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* AES says plans up to 25 VAM facilities in China by 2017 * AES seeking local partners for other emissions initiatives BEIJING (Reuters), May 10 - United States-based power developer AES Corp plans to expand its business of capturing methane from China's coal mines, which could potentially develop into a near-$1 billion industry if market incentives are in place, a company official said. AES Corp, in which China Investment Corp has a 15 percent stake, planned to build up to 25 methane-capturing facilities known as Ventilation Air Methane (VAM) projects by 2017, AES China Managing Director for climate solutions Ian McInnes told Reuters. Globally, the company was eyeing up to 40 such projects during the period, he said. McInnes declined to give the financial details of its planned investments, but said a typical VAM facility could cost around $10 million depending on the size of the project. The company was also seeking local partners for other initiatives that could cut carbon dioxide emissions, such as coal bed methane and shale deposit projects. China holds the largest coal reserves in the world and methane trapped in its mines contribute to more than 50 percent of mining-related methane released into the atmosphere. The Intergovernmental Panel on Climate Change has estimated that methane is 21 times more potent than carbon dioxide over a 100-year timeframe in trapping heat in the atmosphere. AES' first VAM project was under construction at the Datong coal mine in Chongqing municipality, and would be one of the first commercially operating facilities of its kind in China, McInnes said. The company would operate the project by the end of 2010, and was building four more to be operational in the next two years, he said. "There are a lot of people trying to get into this sector, including Chinese investors," said McInnes, who said he expected the market to grow to near the $1 billion mark if the industry was offered the right incentives. McInnes said that while there was growing interest in methane-capture, many were reluctant to invest in the sector in a big way because market incentives remained tied to the climate pact in Kyoto which expires in 2012. World leaders are under pressure to agree on a new climate deal that will replace the Kyoto pact. "Everybody is pretty disappointed with what's going on in Copenhagen and until politicians sort out what's going to happen, I don't expect to see a hockey stick," said McInnes referring to possible sustained growth in the sector with market incentives in place. "No one's going to make the investment in a 10 year project if all we know is we're going to have revenue for the next two years." AES' methane-capturing projects are registered with the United Nations to qualify as a clean development mechanism (CDM) project encouraged under the Kyoto climate pact. Under the pact, companies like AES can invest in clean energy projects in emerging economies like China and receive carbon offsets which can be sold for profit. The price of carbon took a beating last year as world leaders failed to agree on a new climate deal. Carbon offsets are priced at about 11 euros, but McInnes said for technologies such as VAM to thrive the carbon price should ideally be at about 20 euros. "It all comes down to putting a price on carbon," he said. "If you put a value on carbon, then I'm sure even the BHP's (BHP Billiton) of the world will want to do it." ((Editing by Chris Lewis)) ((leonora.walet@thomsonreuters.com; Reuters Messaging: leonora.walet.reuters.com@reuters.net; +852 2843 6358, Fax +852 2845 0636)) (If you have a query or comment on this story, send an email to news.feedback.asia@thomsonreuters.com) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved.

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