9 Jul 2008 07:00
Camco International Limited
Trading update and pre-close statement
9 July 2008
Camco International Limited ("Camco"), a leading climate change business in the growing carbon and sustainable markets, is pleased to provide a trading update for the 6 months to 30 June 2008. Camco is also pleased to announce that it intends to release its interim results for the 6 month period to 30 June 2008 on 10 September 2008.
HIGHLIGHTS
Contracted carbon portfolio stable at 151.0m tonnes
Completion of the 2nd verification for the Yangquan methane to power project, and an increase to 16.2m tonnes in projects that have been through at least one verification
Consulting project wins covering important sectors in the low carbon economy, including launch of the Existing Homes Alliance
Acquisition of Clearworld Energy Ventures Limited as part of strategy to develop asset management capability in house
Jeff Kenna, Camco Chief Executive, said:
"We have made steady progress in the past 2 months and remain confident that the Group is on track to move into profitability in 2008 and meet our target delivery of 127m of carbon credits during the first Kyoto commitment period. The long term market outlook is positive and, as the recent acquisition of CWEV demonstrates, we are building a range of services and products which will meet the future market needs".
The carbon credit (emission reductions) business
The reported increase in the contracted portfolio includes new project wins of 5.9m and a conservative downward adjustment of 5.2m. Over time, as verification reports provide greater certainty around carbon credit production, we expect delivery estimations from the portfolio to become increasingly certain. The reported contracted portfolio figure could move up or down depending on the balance between new project wins and conservative adjustments.
Management remains confident that 127m tonnes will be delivered during the first Kyoto commitment period. We would expect the reported contracted Joint Implementation (JI) and Clean Development Mechanism (CDM) portfolio to stay above the firm delivery commitment of 127m tonnes, with a modest increase in the Verified Emission Reduction (VER) portfolio by the end of the year.
Regulatory and construction progress
Last year's award winning Yangquan coal mine methane projects have completed several important milestones. The two projects, one a power generation project and the second an advanced industrial furnace at a large alumina production facility, have both already achieved high operating performance levels compared to design forecasts.
In June 2008 a request for issuance covering the power project's second verification period was submitted to the EB. This represented an emission reductions generation rate of over 90% relative to that anticipated in the Project Design Document (PDD) for Phase I over the same period.
In 2007, the industrial furnace project completed construction and commissioning, and in January 2008 the plant began regular operation. Between January and April 2008 the project generated 80% of emission reductions predicted in the PDD. These emission reductions are presently under verification.
Consistent with our conservative reporting policy, we have revised expectations on several projects at the pre-registration stage as Camco is experiencing an increase in the length of time it is taking to register a project. The process is taking approximately 3-4 weeks longer than we had previously forecast and we anticipate that a higher proportion of our projects will be reviewed. Camco is managing these delays and does not expect any adjustments to materially affect financial performance.
While this delays the registration of projects and impacts on carbon credit deliveries in the short term, the CDM Executive Board's (EB) rigorous review process is essential to the integrity of the carbon market, and we will work with the Designated Operational Entities (DOE) to ensure the projects we submit for registration meet the standards required by the EB.
| Progress through stage* (cumulative): | 30 June 08 | 30 April 08 | 31 Dec 07 |
| Contracted | 151.0m | 150.3m | 149.3m |
| PDD complete | 111.2m | 115.8m | 107.0m |
| Host LoA | 79.1m | 84.3m | 88.8m |
| Validated | 79.5m | 79.3m | 56.6m |
| Submitted for registration | 73.4m | 73.2m | 41.8m |
| Registered | 43.2m | 44.1m | 30.2m |
| 1st verification** | 16.2m | 12.8m | 12.3m |
| Issued | 3.2m | 3.2m | 2.7m |
| Financed | 127.1m | 128.7m | 126.8m |
| Under construction | 114.7m | 108.2m | 98.6m |
| Operational | 87.0m | 78.8m | 45.3m |
* CDM stage or equivalent for JI and VER projects
** Projects that have been through at least 1 verification process or equivalent
Commercial structures, margins and progress
| Contract structures: | 30 June 08 | 30 April 08 | 31 Dec 07 |
| Carbon share | 105.4m | 102.7m | 101.9m |
| (of which, held in specie) | 41.7m | 40.8m | 37.3m |
| Cash share | 37.5m | 37.1m | 39.1m |
| VERs | 8.2m | 10.6m | 8.3m |
The reported contracted portfolio of 151.0m tonnes comprises compliance credits (Certified Emission Reductions (CER) and Emission Reduction Units (ERU)) and voluntary market offsets (VERs). The contracted portfolio includes 8.2m VERs from which we expect to generate a margin of at least €1-2.
The 142.8m compliance grade credits (i.e. excluding VERs) within the portfolio are contracted either on a "cash share" or "carbon share" basis.
Carbon share contracts total 105.4m tonnes of which Camco's "in specie" amount is 41.7m tonnes. The average purchase price is €7.5/tonne. Cash share contracts total 37.5m tonnes, and commissions range between 10% and 20%, calculated on an average forward sale completion price of approximately €12 per tonne.
