Blackstone GV set to raise EUR 100 mln for CEE fund - director
By Brian Kenety
PRAGUE. SEPTEMBER 24. INTERFAX CENTRAL EUROPE - Prague-based carbon asset management firm Blackstone Global Ventures (BGV) expects to raise EUR 100 mln by year's end to invest in emissions-reduction projects in the CEE region via its new fund, BGV managing director Stanislav Kolar told Interfax in an exclusive interview.
"We have pre-commitments from two organizations - I cannot name them, but one is a global hedge fund and the other a major European electric utility - and they will come in at EUR 5-10 mln each," Kolar said, adding that his firm is in negotiations with potential seeding organization. "We are now introducing the concept to [other] key players in the market in a pre-road show."
The firm's BGV JI Focus Fund will primarily target the creation of emissions credits through so-called Joint Implementation (JI) projects, one of a number of ways that Kyoto Protocol "Annex 1" signatories - such as European Union member states - can partly meet their obligations under the treaty to reduce harmful greenhouse gas emissions.
"Ours will be the first such carbon fund based in the CEE region, and among the first to invest in JI projects in Russia, after the Danish-based Russian Carbon Fund," Kolar said, referring to the investment vehicle backed by Merrill Lynch and renamed the Core Carbon Group in July. "There is an appetite for JI because - with the exception, I think, of Merrill Lynch - all major investment banks have too large an exposure to CDM projects and none in JI."
Unlike projects under the Clean Development Mechanism (CDM) - assessed and approved under the Bonn-based CDM Executive Board, and actively traded on over-the-counter exchanges for two years now - JI projects apply to transitional economies, mainly covering the former Soviet Union and Eastern Europe, and the related processes and procedures vary greatly from country to country.
JI credits are known as Emission Reduction Units (ERUs) and CDM credits are called Certified Emission Reductions (CERs). Like other carbon asset firms, BGV looks to develop JI and CDM projects that generate the credits more cheaply than the price of the European allowances, and even CERs.
BGV trade director Daniel Butler told Interfax that the company has about 3 mln ERUs - or 3 mln tonnes of CO2 - under contract in its current portfolio, mostly in the Czech Republic, while BGV manages assets worth EUR 10 mln as part of its "carbon pool," a compliance instrument for companies participating in the EU emission trading scheme (EU ETS).
"JI is relatively new and smaller; the majority of investment has been going into CDM," Butler said, adding that BGV's new JI fund expects a seeding organization, which will provide prime broker services, would come in at about EUR 25 mln.
Butler said BGV's road show will look to convince potential investors that the JI projects in which BGV is looking to invest in can translate into big profits by taking advantage of sizeable price differences between different emission "currencies."
"European Union allowances, or EUAs, already traded on a several exchanges in Europe are at EUR 21," Butler said. "If you go to a bank in London they will give you a guaranteed CER for a price of about EUR 16.5. But if a developer like us goes out to Ukraine in the early days until now, perhaps the range - the cost to us - was somewhere between EUR 5-8."
JI and CDM credits are interchangeable for the purposes of compliance under the EU's trading scheme for up to a 10% limit in the Czech Republic and Poland, for example, and over 20% in Germany.
Kolar said currently BGV's greatest potential is in Ukraine, adding that he will travel to Kiev this week to establish a subsidiary.
In the longer run, BGV intends to get into Russia and the firm has already established contacts and potential partners there, Kolar said.
"Russia presently does not have a clear and transparent system for approval of JI projects - in fact, they do not have a system at all," Kolar said. "But when our fund is set up, definitely, we will move into Russia because [the fund] will provide us with the resources to be there permanently, full-time, and we can begin looking for projects."
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