18 Jan 2010 07:00
18 January 2010
Camco International Limited (the Company)
Trading update
Camco International Limited (Camco), a global emissions reduction company, is pleased to provide the following trading update for the three months period ending 31 December 2009.
Highlights for the period:
Completion of two successful carbon structured transactions generating upfront net cash proceeds of €14.4m, which are non recourse with respect to delivery,
80% increase of "in specie" carbon projects which have first independent verification, demonstrating significant de-risking of the portfolio
Strong net cash balance of around €28m at 30 December 2009 with positive cash flow for the year to 31 Dec 2009
Issuance of 8.8m tonnes to date (0.7m tonnes issued since 25 Sept 09)
Scott McGregor was appointed as Chief Executive of Camco
Scott McGregor Camco CEO said:
"The year has been an exciting one for Camco. We generated a positive cash flow for the Company and have successfully executed two structured transactions demonstrating Camco's strong commercial position and financial expertise. With a strong cash position we can continue building our global emission reduction platform to service the growing regulatory needs of clients in our key markets. The Copenhagen summit resulted in a number of positive outcomes for our business. Furthermore, the latest developments in the USA present substantial business opportunities for the company which we will pursue during 2010."
Camco Overview
The year to 31 December 2009 was an active and successful period for Camco; market leading commercial sales, de-risking our carbon portfolio, and achieving cost savings across our Carbon and Advisory businesses.
Management changes have taken place since the last update. Scott McGregor has been appointed Chief Executive. Jeff Kenna former Chief Executive has been appointed as Vice Chairman and assumed global policy and strategic development responsibilities. Graeme Halder has been appointed Interim CFO. Paolo Pietrogrande has been appointed as a new non-Executive Director on the Board of Directors and as the Chair of the Audit Committee. Mr Pietrogrande brings his extensive experience in renewables and clean technology at a time when Camco is expanding its investment activities in these areas.
Cost savings have been implemented across the group globally, addressing profitability of the Advisory business. These steps have already shown improvements for the year and are complimented by a move to a regional structure.
The Company's approximate cash balance at 30th December 2009 was €28 million, indicating a positive cash flow for the year.
Carbon
Camco has demonstrated again its commercial capabilities and the attractiveness of its portfolio, executing two market-leading carbon transactions. The total carbon portfolio has remained solid and has been progressing through the regulatory pipeline as expected.
Carbon Highlights
Continuing to demonstrate the strength of our commercialisation capability and carbon portfolio, through two structured transactions generating net cash proceeds of €14.4m
80% increase of "in specie" carbon projects which have first independent verification, demonstrating significant de-risking of the portfolio
Camco has won the environmental finance award for the second time and the best project developer award for the third year in a row.
Agreements reached in the Copenhagen summit are expected to speed up the CDM registration process.
Due to the 80% increase in first verification since September we are expecting an increase in issuance in the coming months. A number of coal mine methane, waste heat recovery and combined cycle power plant projects have achieved first verification since 25 Sept 2009.
Two major carbon commercialisation transactions were executed for cash proceeds of €14.4million. One involved the sale of the Company's rights comprising in specie tonnes of 2.1m tonnes from a portfolio of projects for cash proceeds of €9.8million (net cash €8.4million) and the other transaction involved the sale of the Company's rights comprising in specie of 2.5m tonnes from a portfolio of projects for upfront net cash proceeds of €6million, with further payments upon delivery. All cash proceeds are non-recourse with respect to CER delivery.
The Copenhagen summit has resulted in a number of positive sentiments for Camco. Although, as expected, details on an international agreement have to be resolved this is the first time emerging economies made a political commitment to reduce their emissions. The proposed changes to the CDM processes will lead to greater clarity around delivery and registration as well as shorter regulatory timelines. We expect these changes to have an affect in the latter half of 2010.
In the US, Camco is continuing to expand its operations in the agricultural sector with a portfolio of projects on California's Climate Action Registry.
Portfolio as of 30 December 2009
Table 1 - Summary of Camco's carbon credit portfolio by stage
| Progress through stage1 | 31-Dec-09 | 25-Sep-09 | 31-Dec-09 | 25-Sep-09 |
| PDD Volume2 | PDD Volume2 | Risked Volume | Risked Volume | |
| (m tonnes) | (m tonnes) | (m tonnes) | (m tones) | |
| Contracted | 147.1 | 144.9 | 93.3 | 91.5 |
| PDD complete | 135.2 | 130.3 | 85.4 | 81.6 |
| Host LoA | 120.7 | 115.2 | 76.9 | 70.8 |
| Validated | 111.6 | 91.5 | 71.2 | 55.4 |
| Submitted for registration | 101.0 | 83.7 | 64.1 | 50.0 |
| Registered | 83.3 | 82.5 | 50.0 | 49.3 |
| 1st verification3 | 65.8 | 44.4 | 44.9 | 31.0 |
| Issued | 8.8 | 8.1 | 8.8 | 8.1 |
| Financed | 124.2 | 119.3 | 83.3 | 80.0 |
| Under construction | 122.6 | 116.8 | 82.3 | 77.8 |
| Operational | 102.6 | 93.0 | 70.0 | 62.2 |
| 1 | CDM stage or equivalent for JI and VER projects |
| 2 | Prior to validation or determination, PDD numbers reflect Camco's current anticipated project delivery. |
| 3 | Projects that have been through a minimum of one verification process or equivalent |
In this trading update, both adjusted Project Design Document (Adjusted PDD) volumes and the Company's own estimates of delivery (Risked tonnes) are disclosed with the intention of providing further transparency and guidance on the Company's assets. The Company has applied the following definitions to the portfolio numbers provided in the tables below:
Adjusted PDD - This has been the methodology previously adopted by Camco in RNS disclosures. These estimates are PDD forecasts with adjustments downwards for known operational variances for some projects that had undergone a first verification. Projects contracted but assessed by Camco as currently unlikely to become operational are not included.
