Kazakhstan’s AIFC Green Finance Center LTD and CREON Capital S.a.r.l. signed a memorandum of understanding and partnership to strengthen cooperation in the field of carbon capture, storage and utilization (CCUS).
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In June, Creon Capital established a branch in Düsseldorf. The new Creon mainstay is located directly on the Rhine. Its team is to bundle the investment activities in Germany. For this purpose, Creon Capital has boarded four new leading employees with extensive know-how and a widespread network in the European industries. The mission of the Düsseldorf team is to develop M&A as well as investment projects in Germany and to internationalize them on the Eurasian level.
Josef Rentmeister, the new Co-Chairman of Creon Capital, gained over 20 years of leadership experience at IBM, Cisco, and T-Systems with responsibility for over €1 billion budget and over 2,000 employees. Through his investments in German small and medium-sized enterprises (SME), he brings 15 years of experience in investment management and business development.
“I am thrilled to join the Creon team, combining the outstanding expertise and network of Creon with my global experiences. Together with my team I am looking forward to contribute to bridge the gap between western businesses and eastern suppliers and investors”, said Josef Rentmeister.
Jan Wuppermann, Director, has more than 20 years of experience in corporate finance, restructuring and auditing, amongst others as Head of Internal Audit North- and Latin America of a stock-listed packaging corporation and in the establishment of a bank’s M&A department. Jan Wuppermann completed his vocational training in banking and has a master’s degree in International Business from Maastricht University and a Master of Laws (LL.M.) from the University of Münster. Jan Wuppermann is a founder and Managing Partner of Operando Partners, where he is responsible for marketing/communications, investors, and the origination of transactions. He is also a shareholder of Wuppermann AG, a family-owned metal processing business founded in 1872, which has an annual revenue of around 500 million euros.
Peter Folle, Director Transactions, who gained over 20 years of experience as a PE fund manager. As a trained banker and holding degrees in business administration and economics, he has developed the fund and investment controlling of Triginta Capital since 2001 and is Managing Partner since 2003, responsible for more than 100 transactions. Besides that, he has extensive experience in the areas of investment controlling and restructuring SME, specialized on mechanical engineering, internet, IT as well as health and social services.
Jan Philip Neuhaus, Director, holds a Bachelor and Master of Science in Business Administration with a major in Accounting and Finance. His main focus is the execution and support of M&A transactions in all phases. In addition, he supported the investment process for the company’s own portfolio with regard to investments in start-ups and SMEs.
In June, the European Commission will present a package of bills detailing the European Green Deal, a strategy that aims to reduce CO2 emissions by 55% to 1990 levels by 2030, improve energy efficiency by 32.5%, and increase the share of renewables in the energy mix up to 32%.
Dr. Fares Kilzie, Chairman of the Board of the CREON Group
2020 was a year of radical shifts in energy markets. The first, but not the most important one, was the deliberate failure of the OPEC+ deal in March. This was largely predetermined by the reallocation of standings of the major players in the oil market. In 2016, when the first OPEC+ deal was announced, the share of OPEC in global oil and liquid hydrocarbon production was 37.8%, but in 2019 it was only 34.4% according to the U.S. Energy Information Administration (EIA). The share of the United States in the same period increased from 15.2% to 19.3%, while that of the OECD (Organization of Co-operation and Development) countries combined increased from 27.5% to 31.4%. The dissent within the cartel and the loss of market share forced OPEC to tighten its output reduction policy, which increasingly threatened economic feasibility and the national interests of its own members.
It was Russia, who managed to cut the Gordian knot. Moscow promptly understood the meaninglessness of the ‘reduction race’ when output outside OPEC countries was growing chaotically, and Western Europe and North America are taking up major steps in the transition to low-carbon economies. The general geopolitical situation, coupled with the COVID-19 pandemic, prompted Russia to resume participation in a new deal. However, this was only a tactical retreat and a temporary trade-off that cannot reverse long-term global trends.
The main postulate of Russia is: if everyone is reducing drastically and in addition shifting simultaneously away from fossil fuels and hydrocarbons, who can sustainably cover market demand at least in the short and mid-term?
