UPDATE 2-Trading Emissions pays first dividend despite loss

* H1 pretax loss 126.7 mln stg (74.3 mln profit a year ago)

* Net loss of 146.5 mln pounds on financial investments

* Predicts attractive returns as carbon prices recover

* Has 202.6 mln stg cash, up from 139.15 mln at end June

* To pay its first dividend, shares up nearly 12 pct

(Adds CER portfolio details, investment advisor quotes)

By Paul Hoskins and Michael Szabo

LONDON, March 27 (Reuters) - Renewable energy investment company Trading Emissions Plc (TREM.L) fell deep into the red in the first half due to falling carbon prices but dug into growing cash reserves in order to promise its first dividend.

The clean energy project developer also predicted a recovery in carbon prices from 2010 and therefore attractive returns for investors, helping lift its shares 4 percent.

Trading Emissions posted a pretax loss of 126.7 million pounds ($183.1 million) for the six months to the end of December after a profit of 74.3 million a year earlier.

"The fair value of the company's carbon credit portfolio has fallen compared with the fair value as at June 2008," Trading Emissions said in a statement.

Under the Kyoto Protocol climate change pact, companies can invest in clean energy projects in developing countries such as China, and in return receive Certified Emissions Reduction Credits (CERs) from the United Nations which they can sell for profit.

The company said it expects to receive before 2012 a total of 46.84 million CERs, each worth one tonne of carbon dioxide equivalent. This is 3 million tonnes less than estimates of 49.84 million made on June 30, 2008.

It expects to receive a further 9.6 million CERs after 2012, though these may never be realised if Kyoto expires without a successor agreement in place.

Trading Emissions said its CER portfolio has an average purchase price of 7.74 euros ($10.37) per tonne versus market prices of 9.80 euros on Friday CEREZ9.

The company said its strong cash position meant it expected to ride out the current market downturn without coming under pressure to sell off CERs at low levels in order to cover costs.