MIU, Alm.del - 2011-12 - Bilag 158: Newsletter 2/11 fra NEFCO

News in briefNEFCO signs frameworkcooperation agreementwith China■NEFCO and the Foreign Economic Co-operation Office of the Ministry of En-vironmental Protection of China have,together with the China DevelopmentBank Corporation, signed a FrameworkAgreement to establish environmentalcooperation. The initiative is called theSino-Nordic Environmental ProtectionCooperation (“SNEPCO”) Programme.SNEPCO financing shall for instance beextended to projects which promotemitigation of greenhouse gases, phaseout ozone depleting substances or re-duce discharges of persistent and toxicsubstances including heavy metals.SNEPCO may also finance projects re-lated to resource optimisation, cleanerproduction and energy efficiency.NEFCO has been engaged in China sincethe mid-1990s and in climate changeactivities since 2008. The frameworkagreement signed in October will en-able NEFCO to substantially expand itsfinancing operations in China.

he International Energy Agency (IEA) is wont to argue that improvedenergy efficiency should be perceived as the biggest global ‘energysource’ that could help the world community in its efforts to slowdown climate change and promote transition to ecologically sustain-able energy production. IEA’s latest annual report World Energy Out-look 2011 suggests that Russia could save over 30 per cent in energyconsumption by investing more heavily in energy efficiency.This newsletter takesa look at various innovative ways of improving ef-ficiency in energy use. Columnist Anne Marie Holt Christensen writes aboutthe Danish municipality of Albertslund that snatched the Nordic Council ofMinister’s prize as the Energy Municipality of the Year through determinedrenovation of municipal buildings and adoption of a range of carbon neutralsolutions. We will also get to know the Russian municipality of Gurievsk in theKaliningrad region, where projects are being prepared to upgrade street light-ing, modernise heat production and restructure water supply in an effort tosave money and energy.Things are happeningon a broad front in Kaliningrad right now. Near theswish of the waves and the charms of the spas in Svetlogorsk, NEFCO is cur-rently financing a local wastewater treatment project that will improve thequality of water and life, making it easier for tourists to be attracted to thebeaches by the enchanting nature of the Curonian Spit. History is also beingwritten on the shores of Onega, the second biggest lake in Europe, where theFinnish and Russian governments together with a number of other externalfinanciers are modernising wastewater treatment facilities in Petrozavodsk.The investment will improve the state of the environment both in Onega andthe Baltic Sea.Additionally we willlook into thepossibilities of accelerating thetesting of environmental innova-tions with credits made available bya new fund that NEFCO is planningto set up in collaboration with otherfinanciers. The fund can serve as aspringboard for Nordic environmen-tal technology in situations wherecompanies need institutional back-ing for the testing of their innova-tions. Senior Manager Karl-JohanLehtinen of NEFCO’s EnvironmentalUnit sheds more light on this initia-tive in an interview.

Nordic Climate Facilitylaunches Third Call forProposals■The Nordic Climate Facility (NCF) haslaunched the Third Call for Proposals.The theme for the Third Call is "Innova-tive low-cost climate solutions with afocus on local business developmentin eligible developing countries." Thedeadline for submitting proposals is 16January 2012.The aim of the Nordic Climate Facil-ity (NCF) is to promote the transfer oftechnology, know-how and innovativeideas between the Nordic countries andlow-income countries facing climatechange challenges. The main goal is tobolster the capabilities of low-incomecountries to mitigate and adapt to cli-mate change challenges and implementsustainable development measureswhich will lead to the reduction of pov-erty.NCF is financed by the Nordic Devel-opment Fund (NDF) and implementedjointly with NEFCO. The total budgetfor the Third Call is EUR 6 million.

NEFCO teams up withRaiffeisen Bank in Russia■NEFCO and Raiffeisen Bank havesigned a framework agreement to pro-vide energy saving loans to Russianmunicipalities. Under the terms of theagreement, Raiffeisen will operate asNEFCO’s intermediary bank in Russiaand will disburse funds earmarked forenergy saving projects, which will becarried out by the country's municipali-ties. Raiffeisen Bank International (RBI)is Eastern Europe's third-biggest bankwith 188 offices in Russia.The framework agreement betweenNEFCO and Raiffeisen Bank does notprevent any other credit organisationfrom participating in similar projectswith co-financing and neither does itprevent other financial institutionsfrom offering their services to NEFCO.NEFCO’s Facility for Energy SavingCredits has, since its inception, ap-proved some 50 loan agreements forfinancing energy saving measures inRussian municipalities.

