Rising CO2 prices boost project developers' shares
Mon Mar 23, 2009 9:21am EDT
By Michael Szabo
LONDON (Reuters) - Rising carbon prices are helping boost shares in clean energy project developers, weeks after bearish sentiment in the carbon market forced them to record lows. UK-based project developers EcoSecurities and Camco have seen their shares more than double in the past six weeks, supported also by increased institutional investment and favorable analyst recommendations.
"Elements of optimism are creeping in," said Gus Hochschild, equity analyst at Mirabaud Securities.
Under the Kyoto Protocol pact on climate change, companies invest in clean energy projects in poorer countries like China and India, and in return receive offset credits called Certified Emissions Reductions (CERs) which can be sold for profit.
CERs for delivery in December closed at 10.19 euros a tonne on Friday, up 36 percent from an all-time low of 7.49 euros on February 12, according to the Reuters CER Index.
"Few people anticipate that CER prices will remain this low into 2010, let alone 2011 and 2012," Hochschild added.
European Union carbon permits, the strongest influencer of CER prices, have also gained since early February, rising on strengthening crude oil prices, speculative short position covering and a slowdown in spot selling.
After hitting a 2-year low of 8.05 euros on February 12 on spot selling by cash-strapped firms and forecasts of lower-than-expected EU emissions by market analysts, prices have recovered some 44 percent to 11.60 euros.
UP, BUT STILL DOWN
Higher carbon prices mean more revenues for developers.
EcoSecurities, the world's largest developer, has seen its shares nearly double in the past two weeks after posting a narrower-than-expected pretax loss for 2008.
EcoSecurities shares touched a 3-month high of 38 pence on Friday, up 117 percent from an all-time low of 17.5 pence on March 12. Shares were down 8 percent at 31.35 pence on Monday.
Shares in Camco have also more than doubled at 10.75 pence, after bottoming at 5 pence on February 10. This is despite the fact that it has indefinitely delayed reporting its 2008 earnings.
Camco shareholder Generation IM Climate Solutions Fund, chaired by former U.S. Vice-President Al Gore, has increased its stake in the clean energy project developer to 18.94 percent, from 14.6 percent in February.
RBS currently has 'buy' ratings on EcoSecurities and Camco, forecasting shares to rise to 100 pence and 75 pence respectively.
Investment bank Noble sees Camco valuation at 48 pence while Mirabaud's Hochschild holds price targets of 143 pence for EcoSecurities and 53 pence for Camco.
Despite the share rises, project developers still trade at a fraction of the all-time highs hit in 2007.
Ecosecurities traded up to 421 pence in July 2007 while Camco rose as high as 97 pence a share in May 2007.
The gains are not limited to the UK, as shares in Sweden-based developer Tricorona are up 37 percent to 6.7 Swedish crowns after closing at 4.9 crowns on March 3.
Trading Emissions Plc is the only publicly-traded developer that has not seen a similar spike in its share price.
Its shares traded at 69.25 pence on Monday, up 15 percent from an all-time low of 60 pence hit on March 2 but still down nearly two thirds from a high of 196 pence in April 2006.
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