Last month, a cluster of leading industries based in the North EastEngland, known as The Teesside Collective, announced its collaboration on Europe’s first carbon capture and storage (CCS) equipped industrial zone. This Webinar provided an opportunity to dig deeper into the important findings of the Societe Generale report, produced on behalf of the Teesside Collective among its suite of reports intended as a ‘Blueprint for Industrial CCS in the UK’. To expertly guide us through this process, we were delighted to welcome Allan Baker, Global Head of Power Advisory & Project Finance at Societe Generale and Mark Lewis, Low Carbon Manager, Tees Valley Unlimited, to join us for this Webinar. Allan presented on the key findings of the report and both Allan and Mark were available for an interactive Q&A session in the second half of the webinar. This Webinar explored some of the report findings such as: - the specific issues for incentivising Industrial CCS - the multiple mechanisms that could be applied or adapted for use at the Teesside Collective project, and - recommendations on a number of options for further development.

1. An incentive mechanism for Industrial CCS?
Exploring the findings of the Teesside Collective’s ‘Blueprint’.
Webinar - Wednesday, 02 September 2015, 1900 AEST

2. Mark Lewis
 Mark came to Teesside in 1978 to what was then ICI, working in the
utilities field, oil refining, Olefins and then the Melinar and
Propathene businesses.
 After 6 years promoting and developing the use of Lean
Manufacturing to the UK’s process sectors via the PICME initiative
under the umbrella of the Chemical Industries Association, he joined
the Process Industry Cluster NEPIC in 2006.
 Here he became involved with the development of Industrial Carbon
Capture in the Tees Valley, setting up PICCSI - the Process Industry
Carbon Capture & Storage Initiative. He lead the EU project
LOCIMAP on Industrial Parks which reported (www.locimap.eu) at
the end of 2014 aiming to develop these as the future for Low
Carbon Energy Intensive manufacture in the EU.
 Since early 2015 he has been working in the Local Enterprise
Partnership Tees Valley Unlimited as their Low Carbon consultant
developing the Teesside Collective as the first industrial CCS
network in the UK
Low Carbon Manager – Tees Valley Unlimited

3. Allan Baker
Global Head of Power Advisory & Project Finance at Société Générale
 Allan Baker, Managing Director, Global Head of Power Advisory and
Project Finance, has worked at Société Générale for six years.
 He has been involved in the power sector for more than 25 years,
initially as an engineer and then in finance. During his career, he has
advised on and financed projects in Europe, MENA, the US and Asia,
and in sectors ranging from green-field renewable energy to the
acquisition of large international power portfolios.
 In recent years, he has become a leading figure in the CCS area. He
has been instrumental in bringing the financing perspective to the
policy debate based on his experience of advising on a number of the
world’s carbon capture and storage (CCS) projects. Allan was a
member of the UK Government’s original CCS Development Forum,
led the commercial section of the UK CCS Cost Reduction Task Force,
whose results were published in a report in 2013, and was the author
of a global CCS financing review for the Global CCS Institute (2014).
 Allan is currently advising the White Rose CCS project in the UK; one of two projects selected
for the FEED stage support under the GBP1bn UK CCS Commercialisation scheme and is part
of the team working on development of a commercial structure for the Teesside Industrial CCS
project in the UK. He has also advised Masdar on the Abu Dhabi CCS project and on the UK
Powerfuel CCS (now Don Valley).
 Allan has a BSc (Hons) in Mechanical Engineering, an MBA, is a Fellow of the Institution of
Mechanical Engineers and a Chartered Engineer.

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5. Developing an industrial CCS network in
Teesside
Mark Lewis
Low Carbon Consultant Tees Valley Unlimited
@Teescollective
www.teessidecollective.co.uk
info@teescollective.co.uk

6. Why ICCS and Why Teesside?

7. Who are Teesside Collective?
Multinational companies & partners operating in Teesside
with an interest developing a CCS network on Teesside
BOC Largest steam methane reformer in UK
Growhow Largest UK ammonia & fertiliser
producer
SSI Europe’s second largest blast furnace
Lotte Produces PET for15bn drinks bottles
per year
National Grid Store developer
TVU Local Government & Economic
Development
NEPIC Process Industry Cluster
“CCS on industrial plants is going to be a
critical part of the global effort to prevent
serious climate change. Teesside is in the
right place, at the right time, to get ahead of
the curve.”
Sir David King, UK’s Special Representative
for Climate Change
“A CCS network in Teesside is a critical
step, giving a shot in the arm to British
industry’s long-term future.”
Dianne Sharp, North East Director, CBI

