BUY OR SELL-Is carbon offsetter Camco a takeover target?

LONDON Thu Feb 11, 2010 7:34am EST

LONDON Feb 11 (Reuters) - British-based carbon offset aggregator Camco International Ltd CAMIN.L could be the last public listed company of its kind if a takeover bid for Swedish peer Tricorona TRIC.ST succeeds. Energy and environmental technology group Opcon AB (OPCO.ST) on Wednesday offered to buy Tricorona in an all-share deal valuing the clean energy project developer at just over 1 billion Swedish crowns ($137 million).

If the deal completes, Camco will be the lone survivor of consolidation in the sector that started last year and include investment bank JP Morgan's (JPM.N) purchase of EcoSecurities ECO.L and a proposed merger between Trading Emissions (TREM.L) and Leaf Clean Energy (LEAF.L).

Under the Kyoto Protocol's Clean Development Mechanism, worth $6.5 billion in 2008, companies like Camco can develop clean energy projects in emerging countries like China and India, and in return receive offset credits called Certified Emissions Reductions (CERs) which they can sell for profit.

A disappointing outcome at UN climate talks in Copenhagen in December and a stalled U.S. climate bill has created uncertainty for the CDM once Kyoto expires in 2012, and Camco last month trimmed the number of pre-2012 CERs it expects to get.

Camco shares traded at 15.20 pence on Thursday, near a 10 month low and far from an all-time high of 97 pence in May 2007 as analysts weighed in over where the price might go from here.

BUY OR SELL?

* Andrew Shepherd-Barron, KBC Peel Hunt - Rating: BUY, Price Target: 34p

"We have fair value at double the current share price and we think there is good value. They are a quality carbon developer and they have a good portfolio. Equity investors will come to appreciate it but they don't at the moment. I'd like to think Camco have a pretty robust business, a strong balance sheet and good management, so they don't need to be taken over."

* Gus Hochschild, Mirabaud Securities - Rating: BUY, Price Target: 42p

"Because they religiously follow every single diktat from the CDM's Executive Board, every project that Camco has submitted has been registered. At 15.20 pence, Camco's trading just above its cash level of 13.5 pence per share, giving the registered CERs a per share value of 1.7 pence, so I'd say there's better value to be had as its CERs are undervalued."

* Ken Rumph, Nomura Code - Rating: None, Price Target: None

"The stock is barely trading above its cash position. Camco's consulting business, which lost money last year, is an issue for a pure CER buyer. It could potentially develop demand for CERs and, after the cost cutting they've done and with a better order situation, it could break even this year, meaning it's not a poison pill. It has a value greater than nothing and is not a drag on the business. Camco is very much a target."

WHO MIGHT TAKE IT OVER?

"It could be the same cast that went for EcoSecurities -- a utility or oil major with a big carbon position and is active in trading, or it could be a bank that has shaken off its credit crisis worries and are back in the market. Or there could be a private equity play ... they might think this market has a future post-2012."

"(Generation IM Climate Solutions Fund, chaired by former U.S. Vice-President Al Gore) has around 20 percent and Camco management has a bit, but the company's not invulnerable," - Nomura Code's Rumph

"We don't have any clarity on what the (post-2012 CDM) market is going to look like, so it would take a brave person ... Camco's got some fairly aggressive and well-funded shareholders, but that's not to say someone won't see this as a propitious time to buy the company." - Mirabaud's Hochschild

COULD GENERATION TRY TO BUY ALL OF CAMCO?

"That would be the sensible thing to do one would have thought ... in some circumstances they might think there is more value to be had or greater benefits in taking the company private." - Mirabaud's Hochschild

"In the context of Generation, 20 percent of what Camco's worth at the moment isn't an awful lot ... I've never persuaded myself that they were going to actively take Camco private, nor do I regard them as unconditionally on the side of the management come what may." - Nomura Code's Rumph

(Reporting by Michael Szabo; Editing by John Stonestreet)

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