Financing the East Coast Cluster – an object lesson in tenacious coordination

By Green Finance Institute | December 16, 2025

In this insightful interview, GFI’s Deputy CEO, Ingrid Holmes, speaks with Allan Baker, Head of the Energy+ Group, Europe, the Middle East and Africa at Societe Generale, about the Northern Endurance Partnership (NEP); how this pioneering and multi-stakeholder deal came about and what the wider market and governments can learn from it. What is striking is the tenacity, creativity and trust-building between the public and private sector players involved to turn policy goals into actionable investment.

The Climate Change Committee (CCC) stresses that CCS is one of many tools required for the UK to accelerate to electrification and low-carbon alternatives. As gas shifts from a dominant energy source to a marginal role by mid-century, CCS is essential for capturing and permanently storing emissions, ensuring these residual emissions do not undermine Net Zero goals.

In the last year, several significant CCS deals have closed – including in the UK. After a seven-year process, £8bn in debt finance was arranged for the Northern Endurance Partnership (NEP) – a collaboration between BP, Equinor, and Total Energies – and the Net Zero Teesside Power (NZT Power) projects.

The NEP is developing onshore and offshore infrastructure to transport CO2 from the East Coast Cluster carbon capture projects to secure storage under the North Sea. NZT Power is a gas-fired power plant with carbon capture technology, capable of generating up to 742 megawatts of flexible, dispatchable (possible to turn on and off) low-carbon power.

Societe Generale acted as Exclusive Financial Adviser, Mandated Lead Arranger, and Hedging Bank to both NEP and NZT Power, which were funded based on a specific business model, the Transport and Storage Regulatory Investment (TRI) model, and the Dispatchable Power Agreement (DPA), developed over several years with the UK Government.

Ingrid: Can you tell me about the origins of the deal – how did it come about?

Allan: It’s one of those deals that’s difficult to really pin down the origin precisely because it came out of a number of earlier efforts.

We did some work for the UK Government to try to work out how you can decarbonise the Teesside industrial cluster, which at the time included a steelworks, plus a number of other industries. We were asked to propose a tariff mechanism which would encourage industry to capture
their CO2.

We were also working on a project called White Rose, which was part of the government’s previous competition for carbon capture. White Rose was planning to store CO₂ in an aquifer, which ultimately became the store targeted for the NEP project. Although this project fell through, the Oil and Gas Climate Initiative then picked up the challenge by funding early feasibility work for what became NZT Power and NEP with a group of members, including the current shareholders. Those studies and early bankability assessments eventually became the foundations of the NZT Power and the NEP.

In parallel, we had been working in the Carbon Capture, Utilisation and Storage (CCUS) Council, which is a group of industry stakeholders set up by the Minister of Energy and tasked with looking at carbon capture and working out how you practically kick-start the industry and what is needed in terms of creating a business models to enable carbon capture to go forward. This was the segue to us advising Teesside.

Ingrid: You have talked about how the project challenged traditional understanding of acceptable risk levels for large infrastructure assets. What were these risks and how did you work with other debt providers to get them comfortable with lending?

Allan: There were few or no financing precedents for the technical and commercial risk associated with CCUS, so we first needed to understand them and then narrow them down to the absolute core of what wasn’t acceptable to us (banks). That process was very intense, iterative and technology driven. We onboarded engineering advisers early and collaborated closely with the project sponsor’s engineering teams to build a unified technical narrative and ensure a comprehensive risk assessment. It was useful for us to have our own engineers to work with the insurance companies, the sponsors and government’s consultants. For example, the potential for store leakage was a major concern, and the banks had to go well beyond normal financial analysis to really understand the technical side of the project. Insurers were also faced with the same challenge as we saw them as a key part of risk mitigation.

The deal only worked because of the combination of private structuring, insurance layering, and targeted public intervention to address the specific leakage liability

Ingrid: Can you tell me more about the role of insurers in the deal?

