Climate Exchange defies gloom as volumes rise

By Fiona Harvey, Environment Correspondent
Published: September 18 2008 17:18

Climate Exchange defied the gloom that has settled over the carbon markets, saying trading volumes had risen strongly.
However, its share price slipped 15p to £11.15, reflecting doubts over its high valuation. The company, which runs an exchange on which carbon credits are traded, said it had narrowed its pre-tax losses from £2.8m for the first half last year to £304,000 for the six months to June 30.
Neil Eckert, chief executive, said trading in carbon credits over the exchange was about 150 per cent higher than usual, reflecting continued interest in the sector in spite of the turmoil in other financial markets.
He said the company was entering new areas, with products such as a hurricane contract that pays out on the basis of the severity of hurricanes, and partnerships in markets such as China. He also pointed to the US, where both presidential candidates have pledged to put in place a federal carbon trading system.
But Climate Exchange’s share price has fallen by nearly half. Its high valuation – its market capitalisation is more than £500m – relative to the carbon trading sector is one reason.
Ken Rumph, analyst at Noble, said the fall in the share price was to do with the way in which its shares were valued by the wider market: “Climate Exchange was valued with a remarkable willingness to look a long way into the future. Most investors are now not willing to make those assumptions.”
He added: “The company is not doing anything wrong – they have cash and money in the bank – but life is a bit less buoyant than it was in the first half of the year.”
Although a US carbon trading system would broaden the market, Climate Exchange would face increased competition from mainstream exchanges diversifying into the carbon market, Mr Rumph said.
Copyright The Financial Times Limited 2008