OREANDA-NEWS. On 21 February 2008 was announced, that Fortum, the Russian Territorial Generating Company No. 1 (TGC-1) and ECF Project Ltd signed an agreement according to which Fortum will purchase approximately 5 million tonnes of emission reduction units (ERU) from TGC-1.

The ERUs will come from Joint Implementation projects conducted at TGC-1’s production facilities during the Kyoto Period (2008-2012) of the European Emissions Trading Scheme. The projects TGC-1 will implement include reconstruction of hydro power plants in Leningrad Region, expansion and reconstruction of combined heat and power generation facilities as well as energy efficiency improvements with district heating network in St.Petersburg. Fortum can use the received ERUs to cover part of its own emissions once these projects are completed and their emission reduction has been verified.

ECF Project will act as the consultant responsible for preparing technical documentation for Joint Implementation projects and for acquiring all necessary approvals from the Russian side.

The purchase agreement is based on the Memorandum of Understanding between Fortum and United Energy Systems of Russia (RAO UES) in 2006, and it is the biggest of its kind ever made in Russia. The ERUs purchased cover approximately half of Fortum’s annual CO2 emissions and their value is approximately EUR 70 million based on the current market value of Certified Emission Units in developing countries.

“This agreement clearly demonstrates that Fortum is an industrial investor committed to developing the Russian power and heat sector in a sustainable way. The Joint Implementation mechanism helps us to take climate issues into consideration in our investment program,” says Valery Rodin, General Director of TGC-1. 

“The Kyoto mechanism enables companies to reduce emissions where it is most economical. Last year, 89 % of Fortum’s own power generation did not cause CO2 emissions. Reducing emissions in Russia through Joint Implementation is an effective way for us to mitigate climate change,” says Tapio Kuula, Senior Vice President at Fortum.

Fortum is a leading energy company in the Nordic countries and Baltic Rim area. Its activities cover generation, distribution and sale of electricity and heat, operation and maintenance of power plants as well as energy related services. In 2007 Company's sales were EUR 4.5 billion, and operating profit increased EUR 1.8 billion. Market capitalization of the company is over EUR 21 billion. Fortum has become the first foreign strategic investor in the Russian power industry. At the moment Fortum owns over 25% of TGC- and plans further investments into Russian generation assets.

TGC-1 is the leading producer and seller of power and heat in the North-West of Russia. Company unites generation assets of St. Petersburg, Leningrad and Murmansk regions,  and Republic of Karelia. The power capacity of TGC-1 is over 6,200 MW, out of which 46% is hydro. Heat capacity is about 17,200 MW. In line with its currently undergoing investment program TGC-1 power production capacity will be increased by 3,600 MW and heat capacity – by 2,300 MW by 2015.

ECF Project Ltd. was established according to the decision of RAO UES of Russia. Its sole parent company is non-commercial environmental organization Energy Carbon Fund.  ECF Project Ltd. offers preparation of  PDD, determination of JI projects, presentation of interests of RAO UES’ subsidiaries in the Carbon Market,  support of contractual relationship between Russian sellers of  ERUs and buyers.