The Path to Global Decarbonization
The most important of these trends is the decarbonization of the global economy, spurred by the rapid development of renewable energy resources. Despite COVID-19, the renewable energy sector has demonstrated a higher growth rate compared to all previous years. According to the EIA, electricity generation from renewable sources (not counting hydropower) in the United States increased by 5% in 2019, while in the first nine months of 2020 the growth was already 12% per annum. This growth accelerated from 9.1% to 9.5% in the European Union according to Ember Research Center.
Of no less importance is the fact that investments in the renewable energies proved to be very resilient to the pandemic: the International Energy Agency (IEA) estimates global investment in oil, gas and coal production in 2020 to decrease by 29% (to $689 billion), while in alternative energy by only 3% (to $301 billion). While the share of investments in renewable energies in the electricity generation sector increased to 67% (versus 65% in 2019). This is partly why the IEA improved its long-term forecast for average growth in global renewable energies demand in its latest World Energy Outlook (from 7.1% to 7.4% per annum).
Far from being newcomers
The future of hydrogen energy also became clearer at the end of 2020. In June, Germany published a national hydrogen strategy consisting of 38 steps with a total cost of €9 billion focused mainly on the production of hydrogen from renewable energy resources. The example of Germany was followed not only by the European Union, which presented its own hydrogen strategy in July, but also by Russia, which approved the Hydrogen Energy Development Plan. This is not a coincidence, but a very clear sign that cooperation in the energy sector remains a priority for both countries despite deep political differences. Moreover, the German hydrogen strategy recognizes cooperation with other market players: the document, which consists of 32 pages, makes use of the word ‘international’ 49 times. Russian and Eurasian companies are far from being newcomers to the hydrogen industry:
Hydrogen is already part of the process cycle of dozens of Russian and Eurasian refineries and petrochemical facilities, not to mention LNG and ammonia plants
- Rosatom and Gazprom are going to start up their own hydrogen plants in 2024, which will use nuclear energy (yellow hydrogen) to reduce CO2 emissions, or steam methane reforming (blue hydrogen)
- Another project is going to be implemented by RusHydro that will build a hydrogen plant in the Magadan Region by the mid-2020s together with the Japanese giant Kawasaki Heavy Industries
- Growth points for the industry will also be the Sakhalin region, where local authorities intend to create a hydrogen cluster, and the cluster in the Arctic areas, where hydrogen technologies can solve the longstanding problem of heat and power supplies.
- Kazakhstan and Uzbekistan are investing more and more in solar and wind farms and will be soon suppliers of various types of Hydrogen.
Eurasia in general and Russia in particular, has a huge platform for capital-intensive ‘green’ hydrogen projects, which require a broad international cooperation as clearly demonstrated by the European NortH2 Project (which involves RWE, a German electricity producer, and Groningen Seaports, a Dutch operator of seaports, along with Shell, Gasunie and Equinor). Such projects in Russia can be supported by a very impressive wind-farms fleet, which is owned by the Russian subsidiary of Fortum, Rosnano and dedicated companies of Rosatom, such as NovaWind. Several other major companies can claim the role of initiators and investors, such as Novatek (already showed interest in the hydrogen supplies); Inter RAO (assumed investments in renewable energies in its new medium-term strategy), and, finally, the Russian Railways RZD, that became the first issuer of “green bonds” in Russia.
Therefore, Eurasian companies must not be misunderstood to be fresh newcomers to the hydrogen industry.
Together Towards a Green Future
The results of the 2020 environmental transparency rating (organized by WWF and Creon Group) clearly demonstrate the increasing achievements of Russian and Eurasian oil & gas companies in non-financial reporting and reduction of the environmental footprint. If in 2014, when the first rating was published, the average final score for Russian companies was 0.8, then this year it reached 1.2 (on a two-point scale).
However, the decisive factor will be the return of investments on ‘green’ hydrogen, which today is questionable for businesses, it is similar to the Gas-to-Liquid (GTL) technologies in the 1950s. In order to achieve progress in this area, all stakeholders need close interstate communications and an off-take Roadmap that would not be burdened with neither restrictions nor sanctions. In particular, in the construction of pipelines, which can be used in the future to exports of hydrogen or its feedstock.
Therefore, the administration of President Joseph Biden, perhaps, should listen to the voices of the German industrialists calling for a freeze on sanctions against pipelines that can serve the cause of boosting the Hydrogen era.
