IFC Signs Carbon Emission Purchase Agreement in India
Washington, D.C., June 29, 2006 - The IFC-Netherlands Carbon Facility, a joint initiative of the International Finance Corporation, the private sector arm of the World Bank Group, and the Dutch government, today signed an emissions reduction purchase agreement worth more than $6 million. Under this agreement, IFC will use Dutch government funds to purchase greenhouse gas emission reductions from windfarms in the Indian states of Rajasthan and Karnataka. These farms, aggregating 75MW, are connected to state electricity grids. In accordance with the Clean Development Mechanism of the Kyoto Protocol, the Dutch government will then use the purchased Certified Emission Reductions or CERs, to help comply with its commitment under the Protocol.
Rachel Kyte, Director of IFC’s Environment and Social Development Department commented, “This is an innovative transaction structure enabling small and medium sized wind projects to successfully access the commercial carbon finance market and improve returns on risk capital.” We hope that this transaction will have a significant demonstration effect on other small and medium sized renewable energy projects across key markets.”
CERs are independently verified reductions of carbon dioxide, methane, and other greenhouse gas emissions in developing countries. Under the Clean Development Mechanism, they are eligible for trade and can be sold in countries which have undertaken greenhouse gas emission reductions.
Iyad Malas, IFC’s Director for South Asia, commented, “Our role in helping the South Asian companies participate in the carbon credit markets follows IFC’s objective to provide innovative, effective, and environmentally and socially sustainable solutions for the private sector, throughout the region. IFC leverages its project finance experience in emerging markets, and through its assistance-led approach helps clients minimize key risks associated with the delivery of carbon credits.”
The project is managed by Enercon India Limited, a leading manufacturer of wind turbines and a subsidiary of Enercon Gmbh. Enercon uses a gearless technology which increases the life and reliability of turbines. Enercon has been active in the manufacturing, installation, operation, and maintenance of wind turbines in India since 1995, with installations across seven Indian states. To facilitate investments in the wind energy sector in India, Enercon acts as a project developer anchoring all stages of a project. This entails assessing land with good wind potential, constructing and commissioning the windfarm, and providing lifetime operation and maintenance services.
In addition to bridging demand-supply shortages, wind energy improves the voltage and frequency profile at the interconnect point and has low transmission losses as it is consumed close to the generation point. Revenue from sale of Certified Emissions Reductions improves returns for shareholders and helps improve servicing of debt to lenders.
IFC manages two carbon purchase facilities and offers several financial products for the growing carbon market including an AAA-rated carbon delivery guarantee on behalf of projects generating emission reductions and loans against forward contracts. For more information on IFC’s carbon finance offerings, contact firstname.lastname@example.org.
In India, IFC’s current held portfolio in is $1.2 billion, making India IFC’s second largest country of operations. IFC has been focused on supporting private sector led growth through direct investment and technical advisory support to promote growth and competitiveness in India. In FY2005 alone, IFC committed $413 million in new investments in India.
The International Finance Corporation is the private sector arm of the World Bank Group and is headquartered in Washington, D.C. IFC coordinates its activities with the other institutions of the World Bank Group but is legally and financially independent. Its 178 member countries provide its share capital and collectively determine its policies.
The mission of IFC is to promote sustainable private sector investment in developing and transition countries, helping to reduce poverty and improve people’s lives. IFC finances private sector investments in the developing world, mobilizes capital in the international financial markets, helps clients improve social and environmental sustainability, and provides technical assistance and advice to governments and businesses. From its founding in 1956 through FY05, IFC has committed more than $49 billion of its own funds and arranged $24 billion in syndications for 3,319 companies in 140 developing countries. IFC’s worldwide committed portfolio as of FY05 was $19.3 billion for its own account and $5.3 billion held for participants in loan syndications. For more information, visit www.ifc.org.
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