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Objectives/Workshops
The first workshop under the CMM project was held in Geneva on 31 January 2006 as part of the 2nd Session of the UNECE's Ad Hoc Group of Experts on Coal Mine Methane. Although the objective of future workshops is to present practical information on lessons learned from actual case studies, this workshop was more theoretical in nature as the project is in the initial stages. The workshop consisted of four focus areas addressing the following issues: “Considering Coal Mine Methane Project Options” ; “Criteria for Selection of Investment Project Proposals”; “Facilitating CMM Finance - Presenting Projects to Financial Institutions”; and Karl Schultz – “Project Integration and Management." This report summarizes the discussions on each of these issues at the workshop.
Considering Coal Mine Methane Project Options:
The CMM resource base in Central and Eastern Europe and the Commonwealth of Independent States (CEE/CIS) is significant, especially in Kazakhstan, Poland, the Russian Federation, and Ukraine but there may be project opportunities in other countries such as the Czech Republic and Romania. There are many benefits to capturing and using CMM and these are well known. Key factors in evaluating use options are: (1) the gas quantity, quality and reliability; (2) technical feasibility; (3) markets; and (4) the ability to finance the project.
Criteria for the Selection of Investment Project Proposals:
Ten key criteria that can serve as general guidance for projects seeking institutional finance were presented. To facilitate the submission of projects and to assist project developers and the mining community in developing bankable projects, a “CMM Investment Project Development Project Identification Form” was distributed and discussed. This is a brief four-page template requesting basic information on potential projects that could be used as the basis for development of a business plan. It is available in English and Russian. The document may be use for internal purposes within and organization at their discretion; however, any entity wishing to be considered under the UNECE project must submit a completed Project Identification Form as a first step. It is currently the secretariat’s intent that the forms will be considered public information and posted on the website for the extrabudgetary project.
Facilitating CMM Finance: Presenting Projects to Financial Institutions:
The workshop discussed the various types of financing vehicles that could be available for CMM investments. These include self-equity, favourable tax incentives, debt, guarantee facilities, leasing arrangements, export credit agencies, public to private finance initiatives, global financing mechanisms such as the Global Environment Facility, and specialized funds. This section of the workshop also presented the basic components of a business plan including emphasis on the critical nature and importance of a well-prepared plan.
Project Integration and Management:
The intent was to examine management of the risks associated with integrating the operation of a CMM project into the mining operation. In addition, this presentation also considered managerial integration. This is a critical and often overlooked area. In the CMM industry, there are many players including the mine operator, contractors who may operate the methane collection system, various regulatory agencies, potentially several different mineral rights and landowners, the project developer and technology vendors. It is common to see few of the players with a full understanding of the full value chain. Regardless of the project, those involved should be motivated by mutually beneficial incentives to optimize project design and operations. The importance of having a project manager who is an effective, knowledgeable and experienced coordinator was also emphasized.
The workshop closed with a discussion on the topics presented with the following comments from participants:
| (i) |
Early high risk capital is very expensive. Vendors able to provide funding in the amounts necessary to finance CMM projects are typically very risk-averse, and it is unlikely that they will be interested in providing such capital. The vendors will probably wait until more CMM projects are implemented demonstrating their viability and profit potential; |
| (ii) |
The suggestion was made that any financial analysis of a CMM project should monetize the mine safety benefits in addition to the energy production to ascertain the total economic benefit of such projects. While all delegates acknowledged the potential mine safety benefits of CMM projects, several delegates registered concern over valuation of a life in calculating the costs and benefits of a project; |
| (iii) |
A delegate noted that they have had difficulty securing capital from external investors because of investor’s limited control over mining operations. As a result, many project developers wish to separate the mine degasification, or upstream, aspect of a project from the methane utilization, or downstream, activities. The mining operation and the mine safety regulatory authority, rather than the investor, will always retain control over the methane degasification system. Therefore, investing in the mine degasification system is unattractive for developers of CMM utilization projects; |
| (iv) |
A delegate stated that the European Commission is currently evaluating the prospect of coal mine methane being included in the European Trading Scheme after 2012; and |
| (v) |
Another question asked was which type of organization is most likely to approach a coal mine operator today to develop a CMM project. The answer given by experts in this area, is that it is likely to be a firm or person whose primary interest in acquiring the carbon credits to a project. Mine operators should be prepared that all aspects of a transaction are negotiable, and many investors today are not interested in financing feasibility studies preferring that they already be complete and ready for due diligence reviews. |
The following documents were presented at the workshop. (link to the existing pages in the website for the 2nd Session of the Ad Hoc Group of Experts on CMM, Session 6 - Workshop):
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