International financing to help clean Lake Onega■The FinnishMinistry of the Envi-ronment and the Russian government,together with the Petrozavodsk Com-munal Utilities Systems (PKS), the Cityof Petrozavodsk and a group of inter-national financial institutions, will inDecember sign a EUR 32 million invest-ment package, which is intended tofinance the improvement of drinkingwater quality and the reduction of un-treated wastewater being dischargedinto Lake Onega in Northwestern Rus-sia.PKS is currentlyimplementing aninvestment programme, which is in-tended to improve drinking water qual-ity and upgrade the wastewater treat-ment facilities in Petrozavodsk, a cityof some 270,000 inhabitants, whichis situated on the western shores ofLake Onega. The public utility process-es around 145,000 cubic metres ofwastewater per day.The investment packagewill fi-nance recycling and dewateringof sludge generated in the drink-ing water plant and modernise thewastewater treatment plant byintroducing a bio-chemical pro-cess. These measures are expectedto result in an annual decrease of49 tonnes of phosphorus dischargesinto Lake Onega.The set upof the investment pack-age has been coordinated by NEFCOthat provides a EUR 4 million loanfor the project. The project is alsofinanced by the Nordic InvestmentBank, the Finnish Ministry of theEnvironment and NDEP.

News in briefNDEP gets increasedfunding■The coffers of the Northern Dimen-sion Environmental Programme (NDEP)have been replenished by its membercountries. All in all, the NDEP has man-aged to raise up some EUR 45.3 millionin fresh capital to fund new environ-mental projects.The replenishment coincides with theNDEP’s 10th anniversary, which hasbeen celebrated this year and financialpledges and contributions have beenreceived from the EU, Finland, Norway,Russia and Sweden.“These new funds will enable us and ourbusiness partners to prepare projectscritical for improving the state of theenvironment in the Baltic and BarentsSeas region”, says NDEP Manager,Jaakko Henttonen.At the moment there are 23 active envi-ronmental projects in NDEP’s pipeline.NEFCO became a member of the NDEPin 2008 and chaired the Steering Groupin 2010-2011. The Nordic InvestmentBank is now chairing the NDEP SteeringGroup until June 2012.

“We are delightedby the politi-cal support for our work, which willenable us to intensify our climatemitigation efforts in low-incomecountries”, said Managing DirectorMagnus Rystedt from NEFCO.The Initiative seeksto build hostcountries’ capacity to evaluate,structure and implement NationallyAppropriate Mitigation Actions (NA-MAs), making use of internationalfunding and possible new marketmechanisms.The Nordic PartnershipInitia-tive for Peru and Vietnam will bemarketed in the form of side events,which will take place at the UN’sCOP17 Climate Conference in Dur-ban 28.11-9.12.2011.

NEFCO financesKandalaksha’s energysaving efforts■Some 36municipally owned build-ings in Kandalaksha, which is situ-ated in Northwestern Russia on theKola Peninsula, will benefit from anenergy saving scheme, which is beingfinanced by NEFCO’s Facility for EnergySaving Credits.The total investmentcost of the pro-ject is RUB 10.5 million, and NEFCOwill provide a loan of RUB 9.5 million.The loan will be used to renovate fiveheating sub-centrals and install heatmetering devices at 31 buildings, main-ly schools, day-care centres and youthcentres.The project isexpected to save some2.5 million kilowatt hours of heat en-ergy per year for the municipality andthis will translate into over RUB 5 mil-lion in savings annually. NEFCO’s in-termediary bank in Russia, Raiffeisen,will disburse the loan to the municipal-ity. The maturity of the loan will be 2.1years.

In practice, theministers decidedto support upscaled mitigation pro-grammes and pilot projects in Peru andViet Nam. The programmes, which arestill under consideration, will be im-plemented through the Nordic Devel-opment Fund (NDF) and NEFCO.The pilot projectsin Peru will focusat the waste sector and aim at improv-ing Peru’s readiness to benefit frominternational climate finance for sup-porting upscaled mitigation action.The pilot programme in Viet Nam willbe implemented in the highly energyintensive cement production sector.NEFCO will finance the climate pro-jects in Peru with funds from its NordicEnvironment Development Fund.

