2Co Energy Ltd., a U.K. carbon-capture project developer, is selling a stake in its Don Valley venture to a South Korean utility, adding a second investor from the East Asian country after bringing in Samsung Group in March.
2Co Energy is offloading a stake in the carbon-capture and storage, or CCS, project in northern England, Chief Executive Officer Lewis Gillies said by e-mail, without identifying the buyer. Gillies expects South Korea to provide 1 billion pounds ($1.6 billion) in financing following the deal.
“That level of Korean equity ownership combined enables us to leverage in order of a billion pounds of debt from Korean export credit agencies,” Gillies said. The company has “letters of intent” that may generate about 1.5 billion pounds from the agencies and the European Investment Bank, he said.
Developers of CCS are tapping Asia for funding as European lenders, constrained by the financial crisis, shy away from a technology that’s yet to operate on a commercial scale at power plants. CCS, which traps carbon emissions from power stations and factories for permanent burial underground, has attracted Korea as it gathers expertise for possible replication at home.
“Korea is most likely supporting CCS internationally to help its large technology companies, such as Samsung, gain market share in the early-stage CCS industry and gain experience to help build CCS in Korea,” Kieron Stopforth, a London-based analyst at Bloomberg New Energy Finance, said by e-mail.
China and Japan are doing likewise. The Export-Import Bank of China agreed in September to finance about half of a Summit Power Group LLC carbon-capture project in Texas, while SCS Energy LLC will use funds from Tokyo-based Mitsubishi Corp. and the Japan Bank for International Cooperation for its proposed Hydrogen Energy California CCS venture.
“Japan, China and Korea are countries well noted for standing behind their companies when they procure contracts abroad with government-backed debt to help the company secure business,” Gillies said. That CCS funding model is working in the U.S. and will be successful in the U.K. too, he said.
2Co, a London-based company backed by Texan private equity firm TPG Capital, agreed to sell a 15 percent stake in the Don Valley venture to a Samsung subsidiary in March, and in June sold a further 15 percent to Linde AG’s U.K. unit.
The project is designed to trap 90 percent of emissions from a new coal-fired power plant in south Yorkshire, and funnel them into storage about 3 kilometers (1.9 miles) under the North Sea, where they can be used to help push out crude from depleted oilfields.
The onshore portion of the project will cost about 3 billion pounds, and the offshore infrastructure 1 billion pounds. Including the cost of a 400-kilometer pipeline, the total investment is 5 billion pounds, according to 2Co.
The company already won 180 million euros from the European Energy Program for Recovery and is first in line to win funds in the European Commission’s NER300 program. It’s also entered a 1 billion-pound CCS financing competition in Britain, with results yet to be announced.