2Co recipe for a successful business model of a CCS project

Jane Paxman, policy and communications director at 2Co Energy gave a presentation at the 3^rd Annual Brussels Carbon Capture & Storage Summit 2012 on 15 May. In her speech she inspired optimism on how to successfully plan the financing of a £3bn CCS project such as 2Co’s Don Valley Power Project (DVPP).

The project at Stainforth is one of the UK's and EU's leading CO₂ Capture and Storage (CCS) power projects. It is a 650MW Integrated Gasification Combined Cycle (IGCC) power plant which could store up to 5 million tonnes per year (90% of the CO₂ emissions that would otherwise be emitted to the atmosphere).

DVPP’s business model involves three key points – capital grants from the EU and the UK, cheap debt through South Korean partners and enhanced oil recovery (EOR). Of the total £3bn (€3.7bn) cost of the plant, capital grants could amount to about £1bn (€1.2bn), relatively cheap debt to £1.5bn (€1.9bn) and equity the last £0.5bn (€0.6bn). According to Paxman, the benefits to the UK treasury from the Don Valley project, due to taxation of the additional oil production and to delayed decommissioning of offshore installations, would be roughly equal to what it will cost the treasury through grants. This means that the cost of electricity produced by Don Valley would be roughly the same as that of the conventionally generated power. The EOR revenues to the project furthermore enable the cheap debt – as confirmed by the feasibility study by BNP Paribas. ‘The duration of the debt is encouragingly long’ – Paxman said, as she disclosed that 2Co is in the process of confirming South Korean lending thanks to a 15% stake by Samsung in the project. The country is interested in gaining experience within CCS technologies to reach their ambitious 2020 emission targets. CCS could play an important role in South Korea as a large potential CO2 storage site was found in South Korea’s exclusive economic zone last year.

The final investment decision on the Don Valley project will be taken after confirmation of the necessary financial support from the EU and UK government. It is anticipated that the investment decision will be taken by mid-2013 and, after a construction period of a little over three years, the plant could be commissioned in 2016.

Read more: http://www.2coenergy.com/don_valley_power_project.html