Danosha and NEFCO tosign loan agreement forbiogas production■The Ukrainian agricultural company,Danosha Ltd, and NEFCO will sign aloan agreement to finance theproduction of biogas from pig farms inthe Kalush region of Western Ukraine.Danosha Ltd. is owned by the Danishcompany, Axzon A/S, which farms20, 000 hectares and produces 650,000pigs a year.Under the terms of the agreement,NEFCO will grant a loan of EUR 1.8million for the construction of a biogasplant in Kopanki, which is expected toreduce carbon dioxide emissions bysome 27,300 tonnes per year when thebiogas reactor becomes operational.The 1 megawatt reactor will consumesome 100,000 cubic metres of pig slurryannually.The total investment cost for theproject is EUR 8 million, and there areplans for similar facilities at three otherDanosha-managed sites in WesternUkraine.

New wastewater facilities inaugurated inVershinino■New wastewatertreatment facili-ties were inaugurated in October inVershinino, in the Archangel regionof Russia. Vershinino village is the ad-ministrative centre of Kenozersky Na-tional Park in the South-western partof the Archangel region.Apart from improvingecologicalconditions in Lake Kenozero, whichoccupies some 100 square kilometresof the park, the wastewater facilitieswill also uplift sanitary conditions forthe inhabitants of Pocha and Ust’-Poa-cha villages, which are situated in thenorthern part of Kenozersky NationalPark.As part ofthe project, new wastewa-ter plants, precipitation, infiltrationbasins and sludge deposit designed byBioforsk, a Norwegian environmentalconsultancy, have been constructed.The Vershinino project has also im-proved the water supply system byconstructing new water intake facili-ties and booster pumping stations aswell as laying new pipelines to themunicipally owned buildings.The Arkhangelsk OblastEnergyEfficiency Center has assisted withplanning and co-ordinating the pro-ject. NEFCO and the Norwegian gov-ernment, together with the Arch-angel Region and the local PlesetskMunicipality, have supported theproject. NEFCO’s EUR 240,000 inputinto the project has been drawn fromits Barents Hot Spots Facility.

The road to Gurievsk (formerly Neuhausen) in Russia is flankedby long rows of white-washed tree trunks and barren tree tops.Similar park lanes planted during the German era are typical forcountless main roads in the Kaliningrad Province. A town witha population of 12,000, Gurievsk is a mere 10 kilometres awayfrom Kaliningrad centre. The rural environment and reasonabledistance to Kaliningrad have encouraged a lot of families withchildren and commuters to settle down in the community.

ecently, the town of Gu-rievskjoined forces withNEFCO to upgrade thestreet lighting system. Theidea of the pilot projectis to replace the existingobsolete street lamps with low-ener-gy light-emitting diode, LED lights,which is expected to reduce electric-ity consumption by 270,000 kWh peryear. In economic terms, this meansan annual saving of 1,267,000 roubles.The money will be used, among otherthings, to build and extend the infra-structure in new residential districts.At the sametime, the project yieldsan added bonus in the form of environ-mental benefits. Reduced energy con-sumption will decrease carbon dioxideemissions by about 122 tonnes per yearand additionally decrease substantialamounts of sulphur oxide.

On top ofeverything else, the mu-nicipality will be able to remove envi-ronmentally-hazardous mercury fromthe old lamps at the end of their servicelife.Preparations for theproject arealready under way when we arrive inGurievsk for a meeting with the mu-nicipal decision makers. Competitivebidding for the purchase of new lampswas already finished and the con-tract had been awarded to the InteccoGroup, based in the Moscow region.The company has delivered the newstreet lights in November and is sched-uled to complete the installation by theend of the year.“We recently assumed ownership ofthe street lighting from the GurievskDistrict Administration. Because thispart of the infrastructure eats up a lotof energy, we came soon to the conclu-

New law on energy efficiencyIn 2009, theRussian Duma passed anew law requiring all Russian munici-palities to draw up action plans to im-prove their energy efficiency. Amongother things, the law stipulates thatmunicipalities should install technicalsystems that allow metering of energyconsumption by municipality-ownedproperties. The goal established by theRussian government is to reduce elec-tricity consumption by 40 per cent by2020. These objectives encourage mu-nicipalities like Gurievsk to take a hardlook at their energy consumption.nefco newsletterDecember 20117