Removing any restrictions and freezing of sanctions will also bring the United States and Europe closer to a common ‘green’ future.
While Germany is trying to build up hydrogen partnership with Russia, and while Russia is pushing for stronger measures to protect climate and environment, the country’s oil and gas industry faces accidents with serious environmental impact on a regular basis. The oil and gas business, which has been notoriously non-transparent for decades, can now be seen a little more open to the public. This is what the studies held by WWF Russia and Creon Group say. Creon, the investment and advisory company, sees a growing transparency trend in the oil and gas connected with the decarbonisation efforts of the EU.
The World Wildlife Fund (WWF-Russia) and Creon Group presented the results of the 2020 Environmental Transparency Rating of Oil and Gas Companies. This year numerous accidents and spills caught much attention. At the same time, environmental transparency of business increased, while the final calculation saw the top three leaders changed. The rating report is being conducted with the support of the European Union.
On December 4, 2020 at 12.00 at the ITAR TASS press center, the results of the " Environmental Transparency Rating of Eurasian oil and gas companies 2020" will be presented. The event will also host an online round table "Energy Transition - Eurasian Context" dedicated to the challenges of decarbonization for the oil and gas industry in Russia, Europe and Asia.
European Union has been working on the economy to become carbon-neutral until 2050. Russia is seeking to reduce emissions and diversify the energy exports. For bilateral cooperation, the “Green Deal” may be a challenge on the first glance, but these could turn into opportunities, said Florian Willershausen, BD Director of Creon Capital at the 9th seminar on the future of Russia-EU relations at November 2, organized by the Russian International Affairs Council, Delegation of the European Union to Russia and the Embassy of Germany.
Florian Willershausen, Director BD Creon Capital
In the EU some tend to think quietly that Russia lacks behind in terms of climate change mitigation, recent accidents such as the Norilsk oil spill may give even some evidence. But this perception is incorrect: Together with WWF Russia Creon Capital and Creon Group have been conducting a rating of oil and gas companies in terms of environmental transparency for seven years. This project shows a more and more open discussion of challenges, and the instruction of elaborated ecological policies to reduce the carbon-footprint.
At the same time, in Russia many experts sometimes tend to talk down the “Green Deal”, stating that there will always maintain a market for Russian oil and especially gas, since both resources are cheaper than elsewhere and available on the long run. But this argument is at least risky. EU countries are willing to subsidize the energy transition, so that higher energy costs are sufferable for private and corporate customers.
There are many challenges both sides must face.
Challenges for Russia
For Russia, of course, gas will remain an important export good to Europe in the next decades. But Europe already started significant investments in a hydrogen infrastructure to reduce fossils. Big oil and gas companies are now turning from fossil fuel merchants to green energy suppliers of tomorrow. For example, Shell has been replacing a gas-based steam reformer by a renewables-based electrolysis to produce carbon-free hydrogen for their Rhineland refinery in Germany – with the result of a drop in gas demand.
Some may say, that power generation on gas causes less emissions, than coal-based power generation, that is still durable in Germany. And that since coal remains strong for domestic and social political purposes, gas will stay forever. But there is no guarantee that electricity still will be produced from the fossils, once the coal power plants are shut down in near future of 2030s. This is a trend concerning not only Europe, but the whole world. The Israeli regulators are about to block the construction of a modern and a highly-efficient gas power plant by Siemens Energy. The Israel government switched to support only energy projects from renewables.
The energy landscape is changing dramatically and very fast.
Russia cannot foresee the regulatory sticks to come, for example taxes on pollution or custom duties for carbon-intense products. But Russian enterprises should be prepared that the future of the fossils is in jeopardy.
Challenges for the European Union
And there are also tough challenges from the “Green Deal”the European Union has to face.
It is naïve to think that all energy demands can be covered from renewables at the current stage. Or that all hydrogen to being imported to Europe must be “green”. With all respect to the “Green Deal” and the growing share of renewables in the energy mix, there will not be enough renewable-based hydrogen available in Europe. It is unfeasible, when the entire passenger car sectors will shift to electricity, while coal and nuclear power plants in Germany are being shut down. But instead of hoping to increase their gas supplies to the EU, Russia might promote carbon-neutral hydrogen through a jointly developed infrastructure.
