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MANILA, PHILIPPINES (15 November 2005) - An ADB backed coal mine/coal bed methane utilization project in Fuxin, the People's Republic of China (PRC), has entered into agreements with two separate buyers under the Clean Development Mechanism (CDM).

The transactions were structured by ADB's Clean Development Mechanism Facility and Clearworld Energy, a clean energy development company headquartered in Beijing. The seller in the transaction is Fuxin Mining Group and the buyers are ICTJ Limited and a consortium led by Natsource. The transaction includes innovative pricing structures that will provide economic benefits to the seller.

The project will improve coalmine methane and coal bed methane extraction, distribution, and utilization at mines around Fuxin, Liaoning Province. This will boost safety in the mines and supply methane as a clean fuel to residents, industry, and electricity generation schemes. The process reduces greenhouse gas emissions by capturing and using methane that would otherwise be released into the atmosphere during the mining process.

The project attracted strong competition and interest from buyers. This was helped by the fact that underlying project finance had been secured, with ADB approving a loan (for $15.8 million) in November 2004; there was strong host country support for the project from both the national Government and the Liaoning Provincial Government; and it complied with ADB's social and environmental guidelines.

The CDM is a market-based financial instrument set up under the Kyoto Protocol that allows industrialized countries to invest in developing country projects and acquire greenhouse gas emission reduction credits, or carbon credits, that they can then use to meet their greenhouse gas reduction targets under the protocol.

The Kyoto Protocol sets binding targets for industrialized countries for the reduction of greenhouse gas emissions that would lower the risk of global climate change. As a greenhouse gas, methane is 21 times more potent than carbon dioxide.

ADB's CDM Facility was set up in September 2003 to provide technical and administrative assistance to eligible projects in parallel with project identification and loan processing. ADB undertook a call for expressions of interest from entities interested in buying carbon credits from the project in March 2005.

"ADB views the CDM as a 'win-win' for all," says Bindu Lohani, Director General of ADB's Regional and Sustainable Development Department overseeing the CDM Facility.

"We congratulate all the parties involved in this project, and we look forward to both providing finance, and assisting many more successful CDM transactions in China, and the Asia and Pacific region."

Satish Rao, Director General of ADB's East and Central Asia Department, responsible for processing the loan, add that ADB is happy to be the partner of this innovative project.

"ADB is also considering innovative projects to promote energy efficiency and resource conservation in high energy use regions in PRC," he says. "The projects would directly reduce power demand, thereby cutting back on the investment required in new power generation capacity and supporting economic growth."

The larger volume of credits from the project were purchased by ICTJ Limited in association with a major oil and gas trading house. ICTJ Limited is a company established by the shareholders of ICECAP Limited to carry out trading activities in carbon emissions.

"We are very pleased to have played our part in closing this ground-breaking transaction with Fuxin Mining Group and we believe it will become the template for sales of carbon emission reductions out of China," says Dave Allen, a director of ICTJ.

The Transaction Services division of Natsource, the other entity engaged in this transaction, led a syndicate that included KfW, a large German Development Bank. This syndicate will receive an initial allocation of credits.

"We are pleased to have participated in this transaction," said Natsource President Jack Cogen. "It shows the potential for improving the safety conditions in the mining sector, reducing greenhouse gas emissions and producing clean affordable energy."

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