Where are the Carbon Profits? Part 2
Carbon Footprint
Helvecio Borges Guimaraes
Issue date: 3/10/09 Section: Voices
As we saw in the last article, carbon profitability is not something easy to achieve. Of the two companies we looked at, one delisted from the Alternative Investment Market (AIM) at the London Stock Exchange, and the other is still struggling to turn revenues into profits. Let's continue our investigation and check two other companies.
CAMCO International Limited (AIM:CAO) was established in 2003 and unlike many, has thrived the carbon markets. The firm was admitted to AIM in May 2006, placing about 39 million shares and raising about 25 million British pounds to develop carbon projects around the world. It claimed to have about 103 million of carbon credits in the company's portfolio at the end of 2006, a number that grew to about 150 million in 2007. In 2008, however, the company seemed to start lagging behind, and was able to increase its portfolio of contracted carbon credits by only about 4.4% through August. It is important to understand that 'contracted carbon credits' does not mean carbon credits already delivered to the company's portfolio; contracted carbon credits means credits the company expects to get based on the contracted project characteristics, such as technology, location and so forth.
Unfortunately the promise of such rosy future with millions of environmental assets originated at relatively low prices and to be sold in the international carbon markets for a premium did not seem to convince investors so far. According to Capital IQ, the company's stock traded only for about 8 months above the offering price of 64 pence since the IPO in April 2006. Possibly perceiving the difficulties to turn a profit on a carbon credit generation business model, CAO entered the consulting and asset management business. Only the consulting segment was profitable in the first half of 2008 according to the firm's interim report presentation.
It is important to notice that while the company's stock is down 88% since the IPO, the business has grown, though not profitably. Revenues increased about 70% on a last-12-months basis in June 2008 from December 2007; selling, general and administrative expenses also grew, but at a more modest pace. The challenge, therefore, is similar to Ecosecurities': generate cash and become profitable before the boilers run out of steam (CAO burned about 5 million euro in 2006 and about 12 million euro in 2007). The firm reported about 10 million euro in cash and short-term investments by June 2008 in its balance sheet. On March 5, 2009, CAO announced it would delay postpone publishing its full-year preliminary results. The problem appears to be related to accounting treatment of revenues. If rumors are confirmed, profitability is likely to be delayed once again.
CAMCO International Limited (AIM:CAO) was established in 2003 and unlike many, has thrived the carbon markets. The firm was admitted to AIM in May 2006, placing about 39 million shares and raising about 25 million British pounds to develop carbon projects around the world. It claimed to have about 103 million of carbon credits in the company's portfolio at the end of 2006, a number that grew to about 150 million in 2007. In 2008, however, the company seemed to start lagging behind, and was able to increase its portfolio of contracted carbon credits by only about 4.4% through August. It is important to understand that 'contracted carbon credits' does not mean carbon credits already delivered to the company's portfolio; contracted carbon credits means credits the company expects to get based on the contracted project characteristics, such as technology, location and so forth.
Unfortunately the promise of such rosy future with millions of environmental assets originated at relatively low prices and to be sold in the international carbon markets for a premium did not seem to convince investors so far. According to Capital IQ, the company's stock traded only for about 8 months above the offering price of 64 pence since the IPO in April 2006. Possibly perceiving the difficulties to turn a profit on a carbon credit generation business model, CAO entered the consulting and asset management business. Only the consulting segment was profitable in the first half of 2008 according to the firm's interim report presentation.
It is important to notice that while the company's stock is down 88% since the IPO, the business has grown, though not profitably. Revenues increased about 70% on a last-12-months basis in June 2008 from December 2007; selling, general and administrative expenses also grew, but at a more modest pace. The challenge, therefore, is similar to Ecosecurities': generate cash and become profitable before the boilers run out of steam (CAO burned about 5 million euro in 2006 and about 12 million euro in 2007). The firm reported about 10 million euro in cash and short-term investments by June 2008 in its balance sheet. On March 5, 2009, CAO announced it would delay postpone publishing its full-year preliminary results. The problem appears to be related to accounting treatment of revenues. If rumors are confirmed, profitability is likely to be delayed once again.
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