This situation offers a perfect framework for synergy effects.
Framework for synergies between Russia and the European Union
Apart from the challenges, there is motivation by the financial sector to bring incentives in terms of cheap financing for green projects. The investors demand money to be spent in green projects, which gain cheap funding. EU green bond market is open for Russian projects despite sanctions.
European companies provide plenty of high-end solutions in the fields of energy efficiency, waste treatment and ecological monitoring, which are highly demanded in Russia right now. These solutions must be adapted and localized to the Russian context.
Russia can keep its role as major energy supplier. The country exported in 2019 more than 150 billion qm³ of gas to the EU, yet a very important an irreplaceable market for Russian gas producers. The “greener” the economy becomes, the more will the gas demand decline. So Russia must prepare itself to produce carbon-neutral hydrogen based on natural gas and LNG.
At the same time, Russian business should be ready to shape supply chains for clean energy proactively. This approach works very well, as can already be witnessed in Germany. The Russian LNG producer Novatek invests in a small-scale LNG terminal in Rostock, from which in short run the fuel will be provided to ships and trucks further downstream. For the next 20 years, LNG is the better alternative to diesel and heavy oil, not yet hydrogen.
The governments in both countries should encourage and support such projects also for synthetic polymers, as well as for the hydrogen infrastructure. Both Russia and European countries need to start joint research and development programs to produce blue or turquoise hydrogen, and not only green hydrogen, where the entire European discussion on hydrogen turns around.
Both Russia and Europe share the vision of a long-term climate neutrality, aiming to reduce harming climate emissions and to develop new value chains in green energy. This requires financial support also from governments and development banks. In this context it would be helpful to lift financial sanctions on Russia at least by a degree development banks are allowed to cooperate with Russia and finance joint “green” projects.
Last but not least, the energy cooperation can enhance the political ties between EU and Russia.
Recently, Germany declared an energy partnership with Ukraine with focus on hydrogen. Further partnerships between EU members and other countries are being set up. An EU-Russia Dialogue on green economy and clean energy is urgently needed. And the business demands a bilateral hydrogen partnership driven from the top official level. This kind of cooperation would be very fruitful and beneficial for both sides to fulfill decarbonization goals until 2050.
JSW Steel Italy announced the signing of an agreement with Creon Capital with the aim of developing the renewable energy, LNG, logistics and related industrial activities in the area of Piombino port. On September 15th, JSW Steel presented the Piombino 2030 Industrial Plan.
The new industrial plan for JSW Steel Group’s Italian companies, known as Piombino 2030, was presented on September, 15th at the JSW Steel Italy headquarters in Piombino. JSW Steel Italy’s Vice-President, Marco Carrai, the Undersecretary for Economic Development, Alessia Morani, the President of the Tuscany Region, Enrico Rossi, and the Mayor of Piombino, Francesco Ferrari, were present at the event.
Other participants were the Social Partners, representatives of the Province, of the Ministry of the Environment, of the Ministry of Labour, Invitalia, the Upper Tyrrhenian Sea Port System Authorities and the State Property Office. The meeting was also attended by all the financial partners involved in the industrial plan.
The industrial plan, which envisages an initial investment of 84 million euro thanks also to the participation of Invitalia, as announced in the same office by the Undersecretary for Economic Development Alessia Morani, is divided into two phases: the first, in the short term, aims to make the rolling plants more efficient, complete the product range and bring the company to satisfactory profitability. The second phase, in the medium term, targets over the next five years the return to steel production through the use of the electric furnace and the construction of a multicentric industrial complex that also includes logistics, manufacturing and environment activities to be carried out with selected partners in the individual sectors and financials.
“We are proud to present the business plan today, even in a difficult economic situation. I would like to thank all those present here for making this relaunch a reality” – said Marco Carrai, Executive Vice President JSW Steel Italy – “Invitalia, as announced today by the Undersecretary for Economic Development Alessia Morani, will support this first phase, aiming to relaunch the company and make it productive again. We hope that Piombino will once again become a key industrial place, starting from our core business, steel, and safeguarding all jobs”.
