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KPMG Evaluates Bids for U.K. Carbon-Capture Project

KPMG International, administrator for Powerfuel Plc, is evaluating bids for one of Europe’s most advanced carbon-capture projects in Hatfield, northern England.

Powerfuel, owned by Chief Executive Officer Richard Budge and former Russian billionaire Mikhail Abyzov, has debt of about 85 million pounds ($134 million), said Alison Anderson, a Leeds-based spokeswoman for KPMG. The company’s assets include a coal mine and a project to build a power station that captures carbon dioxide from gasified coal and buries it underground.

Britain’s coalition government has pledged 1 billion pounds to fund the first commercial demonstration project to capture and permanently store carbon dioxide, known as CCS, as it aims to cut emissions 80 percent by 2050 from 1990. Powerfuel’s CCS plans are among the most advanced in Europe, according to Bloomberg New Energy Finance.

“We’re now evaluating the offers received,” said Sorrelle Cooper, a London-based spokeswoman for KPMG. The deadline to submit bids for the projects was Jan. 14 and a second round is unlikely, she said, declining to say how many offers had been received.

Powerfuel, which went into administration last month, has permission to build a power station at the site near its coal field and won 180 million euros of European Union funding. The project is likely to apply for additional funds through the EU via the New Entrants Reserve of EU carbon permits as well. Powerfuel is 653 million pounds short of the investment needed to develop the CCS project, according to KPMG.

Levies on Bills

Iberdola SA’s Scottish Power unit is the only company in the running for the government funds after E.ON AG shelved its carbon-capture plans for the Kingsnorth power plant. The U.K. has given the two companies 90 million pounds to part-fund so-called front end engineering and design of carbon capture kit, and promised subsidies via a levy on electricity bills on three additional projects that trial trapping the CO2 from 300 megawatts worth of either coal- or gas-fired power generation.

A traded company, such as a utility, rather than a distressed debt fund is more likely to show interest in Powerfuel, London-based Iain Burnett, head of distressed debt at BlueBay Asset Management, said by e-mail.

Jonathan Smith, a Coventry-based spokesman for E.ON, declined to comment on whether it had submitted a bid for Powerfuel’s project. Simon McMillan, a spokesman for Scottish Power, declined to comment when contacted by telephone.

Buyers would need to check the contracts and permissions for building the power station are transferable, Burnett said. Bluebay manages $1.5 billion of distressed debt in Europe.

Powerfuel is “too small for most distressed debt investors,” and they may not have the “appetite to build out” the carbon-capture project, he said. “The business has real assets. That’s encouraging.”

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