“An important partof our munici-pal energy programme relates to heatgeneration in the municipality. We’llinvest in an extensive modernisation ofseveral heating plants and boilers in or-der to reduce the cost of municipality-owned properties," says Yury Rudi.Aside from this,plans are in place toupgrade the municipal water supplysystem. Automation of the municipal-ity-owned water pumps could controlwater supply, using less energy andreducing the consumption of drinkingwater. But Rudi underlines that theorder of priority for the contemplatedinvestments will be dictated by currentcost levels. After all, it is the heatingof properties that swallows the mostmoney. Therefore the municipality’snext energy project will address heatgeneration.

Deputy Head of Gurievsk MunicipalityAdministration.Ludmila Ivochkina, Chiefof the Com-plex Development Department at theGurievsk District Administration, con-firms that there is a strong politicalwill to promote energy efficiency acrossthe district because it provides the op-portunity to achieve savings for theDistrict Administration.“We’re interested in supportingsimilar investments in a range of mu-nicipalities in the Gurievsk District,”says Ludmila Ivochkina.Gurievsk expects tofinance around15 per cent of the costs of the plannedprojects with local tax revenues. In theinstance of the NEFCO-funded projectto upgrade street lighting, the munici-pality will take a loan of 5.4 millionroubles from NEFCO’s Facility for En-ergy Saving Credits, which will be duefor repayment in four years. The loancovers 90 per cent of the cost of the in-vestment.Modernisation of thestreet lightingin Gurievsk arouses no strong emotionsamong the local residents, whereasthe plan to increase efficiency in heatsupply is a sensitive issue that calls forpolitical backing because the munici-

pality currently subsidises the price ofheat by around 20 per cent.“Because of the high cost of theinvestment in heat production we’recompelled to raise the tariffs and thiswill no doubt stir up strong reactions asthe increased prices will be felt in eve-rybody’s wallets,” says Yury Rudi.For a retiredperson, the heating billin winter may account for up to 40 percent of the monthly income and so apotential increase in price will have anemotional impact. But without highertariffs it is difficult to come up with thefunding required from the municipal-ity for these important projects. Andwithout local municipal financing it ishard to obtain loan capital from inter-national financial institutions. But aslong as much of the heat goes to waste,everybody loses.“Those with a low income can al-ways receive financial support from theauthorities to pay the higher tariffs.And once the energy projects have beencompleted, we’ll be able to offer cost-effective heat to local residents. Thesavings achieved by the municipalitywill also make more money availablefor social services to distribute to thosewho find it hard to make ends meet,”Rudi points out.

Nordic energy city- local actionThe climate challenge we are facing today isextensive and complex. The consequences of lackof action may seem overwhelming. We aresharing the challenge, and local solutions mayshow the pathway.lbertslund is a Danishmunicipality west ofCopenhagen with around 29,000 residents.The major part of the city was established overa period of 15 years starting in 1960. From theoutset, Albertslund has had a number of focalissues that still put their mark on the policy pur-sued in the city today.In Albertslund climateand energy are part of the overallenvironmental effort and have a large impact on the devel-opment of the city and the way in which we tackle the pre-sent challenges.All cities sharethe challenge of constantly attracting newresidents and businesses. We believe that in being an exem-plary city we can launch a development that will turnAlbertslund into a modern, sustainable, and attractive city.Among 44 Nordiccities Albertslund was nominated as theNordic Energy Municipality 2011. The Nordic Council of Min-isters recognizes with this initiative cities making a specialeffort to reduce energy consumption and CO2 emissionswith solutions serving as an inspiration for other cities andstakeholders involved in finding and applying new, optimalenergy solutions.The City ofAlbertslund is facing a major urban challengeneeding extensive renovation. This is on the other hand aunique opportunity for developing the city in a new and cli-mate-friendly direction. For this task examples and concreteexperience are needed to be used when more than 1,500homes will be thoroughly renovated in the coming years.Albertslund was electedNordic Energy Municipalitywith the project ’the Albertslund Concept’ a significantenergy solution with a potential reaching beyond the cityin question. The Albertslund Concept develops and demon-strates new and efficient energy solutions for renovation ofexisting buildings. Nine pilot projects show how it is pos-sible to renovate industrialized buildings into different effi-cient energy standards.

