Preem signs $260 million-plus loan agreement for Lysekil refinery conversion to produce renewable diesel, SAF

Preem's Lysekil refinery (Photo: Preem AB)

As part of its strategy to transition towards large-scale renewable fuel production, Swedish energy company Preem announced May 20 that it has entered into a loan agreement totaling approximately 240 million euros (USD$262 million) with the Swedish Export Credit Corp. and Crédit Agricole Corporate & Investment Bank.

This loan falls under the National Debt Office's “green-credit guarantees” program.

This is the second credit guarantee issued by the Swedish National Debt Office to Preem under the government’s credit-guarantee program for green investments.

The loan guarantee is intended to fund Preem’s ambitious investment at the Lysekil refinery for the production of renewable diesel and sustainable aviation fuel (SAF).

It is an investment in production that positions Preem to become the largest producer of renewable aviation fuel in Northern Europe and one of the largest producers of renewable fuels for road transportation.

“Preem is executing the most significant transformation in the company’s history, with a series of pivotal projects ongoing at our refineries aimed at achieving carbon neutrality,” said Lina Stolpe, Preem’s chief financial officer. “With this loan, we can ensure an expanded supply of sustainable biofuels for the aviation and transportation sectors.”

The total cost of Preem's investment stands at around 5.4 billion Swedish krona (USD$505 million), with the current green loan of approximately 2.8 billion Swedish krona (USD$262 million) providing partial financing.

This loan, spanning a seven-year term, is backed by the National Debt Office through a green-credit guarantee, covering 80 percent of the loan amount.

The loan is earmarked for the investment in the IsoCracker facility at the Lysekil refinery.

The reconstruction of the facility, currently producing diesel, is set to begin this year and is scheduled for completion by 2027.

“The facility is expected to increase our renewable production capacity by 1.2 million cubic meters, compared to the total capacity of renewable fuels in 2023, which was approximately 530,000 cubic meters,” Stolpe said. “The reconstruction is crucial for reducing fossil carbon-dioxide emissions. According to our projections, emissions in end-user sectors could decrease by up to 3 million tons annually.”

Magnus Montan, CEO of the Swedish Export Credit Corp., said, “Reducing greenhouse-gas emissions is one of the most critical challenges of our time. Swedish Export Credit Corp.’s goal is to support the industry’s transition both domestically and internationally. Financing the next phase of Preem’s redevelopment aligns with this goal and is essential for meeting Sweden’s ambitious climate targets.”

In 2022, Preem secured the first loan covered by the National Debt Office’s green-credit program.

This loan was designated for the reconstruction of the Synsat facility, scheduled to be operational after the summer of 2024 in Lysekil.

To qualify for the government’s green-credit guarantees, the respective investment must contribute to Sweden’s environmental and climate policy objectives and aligned to the EU taxonomy.

The loan agreements with the Swedish Export Credit Corp. and Crédit Agricole Corporate & Investment Bank are contingent upon approval from Preem Group’s other external financiers and the attainment of necessary environmental permits.