Isra-Mart srl:Powerfuel rescue bid in doubt over lack of government support

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Isra-Mart srl news:

A proposed rescue bid for Powerfuel, the company behind one of the UK's most ambitious carbon capture and storage (CCS) projects, is hanging in the balance after the government signaled it was unlikely to provide financial backing for the project.

Earlier this month it emerged that Powerfuel, the parent company behind a proposed 900MW CCS project at Hatfield colliery, had filed for administration, revealing that it was unable to raise the £635m of funding needed to undertake the project.

KPMG was appointed to find a buyer for the company and according to reports in yesterday's Observer, it has received interest from a consortium led by 2Co Energy and backed by private equity group TPG.

However, 2Co Energy has signaled that any rescue bid is likely to be dependent on the government providing some form of support for the project, which would see captured carbon pumped into oil fields under the North Sea to help extract more oil.

But the government is reluctant to back such a large-scale project, arguing that given the embryonic nature of CCS technology, its pledged funding for four demonstration plants should be targeted at smaller-scale projects that are no larger than 450MW.

"As there is not a significant amount of additional learning from a 900MW project compared with a 450MW project, it would not be appropriate to support [it] through our demonstration programme," a government spokeswoman told the Observer. "We have always been clear about this."

Separate electricity market reform proposals unveiled by the government last week that promise a floor price on carbon emissions and improved incentives for low-carbon energy generators could serve to boost the economic case for the Hatfield projects, but it remains to be seen if the new regime can be put into place quickly enough to attract a rescue bid.