Trading Emissions PLC Regulatory News (TRE)

Trading Emissions PLC

Results for the six month period ended 31 December 2014

Trading Emissions PLC ("TEP" or "the Company"), a closed ended investment company that specialises in renewable energy projects and emissions instruments, today announces its results for the six month period ended 31 December 2014.

For further information:

Liberum +44 (0)20 3100 2222

Steve Pearce / Tom Fyson

IOMA Fund and Investment Management Limited + 44 (0) 1624 681200

Philip Scales

Chairman's Statement

Dear Shareholder

The first six months of the financial year for Trading Emissions PLC ("TEP" or the "Company") were focused mainly on:

· realising cash and improving the prospects of further distributions from investments to TEP;

· reducing non-litigation operating costs; and

· improving the transparency of the financial statements.

The most unpredictable financial issue currently facing the Company remains the cost and outcome of the arbitration processes.

Financial Highlights

Change in the basis of preparation of financial statements

There has been a significant change in the preparation and presentation of TEP's interim financial statements for the six month period ended 31 December 2014. The financial statements provided with this report have been prepared on the basis of the adoption of IFRS 10 as the standard applies to investment entities such as TEP.

In the past, TEP was required to consolidate all controlled subsidiaries under the then-prevailing IFRS accounting standards. This confused rather than illuminated TEP's financial position. For example, the fair values of the carbon portfolio and minority stakes in private equity investments were reflected in the Company's Consolidated Statement of Financial Position together with the consolidated balance sheets of controlled subsidiaries that, for example, owned and operated solar plants in Italy, the right to build and operate a wind farm in Poland, an anaerobic digestion facility in Texas, biogas projects in Thailand and land holdings in Africa. Adjustments were then made for minority interests held by third parties. Net asset value ("NAV") was thus an accounting number that did not always reflect fair value and thus the proceeds that the Board believed might be achieved in a sale at any particular time. Given that, in reality, the Board viewed all assets as financial investments available for sale at the right price, over the past three years, we have carried out fair value assessments of all investments and disclosed to shareholders - within the chairman's statement - the aggregate estimated fair value of all investments (no matter whether or not they were minority interests or controlled subsidiaries) to give a sense of the estimated potential realisation proceeds. Two different, in effect, NAV figures always had the potential to cause some confusion, although both were technically 'correct'.

The adoption by TEP of IFRS 10 applicable to investment entities in the current financial period means that TEP can now (and in the future) avoid providing two different investment valuation numbers to shareholders at the date of preparation of the financial statements. In the attached financial statements, the Company's net asset value at 31 December 2014 is now based on the fair value of all investments, both controlled and uncontrolled. No subsidiaries have been consolidated into these financial statements. Shareholders should note that the NAV figure at 31 December 2014 in these financial statements is not directly comparable to the previously published financial statements at 30 June 2014 and 31 December 2013. In accordance with IFRS 10, we have restated the Statements of Financial Position at 30 June 2014 and 31 December 2013 respectively to include our investments at fair value at the same values as previously disclosed in each period's chairman's statement. A reconciliation is provided in note 2a to the financial statements. Other than accounting for the factors described below in the latest fair value assessments of investments, there has been no material change to the main assumptions underlying the previous fair value disclosures and estimates.

Net Asset Value

During the first six months of the financial year, the NAV of the Company reduced marginally to GBP 37.8 million (15.1p per share) from a restated GBP 37.9 million (15.2p per share) at 30 June 2014 and a restated GBP 60.3 million (24.1p per share) at 31 December 2013. The reduction in NAV during the half year was caused mainly by an increase in the liability associated with the provision for the estimated legal costs in connection with the arbitrations (see below) and a small increase in the fair value of the private equity portfolio.

Cash

The Company held cash of GBP 4.9 million (1.9p per share) at 31 December 2014 compared with GBP 5.0 million (2.0p per share) at 30 June 2014 and GBP 16.4 million (6.6p per share) at 31 December 2013. At 31 December 2014, an additional GBP 6.2 million (2.5p per share) of cash was held in wholly-owned and intermediate subsidiaries of TEP.

