Photo of Andrew McLean, Julie Matthew and Nikki Walters, John Wood Group plc.

UK Export Finance facility wins praise from government and helps Wood transition to net zero

The challenge

The company recognised the unstoppable momentum behind the energy transition and has committed to providing practical solutions to help deliver a net-zero future. To accelerate this journey and capitalise on the emerging opportunities in building the low-carbon energy systems of the future, Wood sought a funding solution that was both strategically priced and extended the maturity of its current facilities to enable long-term investment in its sustainability journey and growth of its business. Being a UK exporter, the Export Development Guarantee scheme from UK Export Finance (UKEF) was a good fit for the company; however, with a new UK government policy on overseas fossil fuels coming into force during 2021, the exposure of the company’s business model to the overseas fossil fuel industry resulted in them being ineligible for the standard product offering.

The solution

Given that Wood has such a strong transition story, the company worked with UKEF and its coordinating banks to help develop and undertake the first ever UKEF Export Development Guarantee loan linked directly to a company’s climate change transition, a so called UKEF Transition Export Development Guarantee (UKEF TEDG) facility. The team had to bring together employees from across the organisation, to unlock many separate sources of information and workstreams, to successfully develop a clearly defined climate transition plan, which was then reviewed and opined on by an expert third-party consultant. The facility, which was dependent on Wood having a climate transition plan verified by UKEF and other UK government departments, was put in place for US$600m with a tenure of five years (bullet repayment) – the facility is also flexible with no costs for prepayment. To monitor progress against the plan, the loan is linked to key performance indicators (KPIs) including growing export revenues connected to energy transition and sustainable infrastructure, reductions in carbon emissions, and a requirement to be pre-paid if the plan is abandoned altogether.

Best practice and innovation

With its five-year duration, the loan will provide a source of stable working capital that the company can invest in unlocking the many low-carbon growth opportunities Wood sees across its business. It is thought this is the first ever green transition loan backed by any Export Credit Agency (ECA) globally. It sets the standard for such transition financing going forward in the ECA loan market. The UK government announced that this was the first ever government-backed green transition loan. The climate transition plan, completed with senior management involvement, included commitments to reduce carbon footprint and comparative exposure to fossil fuels by growing renewable energy and sustainable infrastructure business lines. These commitments were translated into quantified metrics against which the performance will be externally audited and reported.

Key benefits

• Cost savings.
• Improved visibility.
• Future proof solution.

“The financing will support the company’s transition journey to net zero and the vision set out by the Government in their Ten Point Plan and Net Zero strategy. It was also confirmed to be fully compliant with the UK government’s announcement to end support for overseas fossil fuel related projects,” concludes Julie Matthew, Director Treasury, Wood.

Please see link below to a UK government press release on the deal: https://www.gov.uk/government/news/ukef-backs-landmark-430-million-green-transition-loan-for-wood-plc