” Local authorities can play adecisive role as co-developers of greensolutions”Energy renovation ofhomes is about much more than ef-ficient energy solutions. More benefits must be gained if thesolutions are to be used. Both for residents and the city as awhole. More daylight, better indoor climate, and new archi-tecture for the city.Local authorities canplay a decisive role as co-developersof green solutions. For it is beyond any doubt that energysolutions must serve many purposes in order to be applied inlarge scale. Focus is on green and market-oriented solutions.And the key word is cooperation, without which the Albert-slund Concept would not have been a success.The Albertslund Concepthas emerged in close coopera-tion between the local authority, housing associations,energy technology, energy consultancy, architects, and thebuilding industry. In this way we are tackling the climatechallenge jointly and each party is expanding its profession-al expertise.

Intense projectactivity for NEFCOCarbon Fundroject activity inNEFCO’s Carbon Financeand Fund Unit during thelast six months has been atits highest levels since theFund inception in 2008.This has occurred despite a collapse inmarket prices to their lowest ever levelsin the third quarter of the year mirror-ing general macroeconomic factors, ex-tra supply and uncertain climate policysignals. The driving force has beenthe EU’s eligibility deadline for usingcredits in the third phase of the bloc’sEmission Trading Scheme 2013-2020.To date, 23 final contracts (Emissionreduction purchase agreements, orERPAs) have been signed in 2011 alone.This has included emission reductionprojects for the first time in India andUkraine (where the sister fund, theTGF has been active for five years).The bulk ofthe projects relate to re-newable energy and energy efficiency,in keeping with the Fund’s project se-10December 2011nefco newsletter

lection criteria. 2011 has seen the firstbiomass projects in the portfolio, locat-ed in India, Viet Nam and Indonesia.In total, theamount of installed re-newable energy capacity from the port-folio exceeds 1GW, two thirds of whichis wind energy. The amount of cleanelectricity generation from these plantsis expected to be a formidable 3,623GWh/ year, equivalent to the electricityconsumption of some 450,000 peoplein Northern Europe.In addition tothe climate benefits,renewable energy offers local air pol-lution and energy security advantagescompared to fossil fuels. In terms ofefficiency, small hydro (NEFCO onlycontracts project below 20MW) andwind have high issuance records i.e.they produce in aggregate around 90%of the expected credits and are there-fore attractive candidates for carbonoffsetting.

“The carbon market is in the dol-drums. With prices for credits dippingbelow EUR 6 at one stage, this does notgive a strong incentive to project devel-opers to undertake clean energy or oth-er emission reduction investments.”However, NEFCO has persevered in theprimary market, sourcing new pro-jects by engaging directly with projectowners and expending its resources intaking contracted projects through theUN’s demanding project cycle. NEFCOcontinues to focus on securing anddelivering high quality projects for itscompliance investors.These efforts havestarted bearingfruit: there have been a record volumeof deliveries from the two carbon fundsmanaged by NEFCO. During 2011, arecord number of credits, 2.82 million,comprising CERs, ERUs and projectspecific AAUs have been issued to theBaltic Sea Region TGF and the NeCF.

Climate Financing in the PostKyoto WorldNEFCO is alsomonitoring develop-ments in new financing instruments ata global level through its membershipof the Climate Change Working Groupfor Bilateral Financial Institutions,which is publishing reports on climatefinance for the Durban conference inSouth Africa, December 2011. In addi-tion, NEFCO is working to establishprogrammes for so-called NationallyAppropriate Mitigation Action (NAMA)market readiness in Peru and VietNam, together with the Nordic groupfor global climate negotiations. NAMAsmay be a future market mechanism,and NEFCO is supporting practical“learning by doing” efforts to build pre-paredness before financial instrumentscan be employed.

Imagine a yellowed photograph depicting moustachedgentlemen in straw hats and light summer suits holding awalking stick by its silver-clad handle with urbane elegance.A group of ladies in fancy dress and flamboyant headwearbring to mind tea salons, while in the background well-dressed holiday makers can be seen strolling along thepromenade admiring the gentle waves of the Baltic Sea.This is more or less what life looked like in the numerous sparesorts built on the shores of the Baltic Sea at the end of the19th century.