Allan: There’s a joke that insurance is the last thing you think about in project finance where you have done variants of deals dozens of times. But here, insurance played a key role in unlocking finance. They had technical teams capable of understanding the sponsors’ analysis of the probability of defaults or failure on several issues that were outside the standard scope of project finance risk. That, combined with the sponsors and advisors’ input, helped move lenders away from a binary view on risk to consider the probability this risk is going to happen, and what it would mean in terms of financial impact on the company. We were then able structure the deal around that that risk – layering and apportioning it to different parties. Their involvement was critical, but even insurance has limits. That’s where government comes in. Not to guarantee everything, but to bridge risks – such CO2 leakage risk that the market could not underwrite for this first project. The deal only worked because of the combination of private structuring, insurance layering, and targeted public intervention to address the specific leakage liability.

Ingrid: What role did public financial institutions play?

Allan: People assume public finance institutions will take on the risks commercial lenders won’t. In reality, when we isolated the hardest risks, such as leakage liability, public finance institutions, whilst being highly sophisticated and experienced, couldn’t take them either. Their value is in filling the gap in risk appetite and liquidity, and to bring confidence. They are not a panacea for underwriting the most difficult exposures that neither debt nor equity is able to take.

In the end, commercial bank liquidity was sufficient to fund the deal because the final project finance structure effectively apportions complex risks, including to government where there are clear market failures. Public institutions can support policy, bring liquidity and offer targeted guarantees, but they can’t replace the need for deep technical and financial due diligence by private lenders.

Ingrid: It seems a lot changed during the process of putting it all together, did the deals you ended up with change from the original concept?

Allan: In terms of the bones of the project, it didn’t change. We knew the anchor emitter would be gas fired power, we knew we would use amine capture technology, and we knew there would be a pipeline. We did have to adapt the structure as we went along because we came across new unique issues we had to resolve. One major change was that it became two projects, not one integrated project. The constant focus on the same outcome was key – as was continuity within government teams, which mattered enormously and reflected our feedback on previous CCUS interactions.

Public institutions can support policy, bring liquidity and offer targeted guarantees, but they can’t replace the need for deep technical and financial due diligence by private lenders.

We also went through a series of market soundings with banks to socialise the projects early. That gave us support in structuring and helped government identify true market failures. In return, we gained insight into policy constraints, value-for-money requirements, and how Treasury and the Audit Office evaluate risk.

There was a time when we were the only bank consistently turning up to CCUS policy discussions, but we feel that we helped shaped an investment model that worked for government and the market. The complexity was immense: aligning contracts, risk allocation, and financial flows across two major projects, then closing them simultaneously. Two multi-billion-pound projects reaching Final Investment Decision and Financial Close on the same day made this the most challenging closing I’ve seen.

Ingrid: How replicable is this for future CCS projects?

Allan: Not as a template, but a foundational transaction that breaks the “no track record, no financing” barrier that blocks first-of-a-kind deals. Most banks won’t spend years understanding a new technology. Those that do, gain first-mover advantage and deep institutional knowledge.

Future CCS deals won’t be identical. Government support in the UK should reduce as lenders and insurers become more comfortable. Internationally, we’re now advising on Asian projects, where cross-border storage adds complexity and will require a different approach. But the fundamentals remain the same: early engagement with government, detailed risk evaluation and alignment across the value chain.

The East Coast and HyNet clusters create pipeline and store infrastructure that unlocks confidence for investors. At Teesside, cement and waste-to-energy operators are exploring CCUS because access terms are clear and subsidies cover the added cost of CO₂ capture.

Most banks won’t spend years understanding a new technology. Those that do, gain first-mover advantage and deep institutional knowledge.

Ingrid: What are the key lessons on persistence and execution?

Allan: We saw these first-of-a-kind projects as an investment in long-term deal flow, just as banks once did with RES technologies, LNG, or gas-fired power. It is difficult for banks to price this type of mandate. Even though it took longer than expected, the benefit was partly strategic: it allowed us to position ourselves to support similar projects globally.

Persistence mattered. We repeatedly briefed banks to explain technical risks and keep government aligned. The final outcome proves that, with a good advisor, credible structuring and committed lenders, you can raise major capital for highly complex projects.

If a transaction is genuinely sound and you can demonstrate viability, even if it’s complicated, the project finance market will back it.

This article was originally published in the December edition of Green Finance Quarterly. Read the full publication here.