Financial consulting firm Vertis Environmental Finance plans to launch an environmental investment fund by the end of this year, company executives said last week.The fund, which is expected to attract investments to the tune of €80 million, would focus on investing in companies or projects in the fields of renewable energy and the trading of CO2 emission quotas in Central and East European countries, said James Atkins, a stakeholder in Vertis.
“We are negotiating with a London-based investment bank about jointly launching an investment fund,” Atkins said. “If launched, the fund will be the first of its kind in the region.”
Citing confidentiality, Atkins declined to name either the investment bank or the details of the planned cooperation.
The closed-ended fund will mature within 8–10 years, with annual yields forecast at 15%–20%, Atkins said.
The fund’s investment strategy will not set allocation targets for individual countries. It will also be flexible concerning the size of the companies and projects selected for investments.
“The amount of good environmental deals in the region is too low for any kind of specification. We will have to be opportunistic,” Atkins said.
According to Atkins, the gradually growing number of renewable energy projects in the region and the launch of CO2 emission quota trading in the EU as of next January are the most important factors behind the company’s plan.
“Many countries in the region, such as Hungary, already have fairly good green regulations supporting renewable energy projects,” he said. “Countries which have not yet got such regulations, like Romania, are expected to follow suit in the next few years.”
Green incentives
Under a deadline set for Hungary by the EU, the country will have to boost the proportion of renewable energy sources in power production to 3.6% from the current 0.5% by 2010. In order to achieve this target, Hungary’s government has been encouraging power producers to engage in such projects, offering direct subsidies.
Under this scheme, green power is bought at a regulated price, which is currently Ft 18.34/kWh. This price is approximately 60% higher than the average price of electricity, which currently hovers around Ft 11/kWh.
In Hungary, the conversion of coal-fueled power into biomass represents a major source of green energy.
AES Borsodi Energetics Kft last year completed the conversion of its 175 MW power station in Kazincbarcika, northeast Hungary, to use biomass fuel. The $10 million project was Hungary’s first biomass project.
Besides the Kazincbarcika project, other biomass conversion projects in Hungary include a 50 MW project carried out by Pannon Power Rt in Pécs, a 30 MW project carried out by Bakony Power Plant Rt in Ajka, and a smaller, 10 MW retrofit development by AES carried out on its plant in Tiszapalkonya.
As for CO2 emission trading, Hungary will need to allocate its overall CO2 emission quota, worth a total of nearly Ft 100 billion (€398 million), to some 150 companies by this fall.
The first draft of the national allocation plan is expected to be made public this week, and will be debated by the European Commission. If it gets the green light, the final version of the allocation plan will be released this fall.
Hungary is obliged to join the EU’s greenhouse gas emission trading system from January 2005.
by Judit Zegnál
Click here for Budapest Business Journal subscription offers!
07.06.2004