Chubu Electric Power to engage in Malaysian project to generate power from oil palm empty fruit bunch biomass

Chubu Electric Power to engage in Malaysian project to generate power from oil palm empty fruit bunch biomass
- First Chubu Electric Power project in Malaysia -

July 28, 2006
Chubu Electric Power Co., Inc.

Chubu Electric Power has set the 5 year period until FY2010 as a growth period for overseas energy operations where we are actively seeking growth opportunities in both power generation businesses for long term and stable profits, as well as environmental businesses designed to acquire CO2 emissions credits while maintaining profitability.

As part of our environmental business initiatives, Chubu Electric Power has decided to participate in a new project to generate power from oil palm empty fruit bunch biomass in the country of Malaysia.

Malaysia is the world's number one producer of palm oil, the production of which generates left over palm empty fruit bunches (1) that are mostly discarded as waste, releasing global warming methane gas into the atmosphere. This project will develop small-scale 10,000 kW power plants using empty fruit bunches as fuel in two locations in the eastern portion of the state of Sabah, on Malaysia's Borneo Island.

While contributing to the area's local environmental protection by effectively using palm empty fruit bunches as fuel, the project has been registered as a CDM (Clean Development Mechanism) project with the UN, and is expected to generate CO2 emissions credits.

From the power plants in these two locations, reductions of CO2 emissions are expected to reach nearly 2 million tons by the year 2012. To start, the first power plant is slated to begin operations in March of 2008, with construction breaking ground in August of this year.

With the establishment of the "Chubu Electric Power Environmental Statement," Chubu Electric Power has placed environmental engagement as a key business objective, and we are dealing with environmental issues by setting tangible, concrete goals.

In an effort to put Kyoto Mechanisms into practice, Chubu Electric Power has already contributed to several projects designed to prevent global warming and protect the environment in developing countries, such as investing in the World Bank Prototype Carbon Fund and the Japan GHG Reduction Fund; and participating in the Thai Rice Husk Fuelled Power Project (A.T. Biopower Co. Ltd.).

(1)Empty Fruit Bunch: The empty husks left over after oil is extracted from palm fronds used in the production of palm oil.

(Attachment)

Malaysian project to generate power from oil palm empty fruit bunch biomass

1 Project outline

Company	• Kina Biopower Sdn Bhd (location one) • Seguntor Bioenergy Sdn Bhd (location two) * Location: Kota Kinabalu, state of Sabah, Borneo Island, Malaysia
Capital investor	• Chubu Electric Power Co., Inc. • Go Bio Sdn Bhd (Malaysia) * Local construction company investing in project • SMEC Energy Sdn Bhd (Malaysia) * Power production engineering and consulting firm • Agritech Marketing, Co. Ltd. (AMC) (Japan) * Development and investor of biomass power production industry
Power generation facilities	10,000 kW output per location
Fuel	Empty fruit bunch (170,000 tons per year, per location)
Construction location	Sandakan, State of Sabah, Borneo Island, Malaysia
Buyer of electrical power	Sabah Electricity Sdn Bhd * Nationally owned electrical power operator
Project cost	Approx. $24 million USD (approx. 2.9 yen billion) per location * Calculated as 1USD = 120 yen
Scheduled start of construction	August, 2006 (location one) October, 2006 (location two)
Scheduled start of operations	March, 2008 (location one) May, 2008 (location two)

2 Project scheme

3 Construction location

(reference)

Previous environmental initiatives overseas

Project	Summary
World Bank Carbon Fund (PCF)	• Green House Gas (GHG) reduction fund launched in 2000 to play a prominent role Kyoto Mechanism system design. • The fund purchases CO2 emissions credits for allocation to investors. • Total value is $180 million USD ($10 million USD by Chubu Electric Power). • Contracts agreed to purchase CO2 emissions credits from 17 countries in 22 projects. • Investors include the Japan Bank for International Cooperation, 8 Japanese corporations, and government agencies and companies in Europe.
Japan GHG Reduction Fund (JGRF)	• The first GHG reduction fund in Asia launched in 2004. • The fund purchases CO2 emissions credits for allocation to investors. • Total value of $141.5 million USD ($10 million USD by Chubu Electric Power). • Investors include the Japan Bank for International Cooperation, the Development Bank of Japan, and 31 Japanese corporations.
Australian Adelaide Forestry project	• Project to plant a total of 10,000 eucalyptus trees in southern Australia. • Joint project between Mitsubishi Paper Mills Limited, Hokuetsu Paper Mills, Ltd., AEON Co., Ltd., Tokyo Gas, NYK Line, and the Mitsubishi Corporation.
Thai Rice Husk Fuelled Power Project (A.T. Biopower Co. Ltd.)	• Development of several small-scale 20,000 kW power plants using rice chaff as fuel in the grain belt of north central Thailand. • First location (Pichit province) started operations in December, 2005. • Assisting the Thai government's application for registration with the UN CDM Executive Board.
Asia environmental fund	• Invests into multiple energy efficiency initiatives in Asian and Eastern European countries like ESCO(2), cogeneration, and renewable energy projects. • Investments have been made into microhydro power (India, China), waste power production (Singapore), and ESCO projects (Thailand). • Joint fund by the Japan Bank for International Cooperation, Asian Development Bank, and the Mitsubishi Corporation.
Purchasing of CO2 emissions credits from Chinese CDM project	• Signed a contract to purchase 2 million tons of CO2 emissions credits from a project that collects and breaks up Freon gas and HFC23 (trifluoromethane) emitted from an HCFC plant in Zhejiang China. • Agreed to a purchasing contract with Japan Carbon Finance, Ltd. worth approximately 2 million tons (maximum) of CO2 emissions.

(2)ESCO(Energy Service Company)project: A project that supplies and guarantees efficient energy services using technological improvements for customers (plants or buildings), then profits off the savings in customer energy bills.