Risked - Fully risked delivery estimate reflecting known and anticipated regulatory, registration, verification, delay, operating and commercial risks across all projects in Camco's portfolio.
Table 2 - Summary of Camco's In specie carbon credit portfolio1
| Progress through stage2 | 31-Dec-09 | 25-Sep -09 | 31-Dec-09 | 25-Sep -09 |
| PDD Volume3 | PDD Volume 3 | Risked Volume | Risked Volume | |
| (m tonnes) | (m tones) | (m tonnes) | (m tonnes) | |
| Contracted | 51.0 | 51.3 | 30.3 | 30.6 |
| PDD complete | 44.9 | 44.4 | 26.2 | 25.6 |
| Host LoA | 41.0 | 39.1 | 23.6 | 21.7 |
| Validated | 37.3 | 27.3 | 21.4 | 14.3 |
| Submitted for registration | 36.4 | 23.9 | 20.7 | 12.0 |
| Registered | 26.3 | 23.7 | 13.8 | 11.9 |
| 1st verification4 | 16.1 | 8.7 | 10.8 | 6.0 |
| Issued | 0.8 | 0.7 | 0.8 | 0.7 |
| 1 | Camco's in specie portfolio excludes VERs |
| 2 | CDM stage or equivalent for JI and VER projects |
| 3 | Prior to validation or determination, PDD numbers reflect Camco's current anticipated project delivery |
| 4 | Projects that have been through a minimum of one verification process or equivalent |
Table 3 - Overview of Camco's carbon credit portfolio by contract type
| Contract structure | 31-Dec -09 | 25-Sep -09 | 31-Dec -09 | 25-Sep -09 |
| PDD Volume | PDD Volume | Risked Volume | Risked Volume | |
| (m tonnes) 1 | (m tonnes)1 | (m tonnes) | (m tonnes) | |
| Carbon share | 109.1 | 109.9 | 66.8 | 67.0 |
| Held in specie2 | 51.0 | 51.3 | 30.3 | 30.6 |
| Cash share | 29.3 | 25.9 | 19.3 | 16.9 |
| VERs | 8.7 | 9.2 | 7.2 | 7.7 |
| 1 | Prior to validation or determination of official PDD forecasts, PDD numbers reflect Camco's current anticipated project delivery.. |
| 2 | Carbon share held in specie refers to the portion of the carbon asset portfolio over which Camco has an interest |
Table 4 - Additional information on Camco's portfolio
| 31-Dec -09 | 25-Sep -09 | |
| Risked Volume | Risked Volume | |
| (m tonnes) | (m tonnes) | |
| Contract portfolio breakdown (m tonnes) | ||
| CERs | 71.5 | 69.5 |
| ERUs | 14.6 | 14.4 |
| VERs | 7.2 | 7.7 |
| Total | 93.3 | 91.5 |
| 31-Dec -09 | 25-Sep -09 | |
| Risked Volume | Risked Volume | |
| (m tonnes) | (m tonnes) | |
| Carbon share in specie (m tonnes) | ||
| CERs | 25.8 | 25.9 |
| ERUs | 4.5 | 4.6 |
| VERs | - | - |
| Total | 30.3 | 30.6 |
| Camco in specie portfolio and forward sales1 | ||
| Carbon share | 30.3 | 30.6 |
| Carbon share sold | 8.9 | 3.3 |
| Cash share | 19.3 | 16.9 |
| Cash share forward sold | 10.0 | 9.8 |
| VERs | 7.2 | 7.7 |
| VERs forward sold | 2.8 | 2.6 |
| Price - in specie portfolio | ||
| Average purchase price | 7.70 | 7.80 |
| 1 | For a number of forward sales some percentage of Camco's sales price remains linked to market prices. For example, Camco may receive a percentage of the market price in addition to a guaranteed floor price |
Advisory
The Advisory business has gone through a restructuring with management changes and cost reductions across the board to bring it towards profitability. This approach, together with the improved general and real estate market conditions have had a positive affect on the advisory unit's performance in the last quarter. There has been a focus on regionalisation, strengthening local hubs across the world.
