Late last year, Perth-based lithium and renewable energy producer Vulcan Energy was awarded a dark green rating from independent ratings agency S&P Global Ratings for its green financing framework.

The company is developing what it describes as the world’s first integrated renewable energy and lithium project in the Upper Rhine Valley in Germany, aiming to decarbonise the lithium supply chain for electric vehicles while supplying local communities with renewable heat and power.

Vulcan has worked with Natixis Corporate & Investment Bank (CIB) to highlight its sustainability credentials to international lenders as part of its phase one project financing.

When it comes to bank financing, renewable energy companies usually benefit from strong in principle interest from potential financiers explains Felicity Gooding, Group Chief Financial Officer at Vulcan Energy.

“There also needs to be a balance between the structure of credit and the inherent risks, including certainty of future revenues in potentially fluctuating energy markets and performance of assets, particularly in the case of new technologies,” she says.

European banks tend to have a strong appetite for sustainable energy projects, largely due to their own internal sustainability objectives and policies. However, projects which are more complex – including those involving new technologies – will require the support of a number of institutions including commercial banks, export credit agencies and/or the European Investment Bank (EIB).

“Export credit agencies bring a degree of legitimacy to industrial projects and are typically viewed favourably by commercial banks as evidence of the public/state importance of a project,” says Gooding. “They also act as providers of credit insurance that lower the cost of capital.”

A S&P Global second party opinion assesses whether the framework aligns with third-party published sustainable finance principles, including the International Capital Market Association’s green bond principles and green enabling projects guidance, and the Loan Market Association’s green loan principles.

A dark green rating is awarded to activities that correspond to the long-term vision of the low carbon climate resilient future.

Vulcan Energy recently issued an updated debt package, including detailed due diligence reports, to its structuring group, consisting of the EIB, export credit agencies from France, Canada, Australia and Italy, and structuring banks ABN AMRO, ING, Natixis CIB and UniCredit.

In mid-December, Vulcan secured EIB board approval to participate in phase one financing.

Having announced in February 2024 that its project was potentially suitable for EIB financing, the board has now approved its participation, with the financing potentially amounting to up to €500m pending completion of final due diligence, signing of legal documentation and final internal approval.

The financing envelope can be split into an EIB direct uncovered facility, funding under export credit agency covered facilities and as liquidity lines for participating commercial banks.

The company is advancing its financing process, supported by BNP Paribas as financial advisor. The current stage of the financing of phase one involves widening the lending pool to other commercial banks.

“We continue to finalise our phase one financing package, including securing €879m of conditional commitments received from Export Finance Australia and seven commercial banks in December 2024,” says Gooding. The company will update the market with further progress in due course.

“A world-first dark green global rating by S&P for a resources company reaffirms our sustainability credentials,” she adds. “Our aim of building a fully domestic, sustainable lithium supply chain in Europe, for Europe, ultimately requires the support of financiers such as the European Investment Bank and confirmation of its participation is a welcome and timely development.”