Carbon Portfolio

Valuation

The value of the carbon portfolio at 31 December 2014 was a net liability of GBP 2.2 million (0.9p per share), compared with a net liability of GBP 2.4 million (1.0p per share) at 30 June 2014 and a net liability of GBP 1.8 million (0.7p per share) at 31 December 2013. The liability in the attached financial statements arises principally from an estimate of the potential liability under one fixed price Emission Reduction Purchase Agreement ("ERPA") which had not been terminated at the end of 2014.

TEP's inventory of CERs at 31 December 2014 was minimal, with only nominal carrying value. As TEP is not projecting to receive any further fixed price CERs, no hedges were in place at the end of the financial period.

Sale of ERPA portfolio

In March 2014, TEP announced the sale of its then-existing stock of CERs and a portfolio of 24 floating rate ERPAs for a nominal consideration. As limited progress has been made in transferring the individual ERPAs, TEP and the buyer have mutually agreed to terminate the sale agreement. TEP has identified a number of alternative potential buyers of the portfolio. We do not expect any significant consideration for the sale of these ERPAs given prevailing market prices of CERs.

Since the end of the financial period, notice of termination has been given in respect of the remaining fixed price ERPA to which TEP was party.

Arbitrations

During the previous financial period, six claims were made against the Company by Chinese counterparties to ERPAs, which are now the subject of arbitration proceedings in Hong Kong under Hong Kong law. The first two claims, which are for a combined amount of approximately EUR 6.1 million, are shortly to be considered together by a tribunal comprised by three arbitrators. The following four claims, which are for an aggregate amount of EUR 18.0 million, have not been consolidated and therefore each is subject to a separate proceeding. In the Board's view, the basis of all the claims is spurious and misconceived and the quantum of the claims is incorrect.

All of the claimants are special purpose companies, which operate hydro-power projects in Yunnan province. The counterparties to the ERPAs are all subsidiaries of the Yunnan Dianneng (Group) ("Dianneng"), which is ultimately controlled by China Power Investment Group ("CPI"), one of China's largest energy companies. A subsidiary of CPI is listed on the Stock Exchange of Hong Kong. Our recent experience indicates that not all subsidiaries and/ or agents of CPI comply with the standards of governance, record keeping and professional and ethical behaviour that are gradually being adopted by China's leading enterprises. CPI enjoys business relationships with many companies around the world and aspires to become a leading participant in the domestic carbon market that the Chinese authorities aim to develop. The Board regrets that, following a mutually fruitful relationship lasting eight years, Dianneng has chosen to pursue an aggressive strategy to extract money from TEP.

The floating rate ERPAs now in dispute with Dianneng are very similar to those we have in place with other Chinese counterparties. Those other ERPAs operate smoothly, albeit with limited CER issuance given the prevailing market prices and costs of registration.

According to the current arbitration schedules, the tribunal in respect of the first two claims could render a decision by the summer. Each of the following four arbitrations will proceed at a different pace given the decision of the Hong Kong International Arbitration Center to appoint different sole arbitrators to preside over each of the four cases. This is the result of the claimants manipulating the appointment system within the rules applicable to these Hong Kong arbitrations. This has meant that now, claims with almost identical merits and arguments are to be decided by different arbitration tribunals, with only very limited rights of appeal for the claimants or TEP to ensure consistency of final outcomes. Given the costs, time and risks involved, it is hard to see how such potentially inconsistent decisions by arbitrators under Hong Kong law is just, efficient or cost effective.

Up to the end of 2014, TEP had incurred tribunal, mediation, legal, investigation and related expenses in connection with these arbitrations of approximately GBP 489,000. Following a detailed review of the projected costs of defending the Company from the claimants' actions, including the costs of continuing different arbitration proceedings, at the end of the financial period, TEP increased its provision for estimated future legal and other costs related to these arbitrations to GBP 2.1 million from GBP 1.0 million at 30 June 2014.

Private Equity Portfolio

Valuation

The aggregate fair value of the private equity portfolio at 31 December 2014 in accordance with IFRS 10 was GBP 37.7 million (15.1p per share), compared with restated fair values of GBP 37.2 million on 30 June 2014 and GBP 46.3 million on 31 December 2013.

