Mr Robert Taylog, Consultant, Agrinergy of the UK, says that his firm is currently working with 50 companies in India in sugar, cement and sponge iron sectors.
Excerpts from an exclusive interview with Mr Robert Taylor:
How many companies are you working with and across which sectors?
At the moment we are working in India with 50 companies. The main sectors that we are focussing on are sugar, sponge iron and cement. We have done a couple of deals and we have secured a couple of contracts. I think the trend we find in the market at the moment is that most people have seen these high European prices and are willing to hold on to their carbon credits and sell them at a later date.
How exactly are the prices moving in that market and do you see these contracts going close to the highs that some of these benchmark contracts struck recently?
I think the prices are on the upside. We don't have the mechanism to reduce risk of delivery from CDM projects into European emission trading schemes. I don't think prices will ever make 20, 22 euros as we are seeing in Europe at the moment and my feeling is that we will settle somewhere between 8 and 12, but that is my guess at this moment. However, there are certain instances where people would want to contract forward and they may want upfront payment and as a general risk management strategy, I think that it is advisable for people to look to secure some price going forward. As it is a regulated market, at the end of the day we don't know what turn the regulation may take.
Give us a sense of the deals you struck in terms of the size of the project, the credit size and give us a sense of the band these projects have been struck at?
The average size for us is around 50,000 carbon credits a year. So we have one project that has been registered just recently, JCT, a renewable energy project. That was struck at the lower end of the current range of prices but it did involve an upfront payment. So in those instances, we do see slightly lower prices. But I would say that generally now if we are looking to sell carbon credits on a forward basis, we are looking at a price of around 7 to 9 euros depending on the risk that the seller is willing to take.
I think one must bear in mind that when we talk about prices there aren't really one standard price in the market. There is a range of prices dependant on the risks involved in the contract.
If you were to break up the carbon credit, how much of that you think India would garner because we understand China is competitive as well in that space?
The Minister of Environment said recently that India has 203 projects that it has approved and they will generate 195 million tonnes of carbon credits. I mean globally what we are seeing at UN level is that 125 million tonnes of carbon credits will be generated from the projects that have been registered and in the UN pipeline, which will not include all the CDM projects that India has approved, we are looking at 575 million tonnes of carbon credits. So India at the moment plays a significant role. I think that we had a very positive regulatory environment in this country from the Designated National Authorities (DNA) the Ministry of Environment, which helped India, move quickly. China and Brazil will come into this market longer term, mainly China with a lot of HFC projects, with a lot of coal mine methane projects and they are going to really push a large volume of carbon credits.
Could you give us some names of some of the companies in various sectors that you are working with by gas, cement or sugar?
In the sugar sector, the project we registered is a Shree Renuka Sugars and we are working now and hope to register Rajshri Sugars and Chemicals in the South and there are number of other factories in UP that we are working with. In cement sector, we are working with Gujarat Ambuja and ACC and a lot of smaller sponge iron plants in Raipur and in Chhattisgarh and we see quiet a good potential within that sector.
Anything from the power project side?
We don't as of now, we have spoken to a number of power companies, but we have not done any contracts for them. I think what happens is that everybody tends to focus on sectors and specifically the gas co-generation where it is relatively easy and then one or two other sectors. We haven't got time to do energy efficiency projects. We believe there is a huge opportunity for power companies here in India and it takes a little more time for people to figure out exactly what the potential is within the sector.
You think you would do 40-50 deals in 2006 more or less?
I would hope to make 40-50 deals and may be I will come back in a year to tell you how many we have done. I mean that the potential is still there within India. There are a number of sectors that we haven't yet touched. So I would hope we can do 40 or 50.
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