Environmental Engineering Reference
In-Depth Information
At the international level, trade in Certified
Emissions Reduction certificates (CERs) is an
additional revenue stream for Greenko. In ad-
dition to fixed feed in tariffs, CERs represent
another economic advantage for the sustainable
deployment of renewable energy in countries
covered by the Clean Development Mechanism
(CDM)
9
. The generation of 1MWh of electric-
ity from renewables sources saves 1MWh of
electricity being generated from fossil fuels; this
corresponds to an amount of carbon dioxide that
has been saved from entering the atmosphere. This
carbon dioxide saving is traded international as
CERs. Aloe analyzed the market for CERs to as-
sess the value of this revenue stream for Greenko.
The additional advantage of proven technology
is that the reduction in carbon is also proven. Al-
though individual plants still require inspection
and constant monitoring to create CERs, it is not
necessary to apply for a new process and thus
delay a vital revenue stream.
In summary companies operating in India have
to comply with Indian laws hence local knowledge
and experience is necessary for an investor to
understand and mitigate the domestic policy risks.
On an equally important macroeconomic scale,
investors have to gauge the potential of instru-
ments such as CERs to understand and mitigate
the international trade policy risks. In assessing
Greenko's technology and marketability, intimate
knowledge of the Indian electricity market and the
management of electricity price risks were critical.
legislation, landfill taxes and raw material prices.
Each type of waste is differentiated from another,
and the plethora of sub-sectors has a different
set of economic drivers and policies. Metals for
instance are sub-divided into steel, copper, zinc
etc., paper and cardboard are further sub-divided,
as is organic waste.
At the international trade level the proxim-
ity principle applies. In the case of Polygenta
the waste polyester and plastic bottles need to
be recycled as close as possible to source of the
waste production. Almost every country in the
world produces plastic bottle waste however with
Aloe Private Equity's assistance the decision was
taken to locate the first recycling site in India to
minimize risk.
Location is paramount in the waste recycling
sector since transportation costs can drain the
profit from investments; a poorly sited facility
could suffer from increased feedstock supply
costs and increased product distribution costs.
Local market knowledge combined with thorough
financial modeling is necessary to understand the
tradeoffs between locating close to the supply of
waste or close to the customers. The decision to
locate the first manufacturing plant employing
the ReNew™ process in India offered a compel-
ling win-win solution, with a population of 1148
million growing at 1.58% per year there will
be no shortage of used plastic bottle feedstock.
In addition the ReNew™ product is a recycled
polyester yarn suitable for the $22 billion11 Indian
textiles market.
In summary, Aloe Private Equity's policy
risk mitigation strategy was to use the domestic
polyester market to promote the latent polyester
recycling industry in India and thus success-
fully commercialize Polygenta's waste recycling
technology. Once the ReNew™ process has been
proven in India through 2011, the technology will
be rolled out globally in 2012.
Polygenta: Propriety
Polyester Recycling
Aloe Private Equity invested in Polygenta (www.
polygenta.com) in December 2007, facilitating the
licensing of the ReNEW™ process10 and re-struc-
turing the company to focus on recycling. Aloe
Private Equity has invested in several companies
in the waste recycling sector of clean tech which
requires specialist knowledge and understanding
