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Carbon Credit from MHI Wind Power Business in Bulgaria Transferred to Japan

No.1364
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Tokyo, July 12, 2010 - Carbon credit from the wind power business, which Mitsubishi Heavy Industries, Ltd. (MHI) has been conducting in Kaliakra, Bulgaria, was recently transferred to Japan. Carbon credit was generated through the reduction of greenhouse gas (GHG) emissions by producing electricity from the wind power plant instead of conventional fossil fuel power plant. The amount credited was for approximately 120,000 tons of carbon dioxide (CO2) emission reduction achieved by the operation by December 2009. Since commercial operation began in July 2008, the wind farm in Bulgaria has been operating without any significant troubles, this project will continue to contribute to the promotion of renewable energy utilization in Bulgaria and to the acquisition of carbon credits for Japan.

The Kaliakra wind power business is being conducted by Kaliakra Wind Power AD (KWP), a joint venture established locally with the Bulgarian engineering firm INOS-1 Ltd. and is approved as a Japanese-Bulgarian Joint Implementation (JI)* project to reduce GHG. The KWP wind farm, located at Kaliakra Cape on the Black Sea coast, incorporates 35 MWT62/1.0 wind turbines, each having rated power output of 1,000 kilowatts (kW). The all of electricity produced at the wind farm, which has rated capacity at 35MW in total, is sold to Natsionalna Elektricheska Kompania EAD (NEK), Bulgarian state-owned electricity utility.

The KWP wind farm has been reducing carbon dioxide (CO2) emissions by 70,000 – 80,000 tons annually compared with conventional thermal power generation. Of the emission credits obtained through the project, up to 350,000 tons will be sold to Japan Carbon Finance, Ltd. (JCF) until fiscal 2012, the last year of the First Commitment Period in the Kyoto Protocol. MHI will purchase any surplus credit beyond 350,000 tons.

KWP was capitalized at €10 million with MHI owning 70% and INOS-1 the remaining 30%. Bulgaria, in line with its joining the EU in 2007, aims to meet 16% of its total energy consumption needs with renewable energies by 2020. In appreciation of its contribution to the country’s renewable energy policy, KWP was awarded “Investor of the Year” in the energy sector in December 2008. The “Investor of the Year” is awarded by the Bulgarian government to outstanding foreign investment projects.

JCF was established by the Japan Bank for International Cooperation (JBIC), the Development Bank of Japan Inc. (DBJ) and major Japanese corporations in 2004 to support GHG reduction projects sanctioned under the Kyoto Mechanism framework as well as purchase emission credits.

The Kaliakra wind farm project is MHI's second overseas power generation investment initiative. The first involved investment in AES Energia Cartagena S.R.L., an independent power producer (IPP) in Spain, which signed with MHI in 2003 and commenced commercial operations of gas turbine combined cycle (GTCC) power generation in 2006.

On the strength of its expanding track record and experiences in this area, MHI aims to continue exploring related new businesses through expanded participation in power generation business operations and the vigorous development of business schemes geared toward the acquisition of carbon emission credits, as well as further strengthening marketing activities of power systems.

* Note:
Joint Implementation (JI) is a mechanism for obtaining emission credits under the Kyoto Protocol. Countries for which numerical targets have been set on GHG reduction jointly conduct projects that will reduce such emissions, and the project participants obtain credits based on the amount of ERUs generated by the project at hand. As of end June 2010, Bulgaria, which is conducting 27 JI projects, ranks fourth in the number of project implementation, following Russia, Ukraine and Czech.