July 27, 2011 / 7:56 AM / in 8 years

UPDATE 2-Trading Emissions ends carbon portfolio sale talks

* Cites a steep fall in value of carbon-related securities

* Says will look at sale of carbon assets at an appropriate time

* Shares fall 12.5 percent to lowest levels since spring 2009 (Adds details, analyst quotes, company estimates)

LONDON, July 27 (Reuters) - British carbon offset project developer Trading Emissions on Wednesday halted talks to sell its portfolio after steep falls in carbon prices, sending its share price to two-year lows.

“The Board has concluded that to sell the company’s entire portfolio now, at a time of extreme market volatility, would not be in line with the Company’s stated investment policy of a tactical and controlled realisation,” the firm said in a statement.

The company trades carbon offsets in a market where rich countries pay developing nations to cut emissions on their behalf under the U.N.-backed Kyoto Protocol.

Its strategy was to exploit higher prices in the main demand market for offsets in the European Union’s emissions trading scheme (EU ETS) compared with developing country projects.

But prices for exchange-traded CERs have fallen 12 percent since January when the company announced its disposal plan, and by as much as a third since March on fears about Eurozone growth and a glut of emissions permits in the EU ETS.

“Unless you are going to offer at a steep discount to the net asset value, which is not in your shareholders’ interest, it will be very difficult to accomplish,” said Gus Hochschild, analyst at Mirabaud Securities.

“It is also a very diverse portfolio of interests...ranging from Brazilian biofuel to Polish wind farms. To find someone willing to take all of that on — particularly in this market — is no mean feat.”

Trading Emissions estimates the size of its CER portfolio at 36.9 million tonnes on December 31 last year. Its costs were 7.5 euros per tonne ($10.86), a company spokesman told Reuters, implying a net value of about 77 million euros at Wednesday’s CER price.

CERs were trading on Wednesday on the European Climate Exchange at 9.6 euros ($13.91) per tonne, illustrating the company’s difficulty in selling its less liquid portfolio profitably.

Trading Emissions also holds equity stakes in renewable energy projects, which are also for sale and which the company said it had received indicative bids for.

Shares in the company were down 12.5 percent at 70 pence at 1130 GMT, their lowest level since spring 2009, valuing the company at about 175 million pounds.

Peel Hunt analyst Andrew Shepherd-Barron cut his realisation expectation to 90-100 pence per share from 113-122 pence per share, and cut his target price to 85 pence from 98 pence.

“They’ve switched strategies on a liquidation and results have been disappointing,” he told Reuters. “I think equity investors have lost confidence in the carbon market generally.”

Trading Emissions said it would look to sell its carbon portfolio at an “appropriate” time and added that it expects to return money to shareholders on or before announcing full-year results in October. ($1 = 0.690 Euros) ($1 = 0.610 British Pounds) (Reporting by Adveith Nair, Nina Chestney and Gerard Wynn; editing by Anthony Barker)

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