8. What has Teesside Collective
done?
Used the £1million received from DECC to:
 Engineer and cost capturing CO2 from 4 industrial plants, an onshore & offshore network and developing a new store ( Amec Foster
Wheeler)
 Develop the Business Case for an industrial CCS network (Pale Blue Dot)
 Propose a solution to ‘how can Industrial CCS be funded?’ (Societe Generale)
We have:
 Shown we can cut industrial CO2 emissions by 2.8million te/yr for at least 20 years
 Shown it supports retaining 5,900 local jobs
 Shown it can be done by 2025 for less than £95/te CO2 stored at current prices.
 Readily expand by a factor of 3 for less than 10% cost increase
We are
 Developing the project proposal and plans for FEED towards a FID
 Identifying additional partnerships

9. AN INCENTIVE MECHANISM FOR INDUSTRIAL CCS?
EXPLORING THE FINDINGS OF THE TEESSIDE
COLLECTIVE’S “BLUEPRINT”
Allan Baker
Managing Director Global Head of Power
2 September 2015

10. 1008/09/2015
This presentation has been prepared by Société Générale Corporate & Investment Banking ("SG CIB"), a division of Société Générale.
In preparing this presentation, SG CIB has used information available from public sources. No express or implied representation or warranty
as to the accuracy or completeness of such information is made by SG CIB, nor any other party.
The contents of this presentation are subject to amendment or change at any time and SG CIB will not notify the recipients of any such
amendment or change. No responsibility or liability (express or implied) is accepted for any errors, omissions or misstatements by SG CIB
except in the case of fraud or any other liability which cannot lawfully be excluded.
Any views, opinions or conclusions contained in this presentation are indicative only, are not based on independent research and do not
represent any commitment from SG CIB. This presentation and any expressed interest of SG CIB in arranging or of Société Générale in
providing finance or entering into any other transactions do not constitute any offer of finance or any commitment from Société Générale to
enter into any other transactions, such an offer being subject to contract, the completion of satisfactory due diligence and all necessary credit,
management and other approvals being obtained.
SG CIB conducts its business in the UK through Société Générale London Branch (“SGLB”). Société Générale is a French credit institution
(bank) authorised and supervised by the Autorité de Contrôle Prudentiel (the French Prudential Control Authority). SGLB is subject to limited
regulation in the UK by the Financial Services Authority.

11. 1108/09/2015
INTRODUCTION
 Société Générale were engaged by The Teesside Collective to undertake a review of potential
incentive mechanisms to support the development of Industrial CCS (ICCS) as part of the
DECC funded study of the potential for ICCS on Teesside
 Given the stage of development and time available, our review was at a relatively high level,
focussing on assessing and evaluating a number of options that could form the basis of
viable support mechanisms for the Teesside Collective project.
 In reaching the conclusions summarised in the final report , we looked at more than 15
options from which we selected four as being most promising as a basis for development
 This presentation provides only a summary of these four options and our analysis, but further
detail is available in the published report and accompanying commercial work from Pale Blue
Dot: http://www.teessidecollective.co.uk/teesside-collective-blueprint-for-industrial-ccs-in-the-uk/

12. 1208/09/2015
OPTION 1 – CONTRACT FOR DIFFERENCE (CFD)
 The Emitter signs a CFD with the CFD Counterparty (potentially the existing Low Carbon Contracts
Company) under which they receive a payment for each tonne of CO2 permanently stored.
 The strike price is linked to the market price of CO2 certificates
 The payment is designed to cover the emitter’s investment and that of a Transport & Storage (T&S)
provider – transferred through a T&S Usage Agreement
PIPE CO2 Flow
Transport &
Storage
Provider
Teesside
Collective
Funding
Investment Investment
CFD
Counterparty
Project Contract &
CFD Agreement
T&S Usage
Agreement
CFD or other
Subsidy
T&S Usage Fee
Option 1 – Emitter CFD Model

