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Norsk Hydro ASA and Statkraft Energi AS Sign an Agreement with C-Quest Capital LLC for Post Kyoto Carbon Offsets from Projects in Developing Countries
Reuters
Norsk Hydro ASA (Hydro) and Statkraft Energi AS (Statkraft) have signed a forward purchase agreement with C-Quest Capital LLC (CQC) for the supply of high quality certified emission reductions (CERs), predominantly for delivery into the post-2012 compliance period. CQC will supply Hydro and Statkraft with competitively priced emission reductions while simultaneously providing project developers with a guaranteed floor price to manage their financial uncertainty and risks. CQC will establish a portfolio of projects for Hydro and Statkraft with a credit volume of 1.1 million tons to be delivered before 2018 and shared equally between the two parties.
This agreement is unique in that it requires the offsets to be compliant in Phase III of the EU ETS and to originate from projects in developing countries that meet a strict set of sustainable development criteria.
Norsk Hydro is an integrated aluminum and energy company. Based in Norway the company employs more than 20,000 people in 40 countries and has activities on all continents. In 2000, Hydro together with seventeen companies and six governments took a position in the Prototype Carbon Fund (PCF), the world’s first carbon fund that was managed by the World Bank. “It is exciting to be among the early movers in the carbon credit market by entering into a contract for credit deliveries in the post the Kyoto period,” states Liv Rathe, Head of Greenhouse Commercial in Hydro.
Statkraft is Europe’s largest renewable energy company, which develops and generates hydropower, wind power, gas power and district heating. Statkraft also develops marine energy, osmotic power, solar power and other innovative energy solutions. Outside of Europe, Statkraft develops hydro- and wind- power projects in Latin America and Asia through its subsidiary SN Power. The group employs 3,200 staff in more than 20 countries. “As a major commodity trader on the European power exchanges Statkraft strongly believes in market based instruments. We want to be able to offer our customers post Kyoto carbon credits already now,” says Asbjørn Grundt, Senior Vice President for Continental Trading Operations.
C-Quest Capital LLC, established in 2008, is based in Washington, DC, USA. CQC’s senior staff has been active in energy, forestry, agriculture, and climate change for over two decades and has pioneered the development of the carbon business at the World Bank and in the private sector. CQC takes principal positions as a carbon strategic investor and employs sophisticated risk hedging strategies to support its carbon origination and asset management activities. CQC is valued not only for the expertise it brings to investments, but for maintaining the highest standards of integrity to ensure that its projects make real contributions to reducing greenhouse gas emissions. CQC’s CEO, Ken Newcombe, states that “this agreement represents a major signal to developers in developing countries that a demand for high quality CERs will continue in the post-2012 period and that socially and environmentally responsible organizations like Hydro and Statkraft are ready to make a long-term commitment to support the development and supply of these credits in the interests of global climate preservation.”
CQC has secured and manages the supply of qualifying credits to Hydro and Statkraft from a portfolio of renewable energy projects including the following small-scale hydropower projects:
| • | Chile, Lircay Run-of-River Project is a small hydropower plant located in the Maule Region and managed by Hidromaule S.A., a Chilean company. Chile Lircay displaces 130 GWh of electricity per year that would have otherwise been generated by fuel-based power plants burning coal, diesel, and natural gas. Hidromaule developed this project in close cooperation with the Asociación Canal Maule, a group of 2,200 independent local irrigators, who contractually will receive an annual payment of nearly 10% of project incomes and use it toward improving the Association’s irrigation system. The project has already created 150 local jobs, and commercial activity and opportunities for local employment have increased as well. As no public funds are involved in the project activity, advance payment for a significant proportion of future carbon revenues was key to project funding. |
| • | Uganda, Ishasha Small Hydropower Project, developed by Eco Power Uganda Limited, is a 6.5 MW small run-of-river hydropower station located on the Ishasha River in the Kanungu District in Western Uganda, a largely undeveloped, mountainous area with little infrastructure or industry. This project will provide and displace much-needed dielse generated electricity to households, businesses and institutions in Kanungu using efficient and carbon-neutral hydropower generation. Considering the difficulty of accessing project finance in Uganda, the project serves as a replicable demonstration of how renewable energy projects and rural electrification can be financed and developed with carbon credits as a relevant source of funding. |
| • | Sri Lanka, Magal Ganga Small Hydropower Project, managed by Eco Power Limited, was commissioned in 2008 to provide 40 GWh of clean electricity per year to Ceylon Electricity Board. Without Magal Ganga, electricity would have been generated from fuel oil or diesel power plants that usually supplement electricity production in Sri Lanka. Magal Ganga has contributed to improving the livelihood of the local community. The project will also contribute annually to local community development projects each year. |
In the case of the projects listed above, assurance of revenues from carbon finance were crucial to financial viability and hence the delivery of clean energy services and employment generation in local communities.
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C-Quest Capital LLC (CQC), established in October 2008, brings together innovators of the global carbon market with leaders in alternative energy project development and risk management and commodities trading. Our management has experience developing and managing the world’s first carbon funds at the World Bank, and has been pivotal establishing major private sector carbon finance businesses in New York and London.
CQC’s mission is to use its competency in environmental markets and finance to accelerate the transition to a low-carbon economy, seeking wherever possible to enhance energy security, poverty alleviation and sustainable local development
CQC has a substantial pool of proprietary capital and is actively trading in international carbon markets. It is taking equity positions in land use, renewable energy, and clean technology solutions for adapting to and mitigating climate change in the Kyoto, North American, Australian and Voluntary carbon markets.
For further information, please contact Phil Ovitt at povitt@cquestcapital.com or 202.416.2452