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| GPPC deal: A bonanza for Swan Energy |
| Maulik Pathak / Mumbnai/ Ahmedabad Feb 04, 2010, 00:35 IST |
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SEL can garner Rs 700-800 cr from carbon credits alone
The Rs 381-crore deal with GSPC Pipavav Power Company Ltd (GPPC) seems to be a bonanza for Swan Energy (SEL). The Mumbai-based company, which recently received shareholders’ approval for picking up 49 per cent stake in GSPC Pipavav Power Company Ltd (GPPC), will be able to rake in about Rs 700-800 crore from carbon credits alone in a period of ten years.
Swan Energy or the erstwhile Swan Mills will emerge the single largest stakeholder in the company once the deal is through with Gujarat State Petroleum Corporation (GSPC) and Gujarat Power Corporation Limited holding 34 per cent and 17 per cent respectively.
“This Agreement is a unique financing structure wherein a private sector investor has agreed to invest at premium for promoting public sector power project resulting in reduced green house gas emissions,” according to an official statement by GSPC.
The stake sale deal with SEL was done through negotiations, sources said. The project will be eligible for generating CERs (carbon credits) upon its operations, for first ten years of operation, as per approved methodology AM0029 of UNFCCC for CDM projects, according to a statement by GSPC.
GPPC have appointed Ernst &Young as their advisors for CER registration process. TUV-Nord has been appointed as the validators for the project design development (PDD). As per the AM0029 methodology, the number of CERs that GPPC project can generate has been estimated to be 1.2 million per year by E&Y in the PDD.
Back of the envelope calculations suggest that if we take average of 13-15 Euros per unit based on December futures contracts traded on Chicago Climate Exchange recently, the power project can generate about Rs 115 crore (at Rs 64 per Euro) worth of carbon credit every year. Of this, SEL has a right to sell 70 per cent and can garner about Rs 70-80 crore per year or about Rs 700-800 crore over a period of 10 years, depending on the price at which it sells CERs.
When contacted a government official close to the development said that “As part of the deal, Swan will be able to sell a certain percentage of carbon credits and earn from it.” He, however, refused to make any future projections.
GPPC project has achieved financial closure and is under implementation. GPPC is in the process of establishing a new 702 MW gas based power project at Pipavav in Gujarat.
The EPC contract was awarded to BHEL and the scheduled commissioning date of the project is December, 2010. GPPC has already received necessary approvals, including environment clearance, for expanding its capacity to 1050 MW. The overall envisaged size of the power project is about 3,600 Mw for which GPPC has also got in-principle approvals from the state government, said government sources familiar with the development.
Meanwhile, SEL is also mulling to set up an LNG terminal at Pipavav in association with APM Terminals and Essar.
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