Svetlogorsk sparesort attractsnew touristsvetlogorsk(formerly Rauschen), some 30 kilo-metres west of Kaliningrad near the CuronianSpit, has looked after its local heritage with duecare. In summer, the number of people multiplieswhen Russian middle-class pilgrims flock to Svetl-ogorsk's snow-white beaches and picturesque sea-front boulevard. Although straw hats have long since beenreplaced by baseball caps and loud Bermuda shorts, the pastis still evident. The new hotels in the resort are built in Ger-man style with mock battlements, towers and trusses. Onour visit to Svetlogorsk on a rainy autumn day the beachesare full of strollers who have come to the sea to relax.

NEFCO has alsolanded in Svetlogorsk in the form of aproject to modernise wastewater treatment systems in theregion. As part of the project, the local sewer network willbe upgraded, the treatment plant’s compressors automatedand new sedimentation basins built. Aside from NEFCO,funding for the project is provided by the local water com-pany OKOS, the EU and Sweden. In addition, the Russianfederal and regional governments are investing in wastewa-ter treatment in neighbouring communities.

The 35-year oldplant in Svetlogorskprocesses the wastewaters of 56,000people living in the towns of Svetl-ogorsk, Zelenogradsk and Pionersk.The total volume of wastewater pro-duced by the towns is around 12,000cubic metres per day. When the projectdue for completion in 2013 is finished,the plant will handle wastewater from67,000 people as a number of suburbswill be connected to the network. Asa result of the upgrade, the plant’s ca-pacity will be tripled to 35,000 cubicmetres.The project planalso foresees the in-stallation of frequency converters, themodernisation of pumping stationsand measures designed to stop leak-ages from broken and rusty pipelinesdisrupting the water flow. Hence, theinvestment will contribute to the state14December 2011nefco newsletter

of the Baltic Sea and the climate by re-ducing phosphorus and carbon dioxideemissions. The modernisation of thepumping stations and the installationof frequency converters are expectedto reduce energy consumption by thewastewater treatment plant by at least30 per cent.“We pay around six million roublesfor electricity per year so it’s no trivialmatter. In the long run, the invest-ment will yield considerable savings,”says Sergey Tomilov, General Directorof the local water company OKOS.General Director Tomilovwashand-picked for the project in June2011 thanks to his 20-years’ experi-ence in the field. His extensive con-tact network and solid experience isevident when we tour the wastewatertreatment plant. Tomilov peppers his

Svetlogorskpresentation with references to statis-tics related to his previous duties in St.Petersburg and other national and in-ternational assignments.“The technical systems are at theend of their service life and worn out,which means that practically every-thing must be replaced here,” saysTomilov who rushes on to show us thefacilities where the mechanical clean-ing of the wastewater takes place.For example, sludgehandling iscarried out manually meaning thatthere are people shovelling sludge intobuckets that are then emptied into acontainer before being transported to alandfill near the plant.According to preliminarycalcula-tions, the project will reduce phospho-rus emissions by around 9 tonnes peryear, which is equivalent to unpro-cessed emissions from a population of14,000 persons.“It’s a highly cost-effective way ofreducing eutrophicating discharges tothe Baltic Sea because in this projectthe per-tonne price of removing phos-phorus is a fraction of the equivalentcost in the Nordic market," says Sen-ior Investment Manager Ulf Bojö ofNEFCO.

Federal interest in Kalinin-grad’s water qualityAs the wastewatertreatment plantin Svetlogorsk is located a few kilome-tres away from the Russian govern-ment’s summer residence, local waste-water treatment is of interest even inMoscow. However, the government’sinvolvement runs deeper than this. Atthe Baltic Sea Action Summit in Hel-sinki in 2010, Prime Minister VladimirPutin pledged to speed up wastewatertreatment in Kaliningrad. Subsequent-ly, the promise has been translatedinto cash, which means that there isfederal money available for the type ofwater projects currently being imple-mented in the Kaliningrad region. Thefunding provided by the Russian gov-ernment is of decisive importance forthe economic puzzle being worked outby project owners and a range of finan-ciers involved in the efforts to save theBaltic Sea.The Svetlogorsk projectis part of anextensive programme covering several16December 2011nefco newsletter

