News

March 05, 2008

EcoSecurities Sell Off Is Likely Overdone But Regulatory Risk Remains High

By Rue Swabey

Last November Aim-traded carbon broker EcoSecurities told the market that it was shaving 23 per cent of its carbon portfolio, reducing it down to 130 million tonnes of Certified Emission Reductions (CERs), because of delays in project approvals. These delays are limiting the registration of projects and the issuance of CERs with the result that revenues and earnings for 2007 will be below expectations. The market reacted swiftly and the share price fell by 47 per cent to 138p. The correction might have been greater had EcoSecurities not had €109 million in the bank.

EcoSecurities is an early mover in the sector and has significant technical expertise. Its portfolio is diversified by methodology and region. While that diversification is generally considered prudent it has also caused problems for EcoSecurities. The Clean Development Mechanism, or CDM, is part of the Kyoto Protocol, is a mechanism that allows developed countries to create carbon credits through carbon-reduction programmes in developing countries. Well and good, but the CDM project cycle is...