Consistent with past practice and to protect commercial sensitivities, TEP does not disclose the carrying values of individual private equity investments.

Surya/ TEP Solar

TEP Solar's five photovoltaic ("PV") plant subsidiaries in Italy generated aggregate revenues of EUR 7.6 million during the first half of the financial year, compared with EUR 15.1 million during the financial year ended 30 June 2014, of which EUR 7.8 million was generated during the first six months.

We focused significant resources during the first half of TEP's financial year to resolve the various issues that confronted TEP Solar.

We reached agreement in principle with the Sicilian provincial authority to reroute the public road that had been planned to cut through the Librandello PV plant, together with the expropriation of our land. We now await approval from the regional Government of Sicily.

Following consultations with the lenders to each of our PV plants in respect of the effect of the 'spalma incentivi' legislation, amendments to the financing structures were agreed and documentation should soon be completed. In four cases, we elected to restructure the incentive tariff, reducing receipts during 2015 to 2019, which will be offset by an increase of the same amount during the subsequent remaining contracted period of each incentive tariff. In one case, we elected for an outright reduction in the incentive tariff of 8% for the remaining contracted period. TEP is reserving its rights in the event that the legislation is, in effect, reversed by the competent European bodies, Italian courts or international arbitration tribunals. In broad terms, we estimate that the effect of the spalma incentivi legislation has been to reduce the net present value of TEP Solar's consolidated projected future revenue stream by 16%.

Discussions with First Solar regarding the abnormal rate of panel degradation at TEP Solar's three larger PV plants proved fruitless. However, negotiations with the EPC contractor, Belectric, have made headway in respect of the Librandello plant and a preliminary agreement to replace approximately 10% of the solar panels has been agreed in principle.

EWG Slupsk

The sale of TEP's interest in EWG Slupsk announced in July 2014 generated proceeds of EUR 7.0 million (GBP 5.6 million) and envisages further receipts of between EUR 15.4 million and EUR 19.1 million between 2015 and 2018 based on milestones related to closure of debt financing arrangements and commissioning of the wind farm project in Poland. The buyer has experienced delays in progressing the project and arranging the debt financing, caused by a combination of changes in the environmental law, amended development approvals and infrastructure issues which may delay receipt of further proceeds by TEP.

Element Markets

Management continues to progress the de-risking of Element Markets' portfolio and sale of distinct business units. A distribution of GBP 1.8 million was received by TEP in December 2014 and further amounts are expected in due course.

Bionasa

TEP's wholly owned Brazilian subsidiary, Billiter Participações, is still unable to increase its 25% equity interest to over 99% through the conversion of its preference shares in biodiesel plant operator, Bionasa. The final arbitration decision to permit conversion awaits the payment by our joint venture partners of their outstanding arbitration fees. Our financial adviser has identified a preferred buyer of our investment and the terms of a conditional sale are currently being negotiated.

Santa Rita/ Electricidad Andina

In April 2012, TEP announced the sale by Santa Rita LP of Electricidad Andina S.A., a company incorporated in Peru with rights to a 255MW run-of-river hydro project to a subsidiary of AIM-listed Rurelec PLC. The Peruvian Government has announced a new project tendering process for large hydros in which Rurelec intends the Santa Rita project to participate. We are in discussions with Rurelec with a view to accelerating the payment of deferred consideration linked to Santa Rita achieving a successful financial closing based on the award of a Government power purchase agreement.

Operating Expenses

Aggregate operating expenses, which comprise investment services fees, administration fees and other operating expenses, includinglegal costs and provisions in connection with the arbitrations, in the first half of the financial year amounted to GBP 2.8 million, compared with GBP 5.5 million in the financial year ended 30 June 2014 and GBP 2.8 million in the six months ended 31 December 2013. Details of other operating expenses are provided in Note 8 to the financial statements. Operating expenses incurred in the ordinary course of TEP's business (i.e. excluding the costs associated with the arbitrations) are expected to decline during the current financial year.

