En+ Group’s first transaction of emission reduction units from a Joint Implementation Project

The En+ Group has completed a transaction to sell approximately 1 million emission reduction units (ERUs) that will be created by a Joint Implementation (JI) Project under Article 6 of the Kyoto Protocol. The ERUs will be created at the Bratsk aluminum smelter. The smelter is owned by UC Rusal.  The En+ Group holds a controlling stake in UC Rusal. The ERUs were purchased by buyers represented by affiliates of Natsource.  New Energy Finance, a leading independent analytical service, ranked Natsource as the world’s largest purchaser of carbon credits on a risk-adjusted basis through 2007.

“The emission reductions will be achieved by implementing a new production system at the world’s largest aluminum producer, Bratsk smelter,” said Ivan Rebrik, Head of UC Rusal’s Health, Safety & Environment Dept. The new system will result in a decrease in the anode effect* frequency and duration. “This will reduce emissions of perfluorocarbon, (PFC), a greenhouse gas, and also help to lower electric power consumption. This is an extremely important transaction as it provides major environmental and economic benefits and it is one of the first JI projects** in Russia,” said Rebrik. The proceeds from the sale will be used to make further investments in activities that benefit the environment at the Bratsk smelter.

The implementation of the new system at the Bratsk smelter was initiated in 2007 within the framework of the plant’s large-scale environmental modernization program, which will be completed in 2015. Once the new system is fully implemented, it is expected to achieve reductions of PFC emissions equivalent to 1.2 Mt of carbon dioxide (CO2e) over a five-year period.

“We are pleased to have been part of this transaction,” said Jack Cogen, Chief Executive Officer of Natsource. “It shows that the Joint Implementation mechanism can help to mobilise capital to fight climate change. Natsource will continue to participate in beneficial transactions in Central and Eastern Europe.”

“Investments that protect the environment and increase the efficiency of electricity use are the priorities for all of our businesses,” said Rusal Jivko Savov, En+ Group Managing Director (Power), and a member of the Board of Directors. “Rusal is a leader in these areas. We will continue to use the Kyoto mechanisms to finance our internal environmental projects and to support companies in the electric power and metallurgical industries in their efforts to raise funds using the mechanisms.”

*Anode Effect – This is the effect produced by polarisation of the anode in electrolysis. It is characterised by a sudden increase in voltage and a corresponding decrease in amperage due to the anode becoming virtually separated from the electrolyte by a gas film. The effect results in emissions of perfluorocarbons and an increase in electric power consumption.

**Joint Implementation (JI) was established under Article 6 of the Kyoto Protocol and allows industrialised countries or emitters to invest in projects located within industrialised countries in order to generate ERUs.  In contrast to Clean Development Mechanism (CDM) projects which are undertaken in developing countries, industrialised nations or emitters can invest in project activities that reduce emissions in other industrialised nations, which are subject to an emissions limit under Kyoto, thereby creating ERUs.  Countries or investors earning the credits may apply them to meet their emissions reduction requirements from 2008-2012.  ERUs currently constitute a small, but growing, class of emissions assets in the global market. 

Kyoto Protocol, which was agreed to in 1997 and entered into force in February of 2005, established the world’s first international framework to address global climate change.  It requires a group of developed countries to reduce their greenhouse gas emissions by approximately 5% below 1990 levels from 2008-2012.  The Kyoto Protocol also incorporates several project-based mechanisms that authorise the creation and use of emission reductions (CERs and ERUs) to reduce costs to comply with these emissions limits.  The emission reduction targets agreed to under Kyoto have led to the development of the existing global carbon market.

En+ Group’s (http://www.enplus.ru/ ) strategy is to focus on businesses which extract raw materials for energy production, generate electricity and produce non-ferrous metals. En+ Group is the majority shareholder in United Company RUSAL, the owner of EuroSibEnergo, the largest private energy company in Russia. En+ Group also owns the United Oil Group with operations covering exploration, extraction and refining of oil and significant coal assets.

Natsource is a leading provider of asset management, origination and structuring, and advisory and research services in global emissions markets. It has approximately $800 million in assets under management and commitments on behalf of its compliance and investment clients as of March 31, 2009. http://www.natsource.com/