Lu Hanwen: Five key tasks need to be done well in the docking of energy-saving, emission-reduction and carbon-reduction projects in the steel industry and green finance

“Many energy-saving, emission-reduction and carbon-reduction projects in the iron and steel industry have clear benefits and abundant cash flow. They are good projects in the eyes of financial institutions. If steel enterprises do a good job in docking, they will be able to make good use of the services provided by green finance. and support.” At the on-site launch meeting of the three-year action plan for energy efficiency benchmarking in the steel industry held on December 9, Lu Hanwen, a full-time member of the China Development Bank Loan Committee, clearly pointed out that green finance and the implementation of energy conservation and emission reduction in the steel industry The relationship between carbon projects, elaborated on what is green finance, the challenges and opportunities faced by the iron and steel industry under the “double carbon” goal, and the five key points that the iron and steel industry needs to do well to achieve the connection between energy saving, emission reduction and carbon reduction projects and green finance Work.

Lu Hanwen said that green finance is an economic activity that supports environmental improvement, climate change response, and resource conservation and efficient utilization, that is, the financing provided for project investment and project operation in areas such as environmental protection, energy conservation, clean energy, green transportation, and green buildings. Serve. The green financial system refers to the institutional arrangements that support the economic transition to green through green credit, green bonds, green stock indexes and related products, green development funds, green insurance, carbon funds and other financial instruments and related policies. In 2021, the National Development and Reform Commission uniformly issued the “Green Bond Support Project Catalog (2021 Edition)”, which is divided into six categories, including energy-saving and environmental protection industries, clean production industries, clean energy industries, ecological environment industries, and green infrastructure construction. Upgrade, green service. Energy-saving technological transformation, pollution prevention and comprehensive utilization of resources in the iron and steel industry are all included in the above-mentioned catalogue.

Lu Hanwen pointed out that under the “double carbon” goal, the iron and steel industry still faces some difficulties in implementing projects such as energy-saving technological transformation. For example, enterprises have heavy burdens, high asset-liability ratios (the asset-liability ratios of key enterprises have dropped from about 70% five years ago to 62.27%), heavy production capacity reduction tasks, heavy emission reduction constraints, and large investment in technological transformation , poor financing channels, weak corporate profitability, etc.

“Some steel companies seem to have more than enough energy in the face of the ‘double carbon’ goal. Especially this year, the profitability of the steel industry is not very satisfactory. According to the data from the National Bureau of Statistics, from January to June 2022, ferrous metal smelting and rolling The processing industry achieved operating income of 4,575.97 billion yuan, a year-on-year decrease of 3.6%; operating costs of 4,332.65 billion yuan, a year-on-year increase of 0.7%; realized a total profit of 82.61 billion yuan, a year-on-year decrease of 68.7%. In the first half of this year, the asset-liability ratio of some typical listed companies The average is about 60%. Most of the asset-liability ratios of other group companies are above 60%, and some are even higher than 70%. The financial pressure of steel enterprises is relatively high, and it is difficult to issue bonds or find bank financing.” He Said, “Of course there are opportunities. The steel industry has a solid industrial foundation, strong scientific research and innovation capabilities, a huge domestic market, and strong national policy support. In addition, the economic benefits of many energy-saving, emission-reduction and carbon-reduction technological transformation projects are also Relatively impressive.”

Lu Hanwen said that no matter whether it is energy conservation and emission reduction or ultra-low emission transformation, without financial support, no project construction can be implemented. To this end, he suggested that the iron and steel industry need to do the following five key tasks to achieve the connection between energy saving, emission reduction and carbon reduction projects and green finance:

One is to construct a good project or project package.“Many companies focus on how to implement funds, but from the perspective of financial institutions, although funds are important, they are not the most important thing. The key is to see that the construction and operation of a project has input and output, economic benefits are guaranteed, benign operations, Sustainable development.” He explained, “How to construct a good project? Simply put, it requires a relatively considerable ratio of input to output for the entire project. The input-output income of a project or a project package is generally It cannot be lower than 6% to 7% (different industries, different projects, and different entities are not the same). This can be an independent and clear technical transformation project, it can be a combination of upstream and downstream projects of the production line, or it can be profitable or non-profitable The combination constitutes a project to ensure a higher rate of return for the project as a whole. The higher the rate of return, the more attractive the project.”

The second is to prepare a feasibility study report.Lu Hanwen said that the feasibility study report includes input-output benefit analysis (internal rate of return), capital composition proposal, project completion and operation risk analysis, which is crucial to whether a project can successfully connect with green finance.

The third is to ensure that the preliminary procedures for land use and environmental impact assessment are complete.

The fourth is to implement the main body of investment, construction and operation.If the enterprise’s own strength is weak, the asset-liability ratio is high, the project construction force is insufficient, and the operation and maintenance experience is little, it can introduce partners to construct a stable and feasible cooperation model.

The fifth is to implement project funds.On the premise of ensuring that funds are in place, reduce (financing) capital costs and increase project investment returns. At the same time, steel enterprises should also make good use of fiscal and financial policies, comprehensively use various financing methods, understand the concerns and risk preferences of financial institutions, and do a good job in attracting capital and financing applications.

Finally, Lu Hanwen said that financial institutions and enterprises are mutually beneficial and win-win partners. Financial institutions should do a series of work such as due diligence, cooperation negotiations, and corporate credit ratings for customers’ financing applications. The authorized review report is completed by financial institutions on the basis of due diligence. It is a demonstration and analysis report on corporate credit and corporate loan applications, mainly including project background, project significance, borrower analysis, shareholder analysis, project review and industry analysis. These elements directly determine whether an enterprise can obtain bank loan approval. “Of course, the strength of the enterprise and the quality of the project also determine whether it can cooperate smoothly with financial institutions.” He added.