NEW YORK, LONDON and TOKYO, March 3, 2005 — Natsource LLC announced that its wholly owned subsidiary, Natsource Asset Management Corp. (NAM Corp), has launched the Greenhouse Gas Credit Aggregation Pool (GG-CAP). GG-CAP is the world’s first operational private sector mechanism designed to help corporates and governments manage their GHG compliance requirements. GG-CAP will purchase and manage the delivery of a large pool of GHG emission reduction (ERs) that GG-CAP Buyers can use to comply with EU ETS and KP emission reduction requirements.
GG-CAP will assist Buyers by using a pooling approach to purchase GHG ERs. These ERs, which would be supplemental to Buyers’ domestic actions, can be used for compliance in European Union (EU) Member States, Japan, and Canada. It is estimated that these countries will be approximately 3.5 billion tons short of their KP emission reduction obligations from 2008-2012 based on current emission trends. Leveraging the collective purchasing power of the Buyers, NAM Corp will purchase and manage a large pool of GHG ERs. Buyers have committed up to â‚¬72 million (approximately US$95 million) to GG-CAP. Committed capital will increase to â‚¬98.6 million (approximately US$130 million) within 30 days.
Participants in GG-CAP’s first closing include six European, Japanese and Canadian firms. These include the Electricity Supply Board (Ireland), The Chugoku Electric Power Company, Inc., Hokkaido Electric Power Company, Inc., Osaka Gas Company, Ltd., and Tokyo Gas Company, Ltd. The participating companies are engaged in electricity generation, chemical manufacturing, oil and gas production, and gas transmission and distribution.
“Over the past several years, it has become clear that our clients will be required to reduce their greenhouse gas emissions,” said Jack Cogen, President of Natsource. “We
have a global team of experts who possess unparalleled expertise in the policies that created the greenhouse gas market, and significant commercial experience in contracting for such reductions. This expertise will be utilized to provide highly valued asset management services to our clients to assist them in managing their emissions liabilities cost-effectively.”
“Environmental issues, particularly the prevention of global warming is an important challenge facing our company and is an important social responsibility. We are taking actions including diversifying our electricity supplies and increasing our efficiency to reduce our emissions. Chugoku decided to take this opportunity to join GG-CAP because we believe this initiative will contribute to the prevention of global warming by supporting the development of projects that reduce greenhouse gas emissions in developing countries,” said Tatsuaki Terada, Managing Director, General Manager of Corporate Social Responsibility Division, The Chugoku Electric Power Co., Inc.
“We have been implementing measures to prevent global warming such as the efficient and stable operation of our nuclear plants and efficiency improvement of our thermal plants. We believe that other actions such as joining GG-CAP, which will utilize the Kyoto mechanisms, will allow Hokkaido to make additional contributions to address global warming,” said Tatsuo Kondo, President and Director, Hokkaido Electric Power Company, Inc.
Natsource’s entry into the asset management business is rooted in the firm’s significant experience in and knowledge of emissions markets derived from its Transaction Services and Advisory Services business units. Natsource personnel have played an integral role in the development of many of the trading systems that have created emissions markets, and of the project-based mechanisms included in the Kyoto Protocol. The firm continues to be deeply involved in the processes underway to develop the rules governing these mechanisms. Natsource has contracted for millions of tons of GHG ERs in the private sector, and has executed many of the early trades in emissions markets. These trades have involved greenhouse gas emissions reductions and allowances, renewable energy certificates (RECs), renewable obligation certificates (ROCs), sulfur dioxide (SO2) permits, and nitrogen oxides (NOx) permits and credits.
“With a full suite of transaction and asset management services, we are well positioned to structure solutions for both buyers and sellers of emissions allowances and project-based reductions,” said Martin Collins, Managing Director, Natsource Transaction Services.
A brief description of GG-CAP follows:
The Greenhouse Gas Credit Aggregation Pool (GG-CAP). GG-CAP will identify, evaluate, purchase and manage GHG ERs that private- and public-sector entities can use to comply with emission reduction requirements during the 2005 to 2012 period under the European Union Emissions Trading Scheme (EU ETS) and similar requirements imposed by nations such as Canada and Japan, which seek to comply with their obligations under the Kyoto Protocol (KP).*
Through GG-CAP, Buyers will be able to benefit from proven risk management techniques to guard against under-delivery of contracted ERs. These techniques include diversification, reserve margins, risk management contracts, and insurance products. Use of these techniques will facilitate the development of a highly valued portfolio of ERs that Buyers can utilize as a component of their compliance strategies.
Paul Vickers, formerly of TransAlta’s carbon market initiative, will take the lead in managing the GG-CAP. “We have developed this greenhouse gas compliance mechanism over the past two years with input from Buyers, environmental, risk, commercial and legal experts. GG-CAP will help Buyers manage their environmental obligations cost-effectively while they continue to grow their businesses,” said Vickers.
Natsource’s Advisory Services unit, led by Rich Rosenzweig, Managing Director, will be renamed Advisory Services and Research. The unit will support the efforts of GG-CAP with its regulatory and market expertise and knowledge of emission reduction projects and portfolios.
About Natsource LLC [ http://www.natsource.com/ ]
Natsource LLC is a leading global provider of asset management, advisory and research services, and transaction services. Natsource assists leading private firms and governments around the world in strategic management of energy and environmental risk. Natsource is headquartered in New York and has a global reach, with offices in many of the world’s major financial centers.
* The EU ETS will require approximately 12,000 installations to reduce their emissions in two phases from 2005-2007 and 2008-2012. The KP, which entered into force on February 16th, 2005, requires developed countries to reduce their GHG emissions approximately 5% below 1990 levels from 2008-2012. Both the EU ETS and KP allow for ERs that conform to specific criteria to be used to comply with emission reduction requirements.