“We had made a commitment and respected it. For some months now I have been following the dispute with Minister Patuanelli. The first commitment we had made was the possibility for the State to enter the capital of JSW Piombino and this will be achieved in the coming weeks through Invitalia, which will enter with 30 million euros” – said the Undersecretary for Economic Development Alessia Morani – “The second commitment was on a regulatory level and took shape last week, with the approval of the simplification decree, regarding the rail orders for the Piombino factory, thanks to which we created the ideal conditions ensuring a continuity that guarantees economic peace of mind for the company and, of course, for the workers. I believe that the policy must be done in the following way: for commitments and concrete results. On the 24th there will be a meeting at Mise to update the addendum that necessarily follows the approval of the industrial plan. With Jindal, all the institutional partners and with the help of the trade union, we hope to guarantee a future for this factory, which is the heart of the city, as soon as possible”.
In recent weeks, JSW Steel Italy announced the signing of an agreement with Creon Capital with the aim of developing the renewable energy, LNG, logistics and related industrial activities in the area of Piombino port and the start of a dialogue with the ship builder Fincantieri to assess the possibility of allocating some areas within the Piombino industrial site to shipbuilding activities and large reinforced concrete cellular modules for maritime infrastructure.
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JSW Steel Italy Piombino S.p.a., Piombino Logistics S.p.a. e G.S.I. Lucchini S.p.a. are part of the diversified JSW Group in India, which has a leading presence in sectors such as steel, energy, infrastructure, cement, sports, among others. Today, JSW Steel Ltd. is one of the leading integrated steel companies in India with an installed capacity of 18 MTPA.
Piombino (Italy), 1st September 2020 – Creon Capital has signed a Memorandum of Understanding (MoU) with JSW Steel Italy Piombino S.p.a., Piombino Logistics S.p.a. and G.S.I. Lucchini S.p.a. aiming for the development of a sustainable energy industry in Italy.
Together with local partners, the fund management proposed to start working on an investment plan that should upscale the Tuscan region of Piombino into a cluster for hydrogen, renewable energy, LNG, and logistics. Accordingly, the MoU has been signed by Dr. Fares Kilzie as Chairman of the Board of Directors (Creon Capital) and Marco Carrai, Executive Vice President of JSW Steel Italy Piombino S.p.a., Piombino Logistics S.p.a. and G.S.I. Lucchini S.p.a.
Subject of the development plan will be the area in the municipality of Piombino, located on Tuscan Coast, 90 kilometers south of Livorno. JSW Steel Italy Piombino s.p.a., Piombino Logistics S.p.a. and G.S.I. Lucchini S.p.a. are companies belonging to the JSW Group, are the concessioner of a part of the area and have an option on another part of it, which is undergoing an industrial conversion.
Creon Capital team will be in charge for ESG integration, fundraising, and strategic development. As the Luxembourg-regulated Creon Energy Fund follows a distinctive sustainable investment approach, the management will evaluate initial quality, ongoing integration, and overall performance of environment, social and governance (ESG) factors in all related projects.
Dr. Fares Kilzie, Chairman of Creon Capital Board of Directors, underlines: “Due to its geographical location and excellent infrastructure, we estimate great potential for the industrial zone Piombino to become an innovative cluster for contemporary energy projects in Italy. Thanks to our strong footprint in the global energy sector, we are capable to attract investors as well as technology partners into the establishment of an energy cluster, that might consist of hydrogen, renewable energy, LNG storage and regasification projects.”
Marco Carrai, Executive Vice President of JSW Steel Italy Piombino S.P.A., Piombino Logistics S.p.a. and G.S.I. Lucchini S.p.a. underlined: “Our long relationship with Creon capital gives me the full confidence in conducting all our plans for Piombino in the midterm and long-term future.”
The Presidency of Tuscany Region, underlines: “cost of energy is a key issue for a full restart of a new steel plant in Piombino. We welcome this MOU as it demonstrates that public efforts put in the area made it attractive for new potential investments on top to the engagements from JSW Steel Group.”
Additional information
JSW Steel Italy Piombino S.p.a., Piombino Logistics S.p.a. and G.S.I. Lucchini S.p.a. are part of the diversified US$ 12 billion JSW Group in India, which has a leading presence in sectors such as steel, energy, infrastructure, cement, sports among others. Today, JSW Steel Ltd. is one of the leading integrated steel companies in India with an installed capacity of 18 MTPA.