TEP's most significant operating costs are now legal and professional expenses. These can be split broadly as follows:

Legal & Professional Expenses

The services of EEA Fund Management Limited ("EEA") continue to be retained by TEP in relation to (a) TEP's carbon portfolio, including support for the arbitration processes; and (b) EWG Slupsk. Performance fees are also payable to EEA based on receipts from the sale of the carbon portfolio, EWG Slupsk and/ or Element Markets.

The Board actively monitors all operating expenses.

Board Composition

In order to reduce the cost and operations of TEP consistent with the shrinking size of the Company, Chris Agar and Norman Crighton resigned and did not seek re-election at the AGM in December 2014. The Board expresses its thanks to Chris and Norman for their efforts and wisdom.

Outlook

The Board continues to work on maximising the value of TEP's remaining investments and, in due course, to realising the value. The arbitrations are consuming significant resources, both financial and non-financial, and, absent an agreed settlement, we can expect this to continue for the remainder of 2015. Given CPI's reputation and aspirations, TEP continues to hope that an amicable solution can be agreed with Dianneng.

Martin M Adams

Chairman

20 March 2015

Statement of Comprehensive Income

 * See note 2

Statement of Financial Position

* See note 2

The interim financial statements were approved and authorised for issue by the Board of Directors on 20 March 2015 and signed on its behalf by:

Philip Scales Neil Duggan

Director Director

Statement of Changes in Equity

* See note 2

Cash Flow Statement

* See note 2

** At 31 December 2013 cash and cash equivalents is made up of GBP 16,432,000 attributable to the Company and GBP 434,000 of cash held in a disposal group classified as held for sale.

Notes to the Interim Financial Statements

1 Operations

Trading Emissions PLC (the "Company") invests in environmental and emissions assets, companies providing products and services related to the reduction of greenhouse gas emissions and associated financial products. The Investing Policy of the Company was amended on 13 September 2010 to carry out an orderly realisation of the portfolio of carbon and private equity assets, distribute the net proceeds to Shareholders and then undertake a voluntary winding-up of the Company. No new private equity investments will be made except where the Board of Directors of the Company (the "Board") considers it necessary to provide follow-on capital to protect an existing investment.

The Company is a closed-ended investment company domiciled in the Isle of Man. The address of its registered office is IOMA House, Hope Street, Douglas, Isle of Man. It was incorporated on 15 March 2005 in the Isle of Man as a public limited company and is quoted on the Alternative Investment Market ("AIM") operated and regulated by the London Stock Exchange. In December 2011, the Company was re-registered under the Isle of Man Companies Act 2006.

During the period, the Company adopted IFRS 10 'Consolidated Financial Statements'. The Board has concluded that the Company meets the definition of an "investment entity" under IFRS 10. As a result, the Company has changed its accounting policy for its subsidiaries to measure them at fair value through profit or loss (see note 2).

2 Basis of Preparation

The unaudited interim financial statements have been prepared using the recognition measurement principles of International Financial Reporting Standards and Interpretations adopted for use in the European Union (collectively "IFRSs").

The principal accounting policies applied in the preparation of the interim financial statements are those the Company expects to apply in its financial statements for the year ended 30 June 2015.

Other than the standards noted below, the principal accounting policies applied in the preparation of the interim financial statements are unchanged from those disclosed in the annual audited financial statements for the year ended 30 June 2014. These policies have been consistently applied to each of the periods presented. The audited financial statements for the year ended 30 June 2014 are available at www.tradingemissionsplc.com.

While the financial information included in the interim financial statements has been prepared in accordance with the AIM Rules for companies, the interim financial statements do not themselves contain sufficient information to comply fully with IFRSs. As permitted, the Company has chosen not to adopt IAS 34 'Interim Financial Statements' in preparing its interim financial statements.

The interim financial statements for the six months ended 31 December 2014 should be read in conjunction with the annual financial statements for the year ended 30 June 2014, which have been prepared in accordance with IFRSs.

a) Change in accounting policy

The Company has adopted the following standards and amendments to IFRS as of 1 July 2014:

IFRS 10 'Consolidated Financial Statements'. The standard builds on existing principles for the presentation and preparation of consolidated financial statements and provides additional guidance to determine control where it is difficult to assess.