Nikel – the mother of allBarents hot spotsThe Russian industrial giant Norilsk Nickel is aworld-leading producer of metals needed for thedevelopment of clean energy technologies andrenewable energy sources. So why hasn’t thecompany, after 20 years of negotiations with itsNordic neighbors, improved its environmentalimage by solving the large-scale emissions fromits smelter in Nikel?t the public press conferenceheld by theForeign Ministers following the signing of theKirkenes Declaration establishing the BarentsCooperation in 1993, more than half of the hallwas occupied by members of the environmentalad-hoc group ‘Stop the Death Clouds’ who show-ered the ministers with probing questions. At the sametime, people with banners outside the Foreign Ministers’hotel in Kirkenes town square were protesting against thelarge-scale sulphur-dioxide emissions from the smelter inthe Russian town of Nikel on the Kola Peninsula. The smelt-er is located a few kilometers from the Norwegian borderand is considered to be one of the worst hot spots of environ-mental problems in the entire Barents Region. Althoughthis ad-hoc environmental group had thousands of support-ers and managed to put the Nikel problem on the nationalagendas of both the Nordic countries and Russia, sadly theydidn’t manage to solve the pollution issue itself.Since then, thepollution of sulphur dioxide and heavymetals from Nikel has been at the top of the environmentalagenda of the Barents Cooperation. Norway granted NOK300 million in the early 1990s to help reduce the emissions.In 2003, alist of environmental hot spots in the Russianpart of the Barents Region was defined by NEFCO and theArctic Monitoring and Assessment Programme (AMAP). Ni-kel is one of the most severe spots on the list and can still getfinancial loans and support from Nordic financial mecha-nisms to solve the problems there.Unlike in theearly 1990s when Norilsk Nickel was a Sovietstate-owned company, the key to clean technology in theproduction of metals is not financial grants from friendlyNordic neighbors. Today, Norilsk Nickel is one of the mostprofitable non-petroleum companies in Russia. Its 2010revenue was USD 15 billion. In October this year, the com-pany presented a strategy development program that aimsto boost net revenue to USD 30 billion; net income to USD10 billion; and market value to a range of USD 140 billion toUSD 250 billion by 2025.

It is interestingto note that Norilsk Nickel’s skyrocketingprofits are partly driven by the world’s increasing demandfor environmental friendly technology. Nickel is a key metalin batteries for non-emission vehicles while platinum, pal-ladium and copper are widely used in catalytic converters. IfNorilsk Nickel plays its cards right, the company can easilychange its image from being the worst-on-dirt to becominga world leading supplier of metals for environmental tech-nology produced with best available smelting processes.Disagreements on environmentalinvestments haveimpacted Norilsk Nickel’s shares before. In 2008, Russianbillionaire Mikhail Prokhorov sold his 25% stake in Noril-sk Nickel and invested the proceeds in the development ofnanotechnology, LED lamps and electric cars. Hopefully,today’s shareholders in the company will see the markettrends and modernize its smelters in Nikel and Monche-gorsk on the Kola Peninsula. In doing so, they will grow intoa leading environmental friendly mining and metallurgicallighthouse for the up-coming natural resources investmentboom in the Barents Region.nefco newsletterDecember 201117

Plans to establish newfund for environmentaltechnologyNEFCO’s Board of Directors hasauthorised the administration tostudy the possibilities of investingin a new pilot fund aimed at financ-ing Nordic environmental innova-tions. Why?Existing technologies have not beenable to solve pressing environmentalproblems. This means that new tech-nologies have to be devised. They willhelp partner countries to solve commonenvironmental problems and generateexport revenues for the Nordic coun-tries. It’s a win-win situation. That’swhy we are carrying out this study.Does this mean that NEFCO willshift its focus and start financingresearch and development effortson a larger scale?Not really. NEFCO’s traditional rolewon’t change that much, but this kindof fund will enable the corporation andother players to finance projects wherethe technological use risk is includedand economical as well as environmen-tal gains are favourable to both parties.NEFCO is not planning to be the leadfinancier of the fund. The main chal-lenge is now to find the anchor inves-tors and fund operators for this initia-tive.What kind of business partners areyou hoping to attract through thisinitiative?There are a number of potential in-vestors and business partners in the ag-ricultural, energy as well as the indus-trial sector in general. Geographicallyspeaking we are focusing on projects,which will mainly be carried out inRussia, Ukraine and Belarus.Can you mention a concrete exam-ple of a project, which wouldbenefit from an additional pushfrom this proposed fund?The volume of poultry manure fromchicken farms in the Leningrad Regionin the vicinity of St. Petersburg and theKarelian Isthmus, in Russia, which iscurrently about 1.5 million tonnes peryear, is increasing at an annual rateof 20 per cent. This effluent, like allrun-off nutrients from various sourcesin the region, is responsible for the eu-trophication of the Baltic Sea.Instead of treating this manure aswaste, it could be transformed intovaluable raw material for the energyand agriculture sectors. We have founda Swedish technology company thatcan solve this environmental prob-lem by producing gas, oil and biocharout of the manure. If all goes well, thevolume of manure would decrease by90 per cent from 1.5 million to 150,000tonnes per year.