13. 1308/09/2015
OPTION 1 – CONTRACT FOR DIFFERENCE (CFD)
Challenges
• Volume Risk:
This mechanism implies that the Emitter and/or T&S provider
are taking volume risk, which is likely to be significant and in
the context of the operating regime of the various emitters
• Evolution of the EU-ETS:
There remains uncertainty around the future evolution of the
EU-ETS and certificate price, making long-term hedging of the
basis risk for this mechanism a challenge.
• Credit Risk:
There is a significant long term exposure to the underlying
credit risk of the various industries that make up the emitter
base, and also to the T&S provider.
• Non-Cash Benefit:
One fundamental assumption is that the Emitters have an
obligation to cover some or all of their CO2 emissions with
certificates, and therefore gain benefit from cost avoidance
rather than direct revenue. Also, various exemptions and free
certificate allocations further complicate the situation.
• Deliverability:
There is an element of “chicken & egg” to development of a
chain project with so much interdependence
• Incentive:
What incentive does an emitter receiving exemption from, or a
free allocation of, certificates under the EU-ETS have to join a
an ICCS project
Positive
• Defined Strike Price:
Provides a defined fixed price when the contract is
signed, providing some revenue certainty for investment
and financing
• Self Adjusting:
As with the power CFD, the ICCS CFD will automatically
adjust the level of subsidy paid by reflecting variations in
the market price of EU-ETS certificates
• Precedent:
By proposing a CFD mechanism, we are seeking to take
advantage of the precedent established by the power CFD
• Applicability:
The Emitter CFD Model is viewed as flexible instrument
that can be adapted to various industrial CCS applications
and also more widely in Europe
• Consistent Volume-Based Approach:
The use of the EU-ETS certificate price facilitates the
payment mechanism to be defined on a “per tonne” basis
through the whole chain unlike power in which the CFD
basis is delinked from the volume of CO2 stored by being
defined in terms of electrical output
• Bankability:
We expect the CFD documentation (and concept) to be
proven from a financing perspective by a number of
transactions currently in process

14. 1408/09/2015
OPTION 2 – STORAGE DRIVEN MODEL
 The T&S provider receives an availability-based payment for making the pipeline and storage infrastructure
available
 The T&S provider receives a Capacity Fee, irrespective of actual usage, to cover the initial investment,
and a Usage Fee in order to procure CO2 and cover operating costs – both fees per tonne of CO2
 The Emitter enters into an agreement with the T&S provider to supply CO2 in exchange for a fee to cover
the investment in and operating costs of the capture plant
PIPE CO2 Flow
Transport &
Storage
Provider
Teesside
Collective
Funding
Investment Investment
CCS
Counterparty
Capacity & Use
Agreement
T&S Usage
Agreement
CO2 Payment –
(Take-or-Pay)
Capacity + Usage Fee
Option 2 – Storage Driven Model

15. 1508/09/2015
OPTION 2 – STORAGE DRIVEN MODEL
Challenges
• Availability Risk:
The T&S provider will lose a potentially significant amount of
revenue if they are unavailable and despite the perceived
benefits of an availability-based approach, additional
underpinning of, for example, CCS related storage risks may be
necessary initially to attract investment
• EU-ETS Interface:
Unlike the Emitter CFD Model, this model de-links the Emitter’s
capture investment from their EU-ETS certificate position to a
certain extent, making it a necessary to factor in any relief they
receive from the EU-ETS obligations.
• Price Discovery/State Aid :
Fundamentally, the Capacity Payment part of this mechanism
means that Government are indirectly underwriting the future
development of ICCS. However, one could argue that with the
likely risk allocation on the other options, they may be required
to do the same to a greater or lesser extent. Setting the
Capacity & Usage Payments may also be challenging. State
Aid clearance may be required for this approach.
• Compatibility with the ‘chosen’ model:
The approach proposed in this option diverges significantly
from the path chosen for the power commercialisation project
where all finding of the T&S infrastructure flows from the CFD
and through the Emitter. An industrial project connecting to the
T&S infrastructure of one of the commercialisation projects may
be complex under this option.
Positive
• Significant De-risking:
The availability-based approach to the T&S infrastructure
substantially de-risks the provision of this infrastructure in
our view, as it largely removes volume and Emitter credit
risk from the equation. This should also assist with an
investment decision on a capture plant if delivery of the
T&S infrastructure is de-linked.
• Phasing:
The de-linking of T&S from capture enables a more
flexible approach to designing an T&S infrastructure sized
for the expected long term CO2 volume, whilst phasing
capacity coming onto the system.
• Bankability:
The back-stopping of a Capacity Payment represents a
significant improvement in the risk profile of the T&S
infrastructure and could help to make this part of the
project more attractive to both investors and commercial
banks. A payment flow from the T&S provider for delivery
of CO2 is also potentially risk enhancing, given the
potential underpinning of a ToP contract for backed by the
usage fee for example
• Precedent:
There is extensive precedent for availability-based
commercial arrangements in the infrastructure and power
sectors. The investor and finance community is very
familiar with these structures