IFRS 12, 'Disclosures of Interests in Other Entities'. The standard requires disclosure for all forms of interests in other entities, including joint arrangements, associates, special purpose vehicles and other off balance sheet vehicles.

Investment Entities (Amendments to IFRS 10, IFRS 11, IFRS 12 and IAS 27). The amendments define an investment entity and introduce an exception to consolidating particular subsidiaries of investment entities and instead require those subsidiaries to be measured at fair value through profit or loss in accordance with IAS 39.

In accordance with the above, the Board has concluded that the Company meets the definition of an investment entity because the Company has the following characteristics:

(a) The Company has obtained funds for the purpose of providing investors with investment management services.

(b) The Company's initial Investing Policy, which was communicated directly to investors, is investment solely for returns from capital appreciation and investment income.

(c) The performance of investments is measured and evaluated on a fair value basis.

As a result, the Company has changed its accounting policy for its subsidiaries to measure them at fair value through profit or loss. Before adoption of the amendments, the Company consolidated the subsidiaries.

The net asset value has changed due to subsidiaries that were historically recorded at their consolidated net asset value now being accounted for as financial assets or liabilities at fair value through profit or loss. Changes in fair value are accounted for through the net changes in fair value of financial assets and financial liabilities at fair value through profit or loss. As the Company's interest in its subsidiaries is now reported at fair value the share of equity attributable to non-controlling interests no longer exists. As part of the restatement the translation reserves of those subsidiaries denominated in foreign currencies has been released to retained earnings.

In accordance with the transitional provisions of the amendments, the Company has applied the new accounting policy retrospectively and restated the comparative information for the year ended 30 June 2014 and the 6 months ended 31 December 2013 retrospectively. If an investment entity disposed of, or lost control of an investment in a subsidiary before the date of adoption of IFRS10, the investment entity is not required to make adjustments to the previous accounting policy for that subsidiary. Therefore investments which were disposed of before 1 July 2014, remain as previously stated in the comparatives.

The change in the accounting policy resulted in an adjustment to the net assets attributable to equity holders of the Company. The tables below presents, in respect of the periods immediately preceding the date of initial application, the resulting changes for each financial statement line affected.

The Company has or intends to adopt the following standards no later than the accounting period in which they become effective:

IFRS 9, 'Financial Instruments' - The standard is the first step in the process to replace IAS 39 Financial Instruments: Recognition and measurement. It introduces new requirements for classifying and measuring financial assets and financial liabilities. The standard will be effective for accounting periods beginning on or after 1 January 2018, subject to EU endorsement.

There are no other IFRS or IFRIC interpretations that are not yet effective that would be expected to have a material impact to the Company.

b) Significant estimates

Estimates and judgements are regularly evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The Company makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results.

As a result of the Company being recognised as an investment entity under IFRS 10 all subsidiaries are measured at fair value through profit or loss. The fair value determined by the Board of the subsidiaries (see note 3) is a significant estimate. All other significant estimates remain unchanged from those disclosed in note 7 of the annual audited financial statements for the year ended 30 June 2014.

3 Financial risk management

Fair value estimation

Assets and liabilities held by the Company carried at fair value include ERPAs, CER inventory and private equity investments.

The table below analyses the Company's asset and liabilities carried at fair value by valuation method. The different levels have been defined as follows:

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability either directly (that is, as prices) or indirectly (that is, derived from prices); and

Level 3: Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs).

The categorisation of a financial instrument within the hierarchy is based upon the pricing transparency of the instrument and does not necessarily correspond to the Company's perceived risk of that instrument. A financial instrument's level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. However, the determination of what constitutes "observable" requires significant judgement by the Board.

A market is regarded as active if quoted prices are readily and regularly available from an exchange. The quoted market price used for assets held by the Company is the last traded price at the date of valuation. Those instruments included within Level 1 are the Company's CER inventory with a fair value of GBP 1,000 (30 June 2014: GBP nil).