"Instead of treating thismanure as waste, itcould be transformedinto valuable rawmaterial for the energyand agriculture sectors."What is needed before the proposedfund becomes operational?We are currently looking for part-ners and various actors in the cleantechand venture capital sectors as well asgovernmental agencies that are inter-ested in these kinds of ventures. For itspart, NEFCO has to attract these play-ers and gain the full support of its own-ers before it can proceed.How would you describe the invest-ment profile of the proposed fund?The details are not fully workedout yet because we are not sure aboutwhat partners will join the fund. Thegeographic mandate will, of course,remain unchanged. The higher risk oftechnological innovation will obviouslyincrease NEFCO’s current risk takingcapacity.

New staff at NEFCO■Mr JohanWillert has been appointed as SeniorAdviser at NEFCO. Mr Willert is by profession anEnvironmental Engineer with 17 years of workingexperience in the areas of municipal services andenvironment from more than ten countries. SinceAugust 2009 Mr Willert is placed at the Swedish Em-bassy in Dhaka responsible for programming andpreparation of new Swedish development assistanceto Bangladesh in Urban Environment and ClimateChange.■Mr Alexander Boldyrevhas joined NEFCO’steam in St. Petersburg as Technical Adviser sincelast spring. Before joining NEFCO he worked asTechnical Project Manager for the Climate and En-ergy Department of the Danish company FORCETechnology in St. Petersburg.

NEFCO’s 2010 Annual Reportclinches third prizeNEFCO’s 2010 AnnualReport has clinched thethird prize in an Annual Reports Competition inFinland. The jury, which comprised independ-ent graphic designers, photographers and visualart experts from media agencies, was impressedby the report’s “simple elegance, relevant and ap-propriate graphic solutions and its vivid visualappearance.”“The text is easy to read and the visual solu-tions reflect the contents of NEFCO’s Annual Re-port”, said the jury’s chairperson, Esa Ojala.NEFCO’s 2010 AnnualReport was designed by Mikko Luotonen from NimiöDesign Studio and Patrik Rastenberger provided the photographic material.The Annual Reports Competition was organized by Lönnberg Printing Compa-ny, which currently prints NEFCO’s publications materials.The first prize in the national competition was won by Fiskars, whose reportwas designed by Dog Design. Sanoma Oy clinched the second prize and its re-port was designed by Dynamo Advertising.

EDITORSMikael Sjövall,Editor-in-chief,Communications ManagerUlf Bojö,Senior Investment ManagerAliona Fomenco,AssistantKari Hämekoski,ManagerFredrik Larsson,AnalystKarl-Johan Lehtinen,Senior ManagerVladimir Morozov,ConsultantElisabeth Paulig-Tönnes,SeniorManagerAsh Sharma,Vice PresidentMagdalena Svensson,Senior AdviserTorben Vindeløv,Executive VicePresidentCOLUMNISTSAnne Marie Holt ChristensenThomas NilsenLAYOUTHans Andersson/LemonWorksTRANSLATIONS ANDPROOF READINGAazet Oy, Percy MashairePRINTED BYOy Lönnberg AbPUBLISHERNordic Environment FinanceCorporation, NEFCOPostal address:P.O. Box 249,FIN-00171 Helsinki, FinlandVisiting address:Fabianinkatu -Fabiansgatan 34Telephone:+358 (0)10 618 003Fax:+358 9 630 976E-mail:[email protected]Internet:www.nefco.orgPHOTOGRAPHSPatrik Rastenberger, Håkon Borch(page 5), Nordic Council of Ministers(page 4)This NEFCO-Newsletter has beenpublished on FSC-certified paper.