Washington (Platts)--4Feb2008

Three large US-based banks on Monday issued a series of principles
designed to help them evaluate and address "carbon risks" in the financing of
coal-fired power projects.

The banks -- Citi, JP Morgan Chase and Morgan Stanley -- said development
of the so-called Carbon Principles was driven by "the risks faced by the power
industry as utilities, independent producers, regulators, lenders and
investors deal with the uncertainties around regional and national climate
change policy."

The banks said they developed the principles over a nine-month period in
consultation with leading US power companies American Electric Power, CMS
Energy, DTE Energy, NRG Energy, PSEG, Sempra and Southern Company.
Environmental groups Natural Resources Defense Council and Environmental
Defense also were part of the talks.

The banks said the effort marks the first time a group of banks has come
together and consulted with power companies and environmental groups "to
develop a process for understanding carbon risk around power sector
investments needed to meet future economic growth and the needs of consumers
for reliable and affordable energy."

The consortium said it has developed an "Enhanced Diligence framework" to
help lenders better understand and evaluate potential carbon risks associated
with coal plant investments.

While the banks said the principles "recognized the benefits of a
portfolio approach to meeting the power needs of consumers," they said that if
"high carbon dioxide-emitting technologies are selected by power companies,"
the banks will follow the Enhanced Diligence process "to factor the risks and
potential mitigants into the final financing decision."

The principles include energy efficiency, saying that "an effective way
to limit CO2 emissions is to not produce them." The banks said they will
encourage clients to invest in cost-effective demand reduction, "taking into
consideration the value of avoided CO2 emissions."

The banks added that they also "will encourage regulatory and legislative
changes that increase efficiency in electricity consumption including the
removal of barriers to investment in cost-effective demand reduction."

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