Bearish prices delay sale of 30.2m carbon portfolio
Weakening certified emissions reduction (CER) prices continue to delay the plans of UK carbon investor Trading Emissions PLC (TEP) to sell its carbon portfolio and its payment of dividends is being postponed. The company said in mid-year it had put the sale of its carbon portfolio on hold because of low certified emission reduction CER prices. Since then, prices have slumped further on the back of the eurozone crisis and a growing oversupply of emission allowances. Since July, TEP has sold and delivered 1.9m CERs, raising €16.0m, and also sold on a forward basis 1.25m CERs and 1.00m EU allowances (EUAs).The delivery breakdown is:
• 0.5m CERs for delivery in November 2011 at approximately €7.60/tonne of CO2 equivalent (tCO2e);
• 0.15 CERs for December 2011 delivery at approximately €6.67/tCO2e;
• 0.6 CERs for December 2012 delivery at €22.00/tCO2e; and
• 1m EUAs for December 2011 delivery at €11.90/tCO2e.
The company said it has around 30.2m CERs due for issuance before 2013 in its risk-adjusted portfolio. It had delivered around a third of that volume by 30 June this year. TEP said 98% of its pre-2012 portfolio has been registered with the UNFCCC, while the remaining 2% is in validation or registration.
Fewer credits for Chinese projects
TEP's expected portfolio is shrinking, having fallen by around 9% since the start of the year because Chinese renewable projects are expected to earn fewer credits as baseline grid emissions fall as risk rises for other project types. TEP expects to receive a further 4.7m CERs as of 2013, when phase III of the EU emissions trading system starts. Since TEP's release of its trading update on 10 October (see EDCM 10 October 2011), the closing price for the OTC CER Year '11 has lost €0.85/tCO2e (see graph).
During the intervening period, the CER benchmark contract has twice been assessed at €6.85/tCO2e, the lowest level at which the CER Year '11 contract has been assessed by ICIS Heren. The EUA premium has widened from €2.90/tCO2e to €3.40/tCO2e at the same time. TEP said the continued drop in carbon values since its July announcement about the delay in the sale of its carbon portfolio meant it was not in the company's interest to sell at a time of "extreme market volatility." According to researchers at Denmark's UNEP Risoe Centre on Energy, Climate and Sustainable Development, 964m CERs are expected in 2013-2020 from projects already registered but only 183m CERs from future projects
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