6 Aug 2009 07:00
Camco International - Trading update
Camco International Ltd
6 August 2009
Camco International Limited
Trading Update
The Camco Group, a leading climate change and sustainable development business, is pleased to provide a trading update for the period to 30 June 2009.
HIGHLIGHTS as at 30 June 2009
Maturing of the carbon portfolio with 30.9m risked tonnes are now through the critical stage of first independent verification. This represents a 69% increase since 31 March 2009 (of 18.3m);
In specie portfolio of 30.6m risked tonnes with 85% of credits now from Clean Development Mechanism projects;
Cash share portfolio of 16.8m risked tonnes; an increase of 2.2m tonnes since 31 March 2009.
The China gross risked portfolio has increased by 6m tonnes with a reduction in Russian Joint Implementation projects of 12m tonnes;
Strong cash position at 30 June 2009 of approximately €18.3 million.
Jeff Kenna, Camco Chief Executive, said:
"Camco has had a solid start to the year. Our projects continue to progress through the registration process and improving economic conditions have resulted in the anticipated strengthening of the carbon price. As we approach the Copenhagen negotiations in December, governments around the world continue to expand their commitments to fight climate change. The next twelve months will be an exciting and successful time for our business."
Notes to editors:
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 | |
| Kreab Gavin Anderson | +44 (0)20 7074 1800 |
| Ken Cronin | |
| Kate Hill | |
| Michaela Wood | |
About Camco
Camco is an international leader in identifying and implementing solutions that help businesses address their climate change risks and opportunities. Camco has a 20-year track record in advisory services and one of the largest and most diversified portfolios of carbon credits, making it a premier climate change and sustainable development company.
Camco brings together the distinct but complementary service areas of Carbon Credits, Advisory and Investments to help its clients manage all aspects of their carbon risk. 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 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 Carbon business unit has also 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 ground breaking 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 turn innovative ideas into commercially viable and applicable solutions that will make a difference in tackling climate change.
Group
The reorganisation of the group structure into Carbon, Advisory and Investments has been successfully completed. This reorganisation was undertaken to focus Camco's respective businesses on delivery and achieving results. The new structure has already shown positive impact on the company operations.
The Company continues to have a strong cash position of approximately €18.3m at 30 June 2009.
Carbon
The period to 30 June 2009 has seen Camco's in-specie portfolio stabilise with a small decline in the gross portfolio. The in-specie portfolio has increased in value with more projects passing critical stages of the validation process.
The China team added new projects and improved performance of existing projects with a total increase in the gross risked portfolio of more than 6m tonnes at 30 June 2009. However, the Russian portfolio of Emission Reduction Unit (ERU) projects was severely impacted by the delays in the approval of Russian LOAs. This delay and validation bottlenecks in Russia have resulted in excess of 12m tonnes being removed from the gross risked portfolio. Remaining Russian ERU projects total approximately 14m tonnes of the gross risked portfolio which are subject to Russia LOA approval.
The global recession and resulting falls in industrial production have had a mixed impact on the Company. The period of depressed carbon prices early in 2009 has allowed Camco to secure new projects at attractive prices. However, the fall in industrial production in China has led to reductions in CER generation for registered and operating projects. A second impact was the increased difficulties by project owners to secure financing which has led to delays in construction.
The China team has continued to expedite projects though the validation process with the gross portfolio 30.9m tonnes are now through first verification representing a 69% increase on verified tonnes since 31 March 2009.
New Designated Operational Entities (DOE) have been appointed to reduce the backlog of projects awaiting submission for registration. However, capacity within the CDM validation process has yet to expand significantly enough and the Company continues to experience delays in undertaking validation activities with DOEs.
Camco achieved the registration of its first Gold Standard Voluntary Emission Reduction (VER) project, which is only the second project to achieve the Gold Standard registration in China.
With the improvement in the carbon price since 31 December 2008 the Company is continuing to explore the possibility of a structured portfolio sale.
