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Thursday, January 8, 2009

Common CER Buyer Questions

(Jon's update: please see the newer January 14 blog post that expands on this subject for both CDM and Joint Implementation projects... the carbon markets are difficult right now and investment banks or funds don't show the patience they used to have for vetting new projects and partners. So this checklist might make a positive difference in discussions with these groups -- as always, good luck out there in project land! The original January 7 blog post follows below.)

From time to time, project owners and developers sometimes ask "what do carbon credit buyers want to know in order to make an investment decision?" In today's difficult economic climate, knowing what investors want is an important thing. So with that in mind, I wrote up a list of some of the common questions that I have come across in the market.

I don't claim to have any secrets or all the answers. Individual investors and carbon offset buyers have their own focus and emphasis areas. Most of what I write about is common sense. But perhaps something in the following article can help a green project to pair with a good financial partner, if yes then I'm happy to have been of service! Cheers.

10 Common Questions You Should Know How To Answer When Talking To Potential Carbon Credit Purchasers

Jon Queen, London UK (30 November, 2008)

You’ve got an exciting new CDM project that is ready for ERPA negotiation with a CER purchaser. Congratulations, great job! The best CDM projects are ones that are great for the environment and good for your bank account also. So with that in mind, it is important to prepare for all conversations with prospective CER purchasers. You should be prepared to respond to these 10 basic questions commonly asked by CER purchasers, even if you can only give a partial answer.

1. What is the project’s name, host country, and approved methodology number?

2. What documentation stage is the project at (PIN, PDD, Validation Report etc.)?

3. What approval stage is the project at (FSR, LOE, LOA or UNFCCC Registered)?

4. Who is the project owner and the project developer, and what track record do they have for undertaking carbon projects?

5. What is the financing source for the project’s construction and equipment costs? Is financing complete?

6. When will the project begin validation? Has a time slot been pre-arranged with a particular DOE?

7. When is the expected project commissioning date?

8. When is the expected project registration date?

9. What are the expected annual CER volumes? What portions of these volumes are available for sale? If not 100%, then who has rights to the remainder and what priority status is the piece available for sale?

10. What are the “get it done” purchase price terms … where if I agree to them we can cut the small talk and proceed directly into exclusive ERPA contract negotiations?

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