* Trading Emissions shares dive to all-time low
* Camco shares hit lowest since Feb. 2009
* U.N. CO2 credits have lost more than half value in 2011
By Nina Chestney and Jeff Coelho
LONDON, Nov 29 Shares in firms set up to
profit from efforts to curb pollution traded near all-time lows
on Tuesday as the collapse of the carbon emissions market they
depend on raised concerns about their future.
London-listed Trading Emissions Plc and Camco
International back projects, often in poorer
countries, that are aimed at cutting greenhouse gases.
They register the investments under a United Nations' backed
scheme and can then sell the resulting "credits" to polluters in
developed countries who need to show regulators they are
contributing to a global push to reduce emissions.
Both companies also hold a portfolio of credits to fulfill
obligations to polluters and other clients such as carbon funds.
Last week, the price of these certified emissions reductions
(CERs) credits fell by 20 percent to below 5 euros ($6.68) per
CERs have lost over half their value this year as concerns
mount over their role in a future global climate treaty, and as
falling industrial production makes pollution targets easy to
meet. Exacerbating this, a record number of CERs was issued to
the market this year.
Trading Emissions' average acquisition price for the CERs in
its portfolio was 6.71 euros, while Camco paid 8.60, company
statements show. Traders say project developers would incur a
loss if they sell at a price below 6 euros per CER.
"CERs are becoming like Greek bonds," said Laurent Segalen
at London-based advisory firm Segalen Environment Partners.
"(Firms) that keep their nerve and have sufficient cash to
weather the current storm will probably be better off in six to
nine months. The ones that panic and try to exit (the market)
will suffer massive losses," he said.
Both Trading Emissions and Camco said they have enough cash
to ride out the current carbon price crash.
"Trading Emissions has sufficient capital to meet its carbon
obligations in any carbon price environment," Simon Shaw, the
firm's investment adviser, told Reuters.
In spite of low carbon prices, the company said it will
continue to pursue buyers for both its carbon and private equity
portfolios, declining to comment on bidders.
Trading Emissions reported a cash balance of 66 million
pounds for the year ending in June 2011, down 28 percent from
the previous year.
Last month, the firm suspended its dividend given the
continued CER drop and four board members left.
Earlier this year, it was forced to scrap plans to sell its
carbon portfolio, which should have given shareholders a return
of 50 pence per share, after low carbon prices made it difficult
to find buyers willing to pay what the firm wanted.
Shares in Trading Emissions were at just under 35 pence on
Tuesday, down 65 percent since floating on London's Alternative
Investment Market in April 2005, shaving 44 million pounds off
its market capitalisation of 135 million when the business was
floated in 2005.
Camco closed at a 33-month low of 7.75 pence on Monday, 88
percent below the level it floated in April 2006, cutting its
market cap to some 15 million pounds from 83 million in 2006.
The state of some project developers' finances is a reversal
In 2009, JP Morgan beat off stiff competition to buy
Ecosecurities for 123 million pounds, while in 2010 Barclays
Capital bought Swedish firm Tricorona in a deal that
valued the company at $159 million.
Although carbon prices have been falling steadily since
June, panic selling drove CERs down by 20 percent last week
alone and analysts worry about the knock-on effect of such sharp
drops will have on some.
"Trading Emissions is in a trickier position (than Camco),"
said Gus Hoschchild, alternative energy analyst at Mirabaud
He noted that Camco had expanded with a profitable advisory
arm and a waste-to-energy business in the United States.
Earlier this month, Camco warned that the decrease in carbon
price may lead to downward revisions to income accrued for prior
periods but said its outlook for the medium to long-term for
Low CER prices have forced other firms to reduce the value
of their carbon portfolios.
Last month, Noble Group's chief executive resigned
after a write-down of the firm's U.N. carbon portfolio plunged
it into a $17 million loss in the third quarter, its first
quarterly loss for over a decade.
The firm did not reveal how much its CER portfolio lost, but
Bank of America Merrill Lynch estimated it at $80-100 million.
Meanwhile, UK-based Climate Change Capital, which operates a
fund investing in CERs, said it has had discussions about
"strategic partnerships" to allow it to raise new capital, but
added it was nothing to do with current carbon prices.