16. 1608/09/2015
OPTION 3 – HYBRID MODEL
 Combination of Option 1 and Option 2 using a Capacity Fee to remunerate the base investment of the T&S
provider and a CFD to fund the Emitters costs
 The CFD includes an allowance for only the usage costs of the CO2 T&S infrastructure which is passed to
the operator through a T&S Usage Agreement, as the initial T&S investment is covered by the Capacity
Fee
PIPE CO2 Flow
Transport &
Storage
Provider
Teesside
Collective
Funding
Investment Investment
CCS
Counterparty
Project Contract
Capacity
Agreement
T&S Usage
Agreement
Capacity FeeCFD or other Subsidy
T&S Usage Fee
Option 3 – Hybrid Model

17. 1708/09/2015
OPTION 3 – HYBRID MODEL
Challenges
• Availability Risk:
As before, the T&S provider will lose a potentially significant
amount of revenue if they are unavailable and despite the
perceived benefits of an availability-based approach, additional
underpinning of, for example, CCS related storage risks may be
necessary initially to attract investment
• Price Discovery/State Aid:
Whilst still posing challenges for price discovery on the T&S
infrastructure, the Hybrid Option at least allows for competition
in the capture part of the equation if this is deemed to be
desirable.
• Complexity:
The Hybrid approach is potentially complex to document and
only partially reflects the existing approach of the
Commercialisation Projects. The willingness or ability of
stakeholders to invest in developing the necessary regulatory
and contractual structures will need to be assessed, but this
could be a very significant investment.
Positive
• Significant De-risking:
This option retains the de-risks benefits of Option 2 but
adds in a direct funding of the capture plant through a
CFD (Option 1) to provide the linkage to the EU-ETS
position of the Emitter.
• Flexibility:
The hybrid approach provides for increased flexibility by
allowing for the Emitter to connect to an existing
(Comercialisation project) or Greenfield T&S
infrastructure, for phasing of the development of the CO2
volume and for a mix of power and industrial emitters to
connect into a hub.
• Bankability:
By separating the payment streams for the Emitter and
T&S provider, it could facilitate an easier investment and
financing story – allowing for investors to focus on the part
of the chain that best suits their risk appetite.
• Precedent:
There is extensive precedent for availability-based
commercial arrangements in the infrastructure and power
sectors. The investor and finance community is very
familiar with these structures

18. 1808/09/2015
OPTION 4 – INTEGRATED HUB
 Assumes the combination of the industrial emitters and a power plant, both receiving CFD payments
 The Emitters enter into a T&S Usage Agreement through which a proportion of the CFD payment is
channelled to the T&S provider to cover investment in the required infrastructure
Pipe
Pipe
Pipe CO2 Flow
Transport &
Storage
Provider
Teesside
Industrial
Cluster
Investment
CFD or other
Subsidy
Power
Plant
T&S Usage
Agreement
CCS
Counterparty
CFD
T&S Usage
Fee
T&S Usage
Fee
Investment
Investment
Funding
Option 4 – Integrated Hub
Model

