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Carbon market veteran to seek 'several hundred million' for new fund
Carbon Finance
The recent turmoil in the carbon market presents a fund-raising opportunity, according to the carbon market veteran heading up a recently launched carbon asset management company.
"It's very hard to predict the appetite for alternative investment risk in the current market," Ken Newcombe, CEO of C-Quest Capital told Carbon Finance. "But we've had quite a lot of people approaching us," he said, noting that, unlike most carbon asset managers, C-Quest "isn't badly burned".
Newcombe, the founding head of the World Bank's Carbon Finance Unit, left a managing director post at Goldman Sachs last year to set up the Washington, DC-based firm with $50 million in backing from a number of US high net-worth investors.
He said the company—which is soon to be 20 strong—has been busily trading in the European and US carbon markets, and developing a pipeline of carbon reduction projects that team members have been working on for more than two years in some cases.
Within the next two months, the company is to begin marketing a managed carbon fund, into which Newcombe is hoping to raise "several hundred millions of dollars". He said that the company has been "working on transactions that make returns despite falling prices—that will be refreshing to the market".
"There's plenty of interest in alternative investment structures with returns north of 25% if you can demonstrate [those returns]. We've kept our powder dry, we've got quality credit and cash, and our deal flow represents profitability in this market," he added.
Many carbon fund managers and project developers are nursing losses on their portfolios, as prices for Clean Development Mechanism (CDM) credits have tumbled from as much as €23/tonne (t) in the secondary market in July 2008 to below €9/t at present.
Newcombe characterises C-Quest's strategy as investing in "carbon-leveraged equity"—taking 5-25% stakes in projects in exchange for "defining, developing and monetising carbon assets ... and with a privileged position in bringing those assets to market."
The company is looking at projects in India, Africa and poorer countries in Latin America, Newcombe said, but also plans to develop projects in the US states which are members of the Western Climate Initiative. "We're skewed towards the developing world, because of the deal-flow we brought with us, but we've a view to rapidly expand in the US—we believe there will be cap and trade, and economic recovery within a few years."
He added that C-Quest's "signature projects" will be "high-risk, high-return, with rich and diverse carbon streams—not just one single carbon asset". For example, C-Quest is developing a project in Andra Pradesh, India, to introduce compact-florescent light bulbs, which could be registered as a programmatic CDM project, and also sell credits into the voluntary carbon market.
The company is also "investing across the entire range of forestry and tree-based biofuels, with ownership models from aggregating farm and community level plots to broad-acre plantations," Newcombe said.
This article is reproduced from Carbon Finance.