Table 1 - Portfolio classifications
| Portfolio classification | Definition |
| PDD | PDD estimated production forecasts. Projects contracted but assessed by Camco as currently unlikely to become operational are not included. |
| Risk Adjusted | 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 carbon credit portfolio by stage
| Progress through stage1 | 30-Jun-09 | 31 Mar 09 | 30-Jun-09 | 31 Mar 09 |
| PDD3 | PDD3 | Risked | Risked | |
| (m tonnes) | (m tonnes) | (m tonnes) | (m tonnes) | |
| Contracted | 145.3 | 156.1 | 92.7 | 100.9 |
| PDD complete | 129.8 | 123.3 | 82.2 | 78.8 |
| Host LoA | 114.3 | 105.1 | 71.6 | 64.5 |
| Validated | 90.3 | 90.8 | 56.6 | 55.8 |
| Submitted for registration | 81.7 | 79.5 | 50.9 | 46.7 |
| Registered | 80.0 | 78.3 | 49.8 | 46.0 |
| 1st verification2 | 43.8 | 25.8 | 30.9 | 18.3 |
| Issued | 6.5 | 5.6 | 6.5 | 5.6 |
| Financed | 119.9 | 124.6 | 80.9 | 85.5 |
| Under construction | 117.6 | 117.4 | 79.0 | 81.4 |
| Operational | 92.3 | 97.6 | 62.4 | 67.8 |
| 1 | CDM stage or equivalent for JI and VER projects |
| 2 | Projects that have been through a minimum of one verification process or equivalent |
| 3 | Prior to validation or determination, PDD numbers reflect Camco's current anticipated project delivery |
Table 3 - Summary of Camco's In specie carbon credit portfolio1
| Progress through stage2 | 30-Jun-09 | 31 Mar 09 | 30-Jun-09 | 31 Mar 09 |
| PDD4 | PDD4 | Risked | Risked | |
| (m tonnes) | (m tonnes) | (m tonnes) | (m tonnes) | |
| Contracted | 51.5 | 51.1 | 30.6 | 32.0 |
| PDD complete | 43.7 | 35.8 | 25.2 | 22.1 |
| Host LoA | 38.6 | 29.2 | 22.0 | 17.0 |
| Validated | 27.7 | 25.8 | 15.7 | 15.0 |
| Submitted for registration | 24.2 | 22.5 | 13.3 | 11.9 |
| Registered | 23.7 | 22.3 | 13.0 | 11.8 |
| 1st verification3 | 8.7 | 2.9 | 6.0 | 2.2 |
| Issued | 0.5 | 0.2 | 0.5 | 0.2 |
| 1 | Camco's in specie portfolio excludes VERs |
| 2 | CDM stage or equivalent for JI and VER projects |
| 3 | Projects that have been through a minimum of one verification process or equivalent |
| 4 | Prior to validation or determination, PDD numbers reflect Camco's current anticipated project delivery |
Table 4 - Overview of Camco's carbon credit portfolio by contract type
| Contract structure | 30-Jun-09 | 31 Mar 09 | 30-Jun-09 | 31 Mar 09 |
| PDD | PDD | Risked | Risked | |
| (m tonnes)2 | (m tonnes)2 | (m tonnes) | (m tonnes) | |
| Carbon share | 110.1 | 124.1 | 68.1 | 79.6 |
| Carbon share held in specie1 | 51.5 | 51.1 | 30.6 | 32.0 |
| Cash share | 26.2 | 24.7 | 16.8 | 14.6 |
| VERs | 8.5 | 7.3 | 7.8 | 6.7 |
| 1 | Carbon share held in specie refers to the portion of the carbon asset portfolio over which Camco has an interest. |
| 2 | Prior to validation or determination of official PDD forecasts, PDD numbers reflect Camco's current anticipated project delivery. |
Table 5 - Additional information on Camco's portfolio
| 30-Jun-09 | 31 Mar 09 | |
| Risked | Risked | |
| (m tonnes) | (m tonnes) | |
| Gross portfolio breakdown (m tonnes) | ||
| CERs | 70.6 | 67.7 |
| ERUs | 14.4 | 26.5 |
| VERs | 7.8 | 6.7 |
| Total | 92.7 | 100.9 |
| 30-Jun-09 | 31 Mar 09 | |
| Risked | Risked | |
| (m tonnes) | (m tonnes) | |
| Carbon share in specie (m tonnes) | ||
| CERs | 26.0 | 25.1 |
| ERUs | 4.6 | 6.9 |
| VERs | - | - |
| Total | 30.6 | 32.0 |
| Camco Portfolio and forward sales1 | ||
| Carbon share | 30.6 | 32.0 |
| Carbon share forward sold | 3.4 | 4.4 |
| Cash share | 16.8 | 14.6 |
| Cash share forward sold | 9.9 | 10.5 |
| VERs | 7.8 | 6.7 |
| VERs forward sold | 2.6 | 2.7 |
| Price - in specie portfolio | ||
| Average purchase price | 7.92 | 7.92 |
| 1 | For a small number of forward sales some percentage of Camco's sale price remain 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 continued to face challenging trading conditions and for the year to date is performing significantly below management's expectation. As part of the Group reorganisation, staff numbers in this business unit have been reduced by 11%. However, the Advisory business is currently loss making year to date and is expected to continue to do so for the remainder of 2009.
The business has responded to these conditions by pursuing new business and expanding the Advisory service offering. The Company has enjoyed significant contract wins with two contracts totalling more that £1m being awarded in 2009 and has a strong sales pipeline. A software tool, Carbon Desktop, has been launched to help UK companies manage their obligations under the Carbon Reduction Commitment (CRC).
The Advisory business continues to provide technical support, IP and lead generation for the other business units.
Investments
The Investment business continues to pursue project and clean tech investment in China and the United States of America. Current economic conditions have led to a number of attractive project opportunities requiring project finance which the Company is currently evaluating.
Outlook
Camco's businesses continue to trade in line with management expectations, aside from the Advisory business as noted. Last year the Company booked a maiden profit as a result of the award winning forward sale transaction which resulted in a non-recourse payment of €15 million. In the absence of a forward sale this year, the Company anticipates a loss for the period to 31 December 2009. The Company will consider a further portfolio sale this year should there be an improvement in the carbon price.