In the UK, the improved performance was the result of substantial cost reduction actions and business development effort. The UK Advisory business exceeded, the end of year internal management, sales target by 8% and had a successful fourth quarter in 2009.
The end of 2009 included a number of large and strategically important commissions including; work for the Department of Energy and Climate Change (DECC) and the Department for International Development (DFID) on global carbon market strategies initially in preparation for Copenhagen and now as part of the ongoing international process; continued support to large companies preparing for the introduction of the Carbon Reduction Commitment Energy Efficiency Scheme (CRC-EES) and Feed-in Tariffs in April 2010.
Indications from the end of 2009 and start of 2010 are that demand is re-building for some of Advisory's other services, such as product emissions assessments, driven by the need for companies to maintain a marketing edge in a competitive market, such as low carbon development work. Further, the development in the property market has led to a restart of some of our major projects.
In China, the business improved profitability in the second half of 2009. As the market conditions improved considerably, Camco has been diversifying its client base and extending new services into the Chinese market. In addition, the business won and implemented a number of projects of direct relevance to Carbon and Investments businesses. Services in environmental and social due diligence have focused on renewable investments, and Camco has reached new clients amongst international financial institutions, providing an opportunity in 2010 to extend these services further. Our piloting of carbon labelling has resulted in the very first certified carbon label for a Chinese company, and demand for carbon assessment and labelling amongst Chinese exporters is growing.
Investments
The Investment business continues to pursue project development and investments in China and the USA.
Camco has been successful in securing funding for expansion and development of our Vanaduim Redox flow battery. This technology, when commercially available, is designed to allow bulk energy storage, a crucial component for a low emissions society.
Camco also expanded its investment program into the industrial energy efficiency market and has signed a development agreement with one of the industry's leading players in the USA.
Outlook for 2010
Camco will originate further low carbon projects and focus on further de-risking our carbon portfolio through the regulatory pipeline. The company will be appropriating value by delivering and commercialising credits.
Camco has increased its activities in the USA and will be focused on expanding emission reduction operations there.
The group will continue to progress building a portfolio of projects to meet the current and future compliance requirements under current emission reduction regulation and planned cap and trade schemes.
For the investments business, we will focus on growing a project investment portfolio in Asia and the US and making small strategic investments in projects to support the carbon business.
For the advisory business, 2010 will continue to bear the fruit of the reorganisational efforts and economic recovery. The business will be moving into a regionally oriented structure continuing to focus on profitability and expansion of our customer's base.
Enquiries:
| Camco | +44 (0)20 7121 6100 |
| Scott McGregor, Chief Executive Officer | |
| Graeme Halder, Interim Chief Financial Officer | |
| KBC Peel Hunt Ltd (Nominated Adviser and Broker) | +44 (0)20 7418 8900 |
| Jonathan Marren | |
| David Anderson | |
| Matthew Tyler | |
| Kreab Gavin Anderson | +44 (0)20 7074 1800 |
| Ken Cronin | |
| Kate Hill | |
| Michaela Wood | |
Notes to editors:
About Camco
Camco International Limited (Camco), a global emissions reduction company, offers a full range of emission reduction services to public and private organisations worldwide, has a 20-year track record and manages one of the world's largest carbon credit portfolios.
Camco brings together the distinct but complementary service areas of Carbon, Advisory and Investments to help its clients manage all aspects of reducing emissions. Camco's businesses collaborate between service groups and countries, sharing technical and commercial expertise to find the best options for its clients.
The Carbon business unit has created one of the largest carbon credit portfolios by working closely with companies to identify and develop projects that reduce greenhouse gas (GHG) emissions. The team has structured groundbreaking and innovative arrangements for the sale and delivery of carbon credits to compliance and voluntary buyers.
The Advisory business unit combines strategic, commercial, financial and technical expertise accrued over two decades to deliver low carbon energy and sustainable development solutions. Our experience spans emission assessments, carbon management strategies and project delivery, as well as international energy and climate change policy.
Camco's Investment business collaborates with manufacturers, project developers, technology providers and investor groups to develop emission reduction projects and turn innovative ideas into commercially viable and applicable solutions that will make a difference in tackling climate change.
In this trading update, both adjusted Project Design Document (Adjusted PDD) volumes and the Company's own estimates of delivery (Risked tonnes) are disclosed with the intention of providing further transparency and guidance on the Company's assets. The Company has applied the following definitions to the portfolio numbers provided in the tables below:
Adjusted PDD - This has been the methodology previously adopted by Camco in RNS disclosures. These estimates are PDD forecasts with adjustments downwards for known operational variances for some projects that had undergone a first verification. Projects contracted but assessed by Camco as currently unlikely to become operational are not included.
Risked - Fully risked delivery estimate reflecting known and anticipated regulatory, registration, verification, delay, operating and commercial risks across all projects in Camco's portfolio.