda Green Package.

Before launching our package, we had deep discussions with the business federation and their first question from the discussion was “are you going to offer discounts, are you going to cut premiums?” Of course, we couldn’t do that under the OECD Arrangement.

Instead, we have taken the most favourable conditions. For instance, we consider transactions when there is national content of around 30%. If it is a Credendo Green Package-eligible transaction, we are also looking at a minimum ceiling of 20%. We are also covering up to 98%, instead of sometimes covering 90-95% and keeping a part of the risk in the debtor, in the client.

We do not usually cover domestic transactions, but for the Credendo Green Package we do if we assess that there is a potential for future exports. Regarding our funding solution, we have increased our capacity to fund Credendo-eligible green projects and in the meantime, we also increased the maximum amount usually offered for our funding solution (factoring and buyer credits) from €8 million to €15 million. We also extended the tenor from the usual five years to 10 years.

Regarding the financial guarantees we provide to banks, we are also ready to go up to 80% instead of the usual 50%.

To benefit from the Credendo Green Package, the projects and transactions need to comply with some conditions. The first condition is the obvious one, that it has to have a positive impact on the environment, by contributing directly or indirectly to a reduction in greenhouse gases in the atmosphere, to reduced vulnerability of human or natural systems to climate change, or to a sustainable environment (for example, through waste minimisation, the circular 2 economy, drinking water projects, etc.). To qualify for these incentives, such projects must also comply with the principle of ‘doing no significant harm’ and respect good governance principles.

How did we introduce that? First we had those deep discussions with the business federation to test the market and feel the need. After getting and taking into account their feedback, we launched the Credendo Green Package. It’s nearly one year on and we have received around 90 applications, and from those we have 18 policies that have fulfilled the eligibility criteria to achieve the Credendo Green Package.