The NeCF was launched in April 2008, to procure high quality compliance units for obligated entities under the Kyoto Protocol and the EU Emissions Trading Scheme. Having substantially placed its EUR 100 million in CER purchases in Asia and Latin America, NEFCO is now seeking fresh capital injection to continue with its activity.
Ash Sharma, Vice President of NEFCO and Head of the Carbon Finance Unit stated that “the compliance regime is hardening for many utilities and industrials, which can expect to face a short position relative to their EU targets. NeCF offers an opportunity for such compliance buyers to hedge post 2012 EU ETS liabilities without taking on significant risk”.
The NeCF has participated in 10 emission reduction projects with signed Emission Reduction Purchase Agreements (ERPAs), all involving deployment of renewable energy, namely wind power and small hydro. The projects are located in China, Vietnam and Mexico. The bulk of the emission reductions are now registered under the Clean Development Mechanism. Additionally, the facility has 7 projects at the Letter of Intent stage in India and South East Asia.
The fund was originally established as a long term, post Kyoto facility which could accommodate future subscriptions in response to policy development. It has allocated over half its capital in post 2012 vintages up to 2020. NEFCO has found that sellers are increasingly willing to sell forward their post Kyoto emission reductions, particularly outside the dominant CDM markets of China and India.
Magnus Rystedt, Managing Director of NEFCO, itself an investor in the Fund, welcomed the initiative: “During 2010, NeCF has built up a strong pipeline of valid letters of intent, offers and prospects, largely falling in the post 2012 period. Owing to capital constraints and an excess of market opportunities, NEFCO is looking to continue supporting these emission reduction projects.”
In the first instance, priority for Tranche II subscriptions will be given to existing investors in NEFCO’s carbon finance facilities, which includes 8 sovereign and 10 private sector participants.
Background
The Carbon Finance and Funds (CFF) operations of the Nordic Environment Finance Corporation (NEFCO) expanded in both volume and scope in 2009 and 2010, against a backdrop of difficult economic conditions globally and political uncertainty regarding international climate policy. The NeCF has been active in sustainable energy investments in Asia, Latin America and Africa. NEFCO's pioneering Baltic Sea Region Testing Ground Facility (TGF), a 35-million-euro regional carbon finance facility, concluded its active procurement and entered fund administration phase in 2009.
Both funds are structured as public-private partnerships with investments from governments and private sector utilities and industrial companies and act as compliance vehicles that purchase Certified Emission Reductions (CERs) and Emission Reduction Units (ERUs) from projects that reduce greenhouse gas (GHG) emissions under the Kyoto Protocol.
In 2009, a new technical assistance fund, the Nordic Climate Facility (NCF) supporting mitigation and adaptation actions for the poorest countries was launched, in association with the Nordic Development Fund (NDF). In 2010, together with NDF, NEFCO is launching an innovative climate guarantee facility, Pro-Climate.
NEFCO is an international financial institution owned by the five Nordic countries and mainly finances environmental-related projects and investments in Russia, Ukraine, Estonia, Latvia, Lithuania and Belarus, in order to generate positive environmental effects for the Nordic region. At present, the funds administered by the corporation are valued at some EUR 383 million.
For more information, please contact:
Ash Sharma, Vice President, NEFCO, +358 400 811 327
Mikael Sjövall, Communications Manager, NEFCO, +358 50 3535 045
