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Financing an Electric Arc Furnace: Why Covenants Matter
A RM200 million electric arc furnace is more than just a balance sheet asset — it’s a test of how well financing structures can balance risk and sustainability. EAFs cut emissions by up to 80% and position steelmakers for the low‑carbon transition, but banks face exposure to scrap supply volatility, price swings, and regulatory scrutiny under CCPT. That’s why covenants on debt ratios, cash flow coverage, supply contracts, and emissions reporting are critical. Done right, they turn a risky loan into a sustainable partnership that protects both lenders and steelmakers in the ESG era.
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Thank you for sharing this high-level overview, it is helpful as a general reference and discussion starter. In practice, we often find that the real challenge in EPCIC projects lies in translating standards and frameworks into consistent contractor behaviour, auditable site practices and sound decision-making across design, procurement and construction. If there is interest in further knowledge exchange on practical implementation and assurance on live projects, I would welcome further professional exchange in this area.