TRE : Trading Emissions NAV falls
Trading Emissions has announced its full year results for the period ended 30 June 2014. It made quite sizeable distributions to shareholders during the year (15p in July 2013 and 8p in June 2014), in line with its policy to sell off its portfolio and return the proceeds to shareholders, but it also wrote down the value of its remaining portfolio.
The net asset value fell to 11.8p – mainly accounted for by four private equity investments. Trading Emissions traded at a 36% discount to this net asset value at the end of June.
The private equity portfolio was written down by 10.4p during the year. The four remaining investments are Bionasa (a Brazilian biodiesel producer) which they say is effectively insolvent. They are trying to sell the investment to someone who can sort out the company’s debts. They say there is demand for biodiesel now and the company’s plant should be attractive to a purchaser. Element Markets – they are selling this off piecemeal and say they expect to receive further distributions from the company in this financial year. EWG Slupsk – sold in July for a payment of €7m then and between €15.4m and €19.1m over the following 48 months. TEP Renewables (owner and operator of solar plants in Italy) where falling electricity prices, lightning damage and problems with the solar panels they used in some of their larger plants have meant that revenue fell from €16.2m to €15.1m. they also have problems with the plant in Sicily (where a public road was supposed to be driven across the middle of one of their plants) and more generally with the Italian government who have just approved a law slashing subsidies to solar projects. All this could lead to a write down in the value of TEP renewables.
There is also an issue with the company’s carbon credit portfolio. litigation by holders of Emission Reduction Purchase Agreements (“ERPA). As this is complicated we have quoted the company’s text below.
“During the last half year, TEP was served with notices of arbitration in respect of six ERPAs governed by Hong Kong law relating to Chinese hydropower projects. On 20 March 2014, the Company received notices of arbitration challenging the enforceability of amendments that had been made to two ERPAs that had previously been renegotiated with the respective Chinese counterparties. The claims are for declaratory relief and sums alleged to be payable under the ERPAs. On 23 June 2014, TEP received four further notices of arbitration in respect of four further ERPAs, making similar claims for declaratory relief and sums alleged to be payable under these four further ERPAs. The aggregate sum alleged to be payable by the Company under all six of the notices of arbitration received to date amounts to approximately EUR 24.1 million, being approximately EUR 6.1 million in the first two cases and EUR 18.0 million in the more recent cases. Having taken legal advice, TEP believes the claims to be unjustified and is rigorously defending them. The Chinese counterparties made two applications for freezing injunctions to prevent TEP’s distribution to Shareholders on 24 June 2014. The initial applications were dismissed by the arbitration tribunal, and the later application by the Commercial Court in London, both dismissals on 23 June 2014.”