they’d finally lined up investors. Deutsche Bank had agreed to underwrite the financing and they were ready to sign the contracts. It was a real coup; a big chunk of the first hundred million would be invested well ahead of schedule and the investors were happy. But much more exciting was that they had ‘circles’ around another €500 million from some big European pension funds to put into a second, much larger fund. ‘Just close that deal in Quzhou,’ Winchester thought to himself, ‘and the money’ll come rolling in. If we get those Dutch pension funds signed up, we could end up with a billion and we’ll be the largest carbon fund on the planet!’ It looked as though the last pieces were sliding perfectly into place just at the right time. But then they got a message from Quzhou. Chief Engineer Wang had called unexpectedly from the chemical factory and said that he wanted to change some key terms of the deal.
When they heard about Wang’s last-minute demands, the investors in the syndicate started to waver. It seemed as though the entire financing structure would collapse. The millions that Winchester had lined up from the Dutch pension funds started to crumble in his hands. It looked as though they might lose everything. A few hours later, I got the call from Mina.
At the end of the conversation in the carriage just outside York, Mina had insisted that I drop by at her offices as soon as the train arrived in London. I could see from the address that IHCF was located in one of the most expensive areas of London, so I had hesitated; I’d come down to London to see friends and hadn’t expected to go to a meeting. I was covered in stubble and in need of a haircut. My glasses were twisted out of shape from one of the children standing on them and I was wearing a pair of torn jeans and a thin cotton jacket that was a bit ragged about the elbows, but I had an hour or so to spare so I took the tube over to Mayfair. IHCF’s offices were in a long row of handsome merchant’s houses near to the American embassy; ornate iron railings ran around the ground-floor balconies and a row of Grecian urns stood out along the roofline. Underneath a white portico, a flight of stone steps led up from the pavement towards a highly polished black door. I’d heard that Condoleezza Rice was in town that day so the roads around Bond Street were blocked off and snarled with traffic. I was glad I hadn’t taken a taxi.
I grasped the brass knocker and, after a few moments, there was a click and the door swung open. Inside, a hallway led towards a pair of tall double doors of elaborately inlaid mahogany. There was a marble fireplace on the left with vases at each end. Pale grey panelling reached up towards ornate plaster mouldings on the ceiling. I sat down next to a low glass-topped table strewn with magazines – Country Life and Horse & Hound – crossed one leg over the tear in my jeans, and waited.
After about ten minutes, the double doors burst open and a tall blonde woman bounded in. ‘How you doing? Thanks for dropping by,’ she said, pushing back her hair with one hand and balancing an armful of files on her hip with the other. ‘This week’s been a nightmare!’ she said shaking her head. ‘Let’s grab a coffee and I’ll fill you in on the details.’
We walked through the doors, up a wide staircase towards the back of the building and out onto a terrace, where we settled on a stone balustrade overlooking a garden. There were neat flower beds and clipped box hedges and a lawn that spread out under the shade of an enormous plane tree. Overhead the skies had cleared; the sun’s fading light fell across the leaves with the familiar sharpness of early evening at the end of a perfect summer’s day.
‘Right,’ she said, folding her arms on top of the stack of papers in her lap. ‘We’ve got a bit of a tricky situation here.’ She paused, drew a breath, and looked rather intently at me. ‘It’s like this. We signed up to do the carbon deal I told you about in Quzhou. It’s about a hundred miles inland from Hangzhou. Hangzhou is down on the coast, just south of Shanghai near—’
‘Yeah, I know where Hangzhou is,’ I interrupted.
She paused and glanced at me briefly before continuing with the story.
‘Okay, so we found this big chemical factory out in the sticks,’ she continued. ‘It’s enormous – you wouldn’t believe it – something like eighty thousand people stuck in the middle of nowhere. The factory’s behind these big walls and no one can get in or out except through the gates at the front. I think most of the workers live inside. The factory makes solvents, plastics, that kind of thing, and right in the middle, there’s a reactor that makes coolants, you know, for air conditioners, fridges, and the like. The waste product from the coolant line is really bad; it’s a greenhouse gas that’s thousands of times more potent than CO2 and they’re just venting it all into the air.’
‘Well, can’t they get rid of it somehow?’ I asked.
‘That’s the point; they can use incinerators to burn up the gas, but they’re only available in Japan. We’ve signed up to buy carbon credits so the factory can use that income to get loans to buy the equipment. We both initialled the deal a month ago, but it’s huge. Our first fund wasn’t big enough to cover it so we organized a syndicate to come up with the rest of the money. We ended up with about twelve other investors. I can tell you,’ she said, rolling her eyes, ‘getting them all to agree at the same time has been like herding cats!’
‘But why would anyone want these credits?’ I asked.
‘There’s a huge new market for them in Europe and Japan. Under the Kyoto Protocol, governments have capped the amount of greenhouse gases that businesses can emit; if they go over the cap, they have to go into the market and buy up extra permits. Prices are expected to rise as the caps on emissions get tighter. Anyway,’ she said, reverting to the story, ‘they were all about to sign the formal documents, but Wang just called our rep in China and told us he wants to change the terms. Now the syndicate is wobbling and the whole thing looks like it’s about to go belly-up.’ Her nose wrinkled. ‘Fifteen rounds of negotiation, everything was agreed, and now he wants to change the deal.’
‘Sounds familiar.’
‘I was hoping you might say that,’ she said. ‘We’ve been working with a law firm in Beijing and when this all blew up, they gave us your number and said you might help.’
‘Any clues why he suddenly wants to change the terms?’ I asked.
Mina was stumped. Wang was the chief engineer of the chemical plant in Quzhou and seemed to be leading the negotiations even though he had no legal background. But there were others involved as well. She told me that there was a Mr Tang, who seemed to be deputy manager; Mr Yang, who looked after contracts; a Fang, who was in charge of the factory; and a Zhang, who did the accounts. ‘This is ridiculous,’ she sighed, pulling her hair back again, rubbing her eyes, and fumbling around with some name cards. ‘It’s just all so confusing.’
‘Anyway,’ she went on, ‘it’s Wang who’s just called and he wants to change a whole bunch of clauses. Wouldn’t normally matter, but some of them require changes to the financing. You can imagine – as soon as Wang said he wanted more changes, Winchester went ballistic. There’ve been so many different deals along the way that everyone completely lost it when they heard Wang wanted more changes and that they’d have to go back to the syndicate; they’re all terrified that the Chinese side will just walk away from the deal, find another buyer, and leave us stuck with commitments to the banks and nothing left in China.’
‘Well, I can understand that,’ I said. ‘But what do they want to change? Price? Delivery? Any other of the key terms of the deal?’
‘We just got a message from Cordelia in Beijing saying that they want to change the volume under the contract – the number of credits we have to buy – and the investors are all wobbling. There have been so many changes that they’re all starting to think that nothing will stick.’
‘Cordelia?’
