LONDON, Dec 3 (Reuters) - Shares in carbon credit seller AgCert AGC.L crashed nearly 80 percent Monday on news that a key deal with a major European trading company had collapsed.
AgCert said in a statement that United Nations-approved carbon offsets generated through existing activities would fall short of the 7.2 million tonnes the company is under contract to deliver by the end of 2008. Shares in the company were 3.15 pence or 76.3 percent lower at 1300 GMT, up from an all-time low of 0.88 pence set earlier Monday.
The U.N.’s Clean Development Mechanism allows companies to buy carbon offsets, or CERs, from clean energy projects in developing countries, then sell them to polluters looking to offset their own greenhouse gas emissions.
“It’s clear from the statement that (AgCert) hasn’t managed to cover its liabilities, and it has to have them covered by the end of next year,” Code Nomura analyst Chris Redhead told Reuters.
In September, AgCert said it had entered into talks with the European trading company to secure 4.2 million tonnes of AgCert’s existing delivery obligations.
Based on this agreement, AgCert estimated it would be able to meet 86 percent of its 2008 commitments.
Without this deal AgCert may now have to purchase CERs in the secondary market, where prices for 2008 delivery can fetch some 18 euros ($26.39) a tonne.
AgCert rival EcoSecurities ECO.L saw its shares crash nearly 50 percent last month following a warning that a bureaucratic bottleneck in the U.N. project approval and CER issuance process may impede the company in meeting its 3.3 million CER delivery obligations for 2008.
AgCert officials were not immediately available for comment, but a spokesman for AgCert told Reuters on Monday that the company’s problems were dissimilar to those of EcoSecurities.
The U.N.’s project bottleneck “is definitely not having a direct impact on what’s happening today,” he said.
“But a lack of consistent (U.N.) policy at times hasn’t been helpful.”
To Nov. 1, AgCert had taken delivery of less than 200,000 CERs, according to U.N. data.
This compares to around 16 million CERs now contracted by AgCert to 2012 from around 50 projects registered in Brazil and Mexico.
“The company’s (project) model proved more problematical than they anticipated and consequently the level of production from those (projects) never reached the targets they had expected,” the spokesman told Reuters.
AgCert said it is continuing negotiations with its secured creditors and customers regarding its delivery commitments.
To view the AgCert statement, click on [ID:nRNSC9867I]
For additional analysis on the carbon markets, click on www.reutersinteractive.com
Reporting by Michael Szabo; Additional reporting by John Bowker; Editing by Anthony Barker
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