Rumors, takeover bids boost CO2 market stocks

LONDON (Reuters) - A U.S. climate bill may eventually stoke major investment in the environmental sector, but analysts say a rise in takeover rumors is providing a short-term boost to shares in greenhouse gas emissions trading and offsetting companies. Britain is home to four major, publicly-traded carbon emissions trading companies, all of which have seen a marked rise in their share prices in the past month.

Clean energy project developers EcoSecurities, Camco International and Trading Emissions aggregate and sell emissions offsets, called Certified Emissions Reductions (CERs), issued under the Kyoto Protocol climate pact, while Climate Exchange owns and operates carbon trading marketplaces in the U.S., Europe and Asia.

Earlier this month, EcoSecurities rejected an offer from the trading arm of France's EDF, days after it rebuffed a bid by a co-founder and former president.

Camco shareholder Generation IM Climate Solutions Fund, chaired by former U.S. Vice-President Al Gore, upped its stake to 19 percent in March from 14.6 percent in February. In April, Camco posted a maiden full-year profit for 2008.

Trading Emissions announced it would pay its first dividend despite a pretax loss for the six months ended in December 2008. It has bought back over 20 million ordinary shares for cancellation since early December, while several funds have been steadily increasing their holdings in the fund so far this year.

Shares in Climate Exchange rose by over a third since last Monday after IntercontinentalExchange said it had taken a 4.8 percent stake in the company.

Despite the recent run-up in share prices, several London-based analysts still see value in the sector:

ECOSECURITIES - at 77.5p, up 78 pct since June 1

* Agustin Hochschild, Mirabaud Securities - Rating: BUY, Price Target: 143p

"Historically, EcoSecurities has the largest CER portfolio and was the cheapest play. It had questions over liabilities on its forward book ... but now that CER prices have dropped it has become a more favored play due to its downside protection."

(CERs closed at 11.78 euros per metric ton on Tuesday)

* Andrew Shepherd-Barron, KBC Peel Hunt - Rating: BUY, Price Target: 100p

"With the prospect of a bidding war it is unlikely that EcoSecurities will survive as a listed entity -- the question is the price. Because the two putative offers to date are at discounts to fair value at today's CER price, and its assets should be of interest to others, we expect bidding to continue."

CAMCO INT'L - at 25.5p, up 24 pct since June 1

* Ken Rumph, Noble GP - Rating: BUY, Target: 48p

"The upside on Camco is greater than Trading Emissions, but the risk is accordingly higher because they have cash costs they have to pay and a limited amount of money to do so. There are also potential gains to be made from their other businesses, so it's the higher risk, higher return option."

* Mirabaud - Rating: BUY, Target: 53p

"They have bigger projects than its peers and it's a focused, well-managed portfolio, but they are more vulnerable to a sustained slow-down. However, with a smaller forward book than EcoSecurities, Camco should benefit from a rally in CER prices."

TRADING EMISSIONS - at 101p, up 12 pct since June 1

* Will Wallis, Numis Securities - Rating: BUY, Target: 130p

"We estimate the net asset value is around 135-140p. It's a fund so there are reasons why it would trade at a discount to its portfolio value, but the discount is relatively narrow compared to where it has been in the past year."

"If the CER price was 10 euros, I'd say it's worth about 120 pence and if the CER price was 15 euros, it's about 170 pence."

* Mirabaud - Rating: BUY, Target: 127p

"Trading Emissions has the second largest net portfolio of CERs but it is still much more expensive than its peers. EcoSecurities and Camco have more upside, and Trading Emissions has a number of corporate investments which are not particularly transparent. It's the most liquid of the three and it has the most cash, but they should give it back to shareholders or deploy it, possibly by bidding for EcoSecurities."

* Noble GP - Rating: BUY, Target: 157p

"In terms of the CERs they've sold forward and the cash they have, Trading Emissions is a cheap company. It's the lower risk, lower return option, but still a very interesting return."

* KBC Peel Hunt - Rating: BUY, Base Price Target 118p

CLIMATE EXCHANGE - 865p, up 35 pct since June 1

* Noble - Rating: BUY, Target: 786p

"It's a cash-generating company, it's growing very rapidly and it has a leading position on both sides of the Atlantic. When it was trading around 20 pounds last year, it was rather optimistically valued. A year later, we're a lot closer to having cap-and-trade in the U.S. and the share price is lower."

"Frankly, if you're ICE, Chicago Mercantile Exchange or NYSE/Euronext and you decide that emissions trading is for real, you might see spending 400-500 million pounds ($663 million-$829 million) to buy the leading exchange as a cheap investment compared to what you could spend trying to beat them into second place."

* Numis - Rating: BUY, Target: 1080p

"It's more of a regulatory play on the volumes of trading, as it doesn't actually matter so much about the carbon price."

* Morgan Stanley - Rating: OVERWEIGHT, Target 1500p

For additional news and analysis on the carbon market, go to here

(Editing by David Cowell)