Fortum and TGC-1 agree on largest ever trade of CO2 emission reduction units in Russia

Fortum, the Russian Territorial Generating Company No. 1 (TGC-1) and ECF Project Ltd have today 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, expansion and reconstruction of combined heat and power generation facilities as well as energy efficiency improvements with district heating network. 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 price of Certified Emission Reductions originating from 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.

TGC-1 was founded in 2006 as part of the Russian power sector reform. The company operates in north-west Russia from St. Petersburg to the Kola Peninsula. Fortum is the second largest owner of TGC-1 with a slightly over 25% share. The production capacity of TGC-1 is over 6,200 MW power and about 17,200 MW heat. Furthermore, 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 by the year 2015. To finance the investments, TGC-1 organised a share issue in 2007. Fortum participated in the issue subscribing to shares with approximately 243 million euros.

Fortum Corporation
Maria Romantschuk
Senior Vice President, Corporate Communications

Further information:
Tapio Kuula, Senior Vice President, Fortum, +358 10 452 4112