19. 1908/09/2015
OPTION 4 – INTEGRATED HUB MODEL
Challenges
This option clearly relies on the ability of ICCS to connect to either
an existing T&S infrastructure, but potentially taking an investment
decision before the infrastructure is in place, or developing in
parallel with a new power project.
Whilst connection to an existing project could accelerate the
development in our view, there are challenges in doing so and in
making an investment decision based on the expectation that one
of the Commercialisation Projects will be successfully developed.
Development of ICCS off the back of a new power plant
development could raise significant timing issues in terms of the
long lead time for power development, delivery uncertainties and
consenting processes.
Positive
This option effectively takes the previous options one step
further by assuming that an existing or new power project,
using the power specific CFD, is used to ‘anchor’ a CCS
cluster into which industrial Emitters can connect at ‘marginal
cost’.
This is a different approach to managing the longer term risk
of industrial CCS volumes as the T&S provider would recover
his investment primarily through the relatively stable CO2
volumes coming from the anchor, with industrial volumes
being able to build up over time on a third-party access basis

20. 2008/09/2015
INDUSTRIAL CCS – SOME OPEN QUESTIONS?
 Who pays?
In the power sector, the cost of CCS can be relatively easily passed through to the consumer. For industrial CCS this is
not possible due to the diversity of the industries and the fact that they largely operate in highly competitive global
markets where cost competitiveness is crucial to their survival. Funding for any subsidy will have to come from indirect
sources.
 Who bears the credit risk?
CCS infrastructure has a long term investment horizon (20+ years) whilst the underlying industries can generally only
raise shorter term corporate facilities. This mismatch is a fundamental challenge for raising external debt for any ICCS
scheme
 CCS Risk Allocation?
As of today, there is no clarity on the expected risk allocation for CCS. Progress on the Commercialisation projects
could provide invaluable input into the structuring of the Teesside Collective ICCS project
 Phasing - is there a role for an ’aggregator’?
One could foresee some benefit in aggregation of the CO2 volumes in order to gain benefit from spreading the credit
risk, negotiating single point contracts etc, depending on the approach taken to incentivise the industry. However, this
may create additional credit risks and complicate the structuring as well.
 Role of NER400:
With the ongoing consultation around NER400, there is a need to industrial CCS to be represented as this could be a
valuable source of funding for the industry despite the shortcomings identified previously (timing, one-off funding
rather than ongoing development etc). NER money could act as a catalyst for development of the Teesside industrial
cluster if it were available for funding some or all of the T&S capex for example.
 Motivation:
The Teesside Collective, supported by DECC and BIS have taken the first step on the road to demonstrating that ICCS
is possible but a significant amount of work remains to be completed

21. 2108/09/2015
CONCLUSION
 Based on our analysis we recommended that the following ICCS incentive options were
assessed in greater detail as part of the next phase of the Teesside Collective work:
 Option 1 – The Emitter CFD Model
 Option 2 – The Storage Driven Model
 This does not imply that either of the other two models are not viable but in our view,
development of Options 1 and 2 encompasses much of the work required to also develop the
Hybrid and Hub options if these eventually make more sense.
 There is a potentially strong case for integrating an Industrial CCS cluster with a power plant,
not least to mitigate T&S infrastructure development and optimse the economies of scale
through a hub approach
 Overall, we conclude that there are several viable models for financing ICCS and whilst much
more work needs to be done in developing these models, a number of the key challenges
facing the Teesside Collective and other potential ICCS projects are policy related, including
crucially the availability of funding for further development and ultimately implementation of
the projects
Any questions are welcome

22. 2208/09/2015
SOCIETE GENERALE AND CCS .......
Leading Financial institution in the CCS sector:
 Financial Advisor to White Rose CCS Project, UK (ongoing)
 Teesside Collective Industrial CCS initiative (ongoing)
 Financial Advisor for Hydrogen Energy California (ongoing)
 EEPR guarantee facility arranger for the 2Co Don Valley CCS project (2012)
 Financial Advisor to Abu Dhabi “full chain” CCS (Masdar) project (2010-11)
 Financial Advisor to Powerfuel IGCC, UK (2010-2011)
 Member of the UK Government CCS Forum (foundation to 2014)
 UK CCS Cost Reduction Task Force Member and Commercial Lead
 Financial Lead for the EU-funded Dynamis CCS Feasibility Study
Teesside Industrial CCS
Financial Advisor
ONGOING UK
Development of an Industrial
CCS project in the Teesside
Industrial Cluster

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