The fair value of assets and liabilities that are not traded in an active market is determined using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in Level 2, otherwise they are classified as Level 3. Where valuation techniques (for example, models) are used to determine fair values, they are validated and reviewed by experienced personnel. Models are calibrated by back-testing to actual transactions to ensure that the outputs are reliable.

The Company holds no Level 2 assets or liabilities.

The instruments included within Level 3 are the Company's:

· ERPAs

· Private equity investments

Fair value inputs

The valuation methodologies, significant assumptions and fair values of the Company's investments as at 31 December 2014 are summarised below:

Fair value subsidiaries, associates, partnerships and ERPAs

Fair value of financial assets and liabilities

*See Note 2

*See Note 2

4 Disposal of a subsidiary

On 7 July 2014, TEP (Renewables Holding) Limited ("TEP Renewables"), sold its interest in EWG Slupsk to Pakenham Spolka Z Organiczona Odpowiedzialnoscia (the "Buyer") for a minimum consideration, subject to price adjustments for the completion of the project in accordance with the sale and purchase agreement of EUR 22,414,000 (GBP 17,803,000). The consideration included EUR 7,000,000 (GBP 5,560,000) that was paid to TEP Renewables on 21 August 2014.  The remaining minimum deferred amount will be paid when the Buyer secures debt financing to fund the development of the project and the project is commissioned, which will be within a 48 month period from the date of sale. The deferred receivable may be greater than the minimum amount if the Buyer obtains debt under certain financing conditions from banks and successfully amends certain building permits. The Board has determined that the minimum proceeds are the most appropriate estimate of the deferred consideration.

TEP Renewables has provided various representations and warranties to the Buyer customary for this type of transaction. All representations and warranties will expire by 7 July 2016. The maximum aggregate potential liabilities are capped at 66% of all amounts actually received from the Buyer.

The deferred consideration is included in the fair value of the Company's investment in TEP Renewables at the reporting date. EEA Fund Management Limited ("EEA") is entitled to receive from the Company an Equity Transaction fee equal to 2.7 per cent of the net aggregate consideration received on the disposal of EWG Slupsk (see note 5). The fee is paid by the Company in line with the receipts of the deferred consideration received by TEP Renewables. On 25 September 2014 the Company paid a performance fee of GBP 144,000 (EUR 185,000) to EEA. Potential payments of up to GBP 317,000 remain payable at 31 December 2014.

5 Investment Services fees

Investment services fees paid to EEA for the 6 month period ended 31 December 2014 were GBP 296,000 (for the year ended 30 June 2014: GBP 974,000) (for the 6 month period ended 31 December 2013: GBP 690,000).

Under a Services Agreement, which became effective from 1 January 2014, EEA was paid a monthly fee of GBP 32,000 to cover services provided in relation to the investment in EWG Slupsk and the carbon portfolio. After the sale of the investment in EWG Sluspk, the monthly fee payable to EEA reduced to GBP 23,700.

 The table below provides a breakdown of the fees paid to EEA:

6 Directors' fees

In addition to his Directors' fees, during the period Christopher Agar was paid a consultancy fee for services provided in relation to the disposal of the investment in EWG Slupsk of GBP 65,000. GBP 30,000 of this fee was paid during the period. At 31 December 2014, an accrual had been made for the remaining consultancy fee of GBP 35,000.

The Company operates a Directors Incentive Plan ("DIP"). After the financial period end the terms of this agreement were changed and the DIP increased to 2% of any distribution to Shareholders.

On 5 December 2014, Christopher Agar and Norman Crighton resigned as Directors of the Company.

7 Net foreign exchange losses

Net foreign exchange losses have arisen on the translation of Euros ("EUR") and United States Dollars ("USD") denominated cash to British Pounds ("GBP"), the Company's functional and presentational currency.

8 Other operating expenses

* See note 2

9 Discontinued operations

During the current period and as at the 31 December 2014 the Company has no disposal groups classified as held for sale. Disposal groups stated in the comparative information relate only to investments which were disposed of before 1 July 2014 and remain consolidated in the restated comparative information up until their date of disposal in accordance with IFRS 10 (see note 2).

