Trading Emissions PLC Regulatory News (TRE)

Trading Emissions PLC

4 September 2015

Trading Emissions PLC

Update on Carbon Arbitrations

Trading Emissions PLC (the "Company" or "TEP") announces that it has today been informed of the award made by the arbitration tribunal in respect of the largest claim lodged by a subsidiary of Yunnan Dianneng (Group) Holding Co. Ltd ("Dianneng"). The original claim was for approximately €7 million but was subsequently revised by Dianneng to €9 million towards the end of the arbitration process.

Arbitration Award

The arbitration tribunal found in favour of TEP and dismissed the claim in its entirety.

The tribunal also awarded TEP reimbursement of both HK$2,750,000 (approximately €320,000) of its direct costs and the sums TEP had paid as a deposit to the Hong Kong International Arbitration Centre ("HKIAC").

This tribunal comprised a sole arbitrator, who is an eminent and respected arbitrator with substantial experience determining complex international disputes in an arbitral capacity.

The decision of the tribunal is final and the arbitration award is binding. There are very limited rights of appeal.

Hong Kong arbitration awards are enforceable in China in accordance with the "Arrangement Concerning Mutual Enforcement of Arbitral Awards Between the Mainland and the Hong Kong Special Administrative Region". This Arrangement provides for the enforcement of Hong Kong arbitration awards in the Chinese courts, without re-opening the merits of the underlying disputes. Possible challenges to such enforcement are limited.

Background

In March and June 2014, the Company received notices of arbitration challenging the amendments that had been made to, in total, six Emissions Reduction Purchase Agreements ("ERPAs"), each between TEP and a project company owned by Dianneng.

Each claimant is a special purpose company, which operates a hydro-power project in Yunnan province, and is counterparty to an ERPA with TEP. These companies are subsidiaries of Dianneng, which is ultimately controlled by the 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.

The associated claims originally amounted to, in aggregate, approximately €24 million, but have since been revised by Dianneng to an aggregate of approximately €26 million. These figures do not include costs incurred as a result of the claims, which will usually be paid, at least in part, by the losing party to the winning party.

All submissions and hearings have been completed in respect of the first three claims, amounting to approximately €15 million. The single largest claim (approximately €9 million) has now been decided in TEP's favour and dismissed entirely. Decisions are imminent in respect of the two other claims which have been heard, amounting to a total of approximately €6 million.

The arbitration processes in respect of the remaining three claims, amounting to approximately €11 million, have been deferred by mutual agreement between Dianneng and TEP pending the issuance of awards in the claims that have been heard.

Each of the disputes is subject to arbitration proceedings in Hong Kong under Hong Kong law. TEP continues to believe that the basis of all of the claims is spurious and misconceived and that the quantum of the claims is in any event incorrect.

Each of the claims lodged by Dianneng's subsidiaries is based on substantially similar ERPA contractual terms and arguments. However, Dianneng's manipulation of the rules applicable to arbitrations in Hong Kong resulted in the HKIAC appointing different sole arbitrators to preside over each of four of the claims (being the single largest claim, now decided, and the three remaining claims). This has resulted in an inefficient and unnecessarily expensive resolution process for these disputes, with the inherent risk that the tribunals could render inconsistent decisions.

Enquiries:

IOMA Fund and Investment Management Limited +44 (0)1624 681250

(Philip Scales)

Liberum Capital Limited +44 (0)20 3100 2222

(Steve Pearce/ Tom Fyson/ Josh Hughes)