Camco has secured Emission Reduction Purchase Agreements (ERPA) (or VERPAs for VERs) on behalf of our clients to lock in the best possible carbon prices to help finance their emission reduction projects. There are now "sell-side" ERPAs are in place between project owners and carbon credit buyers (e.g. financial institutions, compliance buyers or Camco) for 82.4m tonnes.
Camco has not yet entered into onward sale arrangements for its 41.7m in specie carbon credits but this year plans to place up to one third with compliance and financial buyers. The timing of this transaction will be managed with close attention paid to both the carbon price and the maturity of the projects in our portfolio.
Analysis of the portfolio by region and carbon credit type
The Group is pleased with the growth in the JI portfolio of ERUs, in particular the continued growth in Russia and the FSU. We hope to be able to progress the ERU portfolio through the necessary approval process quickly, though as with the CDM process, there are some bottlenecks and delay risks.
| Carbon portfolio by region: | 30 June 08 | 30 April 08 | 31 Dec 07 |
|
| |||
| Asia | 103.2m | 106.6m | 110.3m |
| ERMEA | 46.0m | 42.2m | 37.6m |
| North and South America | 1.8m | 1.4m | 1.4m |
| CDM (CERs) | 102.4m | 103.6m | 106.7m |
| JI (ERUs) | 40.4m | 36.1m | 34.3m |
| VERs | 8.2m | 10.6m | 8.3m |
The consultancy practice
Camco's consulting business continues to grow and demonstrate value creation from product and service synergies. The contract wins below demonstrate cross-regional co-operation and the Group's success in building a high value / multi-disciplinary climate change & low carbon services. Several projects are in sectors which could feature in the "next wave" of low carbon technologies utilising carbon market finance.
Camco won a competitive pitch to become the Democratic National Convention Host Committee's official carbon adviser. In this role Camco has been working to quantify carbon dioxide emissions, to review and manage carbon emission reduction measures, to advise on how to select quality carbon offset projects, and to develop a travel and event calculator.
ESD Sinosphere, ECCM and Camco's China office have been awarded a major carbon management contract by one of China's largest paper manufacturers. While carbon footprinting is a fairly new concept in China, our client believes assessing its GHG emissions will be an important first step in evaluating how climate change is affecting their operations and how best to respond.
A US$200k "Lighting Africa" project was awarded to Camco's Nairobi office from a pool of 64 finalists. The project will set up an Energy Product and Service Delivery Company dedicated to supporting Microfinance Institutions and Financial Cooperatives effectively implement the consumer financing Photovoltaic delivery model in Kenya.
One of the largest glass manufacturers in Africa has contracted Camco to complete a carbon footprinting, energy optimisation and carbon management project, drawing on the skills of ECCM, Bradshaw Consulting and ESD respectively.
ESD has played a central role in the creation of The Existing Homes Alliances by providing the pre-launch Secretariat and Chair for this new coalition calling for urgent action on the UK's existing housing stock. The Alliance was launched on 3rd June with an impressive attendance from central and local government, business and environmental groups. The building sector is one of the major contributors to greenhouse gas emissions, and while zero carbon homes often take centre stage, 90% of the existing housing stock will be with us in 30 years' time.
Camco Ventures
In May, Camco completed the acquisition of ClearWorld Energy Ventures Limited ("CWEV") as part of Camco's strategy to develop a wide range of services for the low carbon economy, including asset management. The acquisition of CWEV and its experienced management team will leverage the market leading position of the Camco brand name in China and enable the Group to create value through investments in underlying project assets and technologies.
In addition, Camco will continue to progress the development of an asset management business outside China by recruiting a team of experienced asset management professionals.
Finally, Camco can report that it is pleased with recent production performance from Dallas Clean Energy (formerly McCommas), the landfill gas asset acquired last year.
Enquiries:
| The Camco Group | +44 (0)20 7121 6100 |
| Jeff Kenna, Chief Executive Officer | |
| Scott McGregor, Chief Financial Officer | |
| KBC Peel Hunt Ltd (Nominated Adviser and Broker) | +44 (0)20 7418 8900 |
| Jonathan Marren | |
| David Anderson | |
| Gavin Anderson | +44 (0)20 7554 1400 |
| Ken Cronin | |
| Kate Hill | |
| Janine Brewis | |
| Daniela Stawinoga |
Notes to editors:
The Camco Group is a leading climate change business in the growing carbon and sustainable energy markets. We offer a full range of carbon-related services to public and private organisations worldwide. The Group has a 20-year track record and manages one of the world's largest carbon credit portfolios.
The Group consists of three business segments:
The Camco carbon assets business is a leading project developer with one of the world's largest carbon credit portfolios. We partner with companies to identify, develop and manage projects that reduce greenhouse gas emissions, and then arrange the sale and delivery of carbon credits to international compliance buyers and into the voluntary market.
The consulting practice consists of Bradshaw, ECCM, ESD and ESD Sinosphere. It combines specialist technical, strategic and financial expertise and experience accrued over two decades to deliver a sustainable low carbon society. We are positioned to work with our clients to turn climate change liabilities into economic, social and environmental assets.
Camco Ventures works with project and technology developers, early stage businesses and investor Groups to commercialise climate change mitigation technologies, projects and services. Part of this business is the Camco asset management vehicle.