10 Loss per share for the period

(a) Basic

Basic profit or loss per share is calculated by dividing the profit or loss by the weighted average number of ordinary shares in issue during the period.

* See note 2

(b) Diluted

Diluted profit or loss per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. The Company had no dilutive potential ordinary shares at each of the reporting dates.

11 Net asset value per share

The net asset value per share is calculated by dividing the net assets by the number of ordinary shares in issue.

* See note 2

12 Share capital

The total number of authorised and issued ordinary shares of the Company is as follows:

All issued ordinary shares are fully paid, and each ordinary share carries the right to one vote.

13 Related party transactions

The related party transactions in the period are consistent with the nature and size of transactions disclosed in the notes to the Financial Statements for the year ended 30 June 2014.

14 Events after the Reporting date

On 7 January 2015, Shareholders resolved that the DIP be increased to 2% of any distribution to Shareholders.

Amounts relating to Norman Crighton's share of the DIP which were retained from previous periods were paid on 5 February 2015 at the discretion of the Remuneration Committee and amounted to GBP 79,000 (see note 6).

Subsequent to the reporting date the Buyer of EWG Slupsk has made TEP Renewables aware of planned infrastructure construction, which may impact deferred consideration to be received in the future. The decrease could be approximately EUR 1,750,000, which has been factored into the fair value of the investment at 31 December 2014.

15 Provisions

The Company has made a provision for legal fees likely to be incurred in association with the arbitrations (see note 16) of GBP 2,097,000 at 31 December 2014.

16 Contingent liabilities

During the previous financial period, six claims were made against the Company by Chinese counterparties to ERPAs, which are now the subject of arbitration proceedings in Hong Kong. The first two claims have been consolidated into a single arbitration process. The following four claims are each subject to a separate arbitration proceeding.

The aggregate sums alleged to be payable by the Company under all six of the notices of arbitration received amount to approximately EUR 24,078,000.

Having taken legal advice, the Company believes the claims made in the notices of arbitration to be unjustified and is rigorously defending them.

17 Approval of Interim Financial Statements 

The interim financial statements were approved by the Board on 20 March 2015.

Independent review report to Trading Emissions PLC

Introduction

We have been engaged by the Company to review the interim financial statements in the half-yearly financial report for the six months ended 31 December 2014, which comprises the statement of comprehensive income, the statement of financial position, the statement of changes in equity, the cash flow statement and related notes. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim financial statements.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half-yearly financial report in accordance with the AIM Rules for Companies which require that the financial information must be presented and prepared in a form consistent with that which will be adopted in the Company's annual financial statements.

As disclosed in note 2, the annual financial statements of the Company are prepared in accordance with IFRSs as adopted by the European Union. The interim financial statements included in this half-yearly financial report have been prepared in accordance with the basis of preparation set out in note 2.

Our responsibility

Our responsibility is to express to the Company a conclusion on the interim financial statements in the half-yearly financial report based on our review. This report, including the conclusion, has been prepared for and only for the Company for the purpose of the AIM Rules for Companies and for no other purpose. We do not, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the International Auditing and Assurance Standards Board. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the interim financial statements in the half-yearly financial report for the six months ended 31 December 2014 is not prepared, in all material respects, in accordance with the basis of preparation set out in note 2 and the AIM Rules for Companies.

Emphasis of Matter - Valuing financial assets and liabilities at fair value

Without modifying our conclusion, we draw your attention to the disclosures made in note 3 concerning the Board's estimations of the Company's financial assets and liabilities at fair value. As explained in note 2 the Board has estimated fair value taking into account all events and circumstances pertaining to those financial assets and liabilities. However, because of the uncertainty of the valuation basis, the estimated fair value may differ materially from the value of the financial assets and liabilities that might ultimately be realised.

PricewaterhouseCoopers LLC

Chartered Accountants20 March 2015

Douglas, Isle of Man

(a) The maintenance and integrity of the Trading Emissions PLC website is the responsibility of the directors; the work carried out by the auditor does not involve consideration of these matters and, accordingly, the auditor accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website.

(b) Legislation in the Isle of Man governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.