MUFG supported the successful financing of Net Zero Teesside Power (NZT Power), a joint venture between BP and Equinor, that aims to become the world's first gas-fired power station with carbon capture and storage (CCS) technology in Teesside, UK. Despite the complexity and risks involved, MUFG helped the project raise critical funds, which will enable the construction and operations of the project and support the UK Government's Clean Power 2030 strategy.

MUFG has also supported the Northern Endurance Partnership (NEP), which is the CO2 transportation and storage infrastructure provider for the East Coast Cluster (ECC). The ECC has a crucial role to play in the decarbonisation of the industrial powerhouse regions of Teesside and the Humber. These deals reinforce MUFG's position as a trusted global energy and infrastructure project finance bank and strengthen its CCS track record. MUFG is proud to support NZT Power and NEP in raising £8 billion, enabling them to deliver critical infrastructure that will help the UK hit net-zero by 2050.

The Challenge

NZT Power has the potential to produce 742MW of low-carbon power – enough to power around 1 million homes – and capture up to 2 million tonnes of CO2 per year that can be transported and safely stored by NEP in subsea storage sites beneath the North Sea. The UK Government sees the project as crucial to accelerating its decarbonisation ambitions and creating economic benefits across the East Coast of England, while maintaining energy security.

To kick-start the construction of this landmark project, NZT Power needed to raise new capital. Given the high-profile and complex nature of the project, and the significant risks involved, NZT Power had to utilise banks with strong balance sheets and a proven track record of financing complex and pioneering energy projects.

Execution

Having already supported the successful financing of NEP, MUFG was approached by NZT Power, alongside selected other banks, to help raise funding for the construction of the project.

Prior to NZT Power, MUFG worked on a bankability study for the early-stage Teesside Clean Energy CCS Project and acted as a pathfinder bank on the White Rose CCS Project. Learnings from these early attempts ultimately led to the development and implementation of the current regulatory frameworks that underpin CCS projects in the form of Dispatchable Power Agreements (DPA), which are based on the UK's Contracts for Difference (CfD) model. The DPA offers NZT fixed availability payments decorrelated from market, commodity price and dispatch risk.

From the outset, MUFG applied this experience to support the financing of NZT Power. The team worked with the wider consortium to create a bespoke DPA that protects the project against operational risks and market volatility. To ensure the overall bankability of NZT Power, the sponsors put in place a robust completion testing regime and secured a comprehensive warranty package from the suppliers. This step was essential in providing the project with the confidence they needed to move forward.

Results

Financing pioneering energy and clean technology projects is complex and requires a detailed understanding of the market, the client, and the project. MUFG's unique knowledge of the energy sector and its previous experience of working with NZT Power shareholders BP and Equinor helped to support the smooth execution of the transaction, with financial close on this landmark project achieved in December 2024.

The financing enabled the construction of NZT Power to commence in 2025, and once operational in 2028, it could become the world's first gas-fired power station with CCS technology, providing flexible, low-carbon power equivalent to the electricity requirements of around 1 million UK households.

As the sector evolves across EMEA, MUFG continues to support CCS projects from an advisory and lending perspective. MUFG's experience of the UK CCS sector also included acting as Financial Adviser for a client seeking a DPA for 2 Power CCS projects and a client negotiating a Waste Industrial Carbon Capture contract.[1]

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[1] AD note: We could link to Protos once that case study is live.