Interim Results

27 Mar 2008 07:02

Trading Emissions PLC27 March 2008 For immediate release27 March 2008 Trading Emissions PLC Interim Results for the six months ended 31 December 2007 Trading Emissions PLC ("TEP" or "the Company"), a closed end investment companythat specialises in renewable energy projects and emissions instruments such ascarbon credits, today announces its interim results for the six months ended 31December 2007. Operational highlights • On target to complete contracts for carbon purchase and acquisition sufficient to deliver a portfolio of 66 million carbon credits between 2008 and 2012 • As of 31 December 2007, risk adjusted CER portfolio under exclusivity and contracted total 57.04m of which 1.39m issued • As of 26 March 2008, risk adjusted CER portfolio under exclusivity and contracted total 57.09m of which 1.92m issued • Expects issued CERs to rise to at least 5 million by the end of April 2009 • Entered into a further sixteen CER purchase contracts in China, which are expected to deliver 10.1m CERs to 2012 on a risk adjusted basis • December 2007, net asset value per share of 184.41p Neil Eckert, Chairman of Trading Emissions PLC, said: "We have made significantprogress with our deal flow. Projects have been steadily converted from pipelineto exclusive term sheet and from exclusive term sheet to final contract. We nowfully expect to have 5 million CERs issued by the end of April 2009 and are ontrack to deliver a portfolio of 66 million carbon credits between 2008 and 2012. "Politically, the world's eyes are now on North America. We feel that there is astrong likelihood of a mandatory cap and trade scheme passing through thelegislature during 2009. The aggregate scheme baseline could be as high as sixbillion tonnes, and we consider it likely that the scheme will allow the use ofinternational offsets. This, combined with evidence of increasing marketactivity in Australia, Canada, Japan, China and India bodes well for TradingEmissions." --ENDS-- For further information: EEA Fund Management Limited +44 (0)20 7553 2361Simon Shaw, Investment Advisor to TEP Haggie Financial +44 (0)20 7417 8989Peter Rigby/Alexandra Parry Cenkos Securities plc +44 (0)207 397 8900Ivonne Cantu / Oliver Goad INTERIM STATEMENTfor the six months to 31 December 2007________________________________________________________________________________ CHAIRMAN'S STATEMENT It remains the Company's intention to aggregate a substantial portfolio ofcarbon assets and to commercialise these at the optimal point of liquidity andvalue. The ordinary share and C share were merged during the period at a ratio of0.8683 ordinary share per C share. Following the Company's share class mergerduring the period, we have made significant progress with our deal flow.Projects have steadily converted from pipeline to exclusive term sheet and fromexclusive term sheet to final contract. We continue to apply a robust riskadjustment methodology in our analysis and projected delivery, revising CERvolumes with respect to contractual status, technology type, CDM status andproject finance and construction. The Company's aggregate risk adjustedportfolio has increased not only as a result of new contracts, but also as aresult of previously contracted projects' progression through the CDM process atthe achievement of validation and registration milestones. The Company has consistently applied the same CER valuation method. The averageEuropean Allowances (EUAs) settlement price for December 2007 were €22.50,€23.04, €23.62, €24.23 and €25.03 for vintage 2008 to 2012 respectively, theimplied CER price at 68% of EUA price were between €15.30 and €17.02 for vintage2008 to 2012. This has led to a net asset value per share (combined with otherCompany assets) of 184.41p. We remain of the view that conditions in the CER secondary market are not yetoptimal for large scale disposal. However, we have entered into some modestdisposal, liquidity enhancing and rebalancing transactions that will create asmoother portfolio profile over the Kyoto compliance period. We expect thisactivity to accelerate over the coming months and are working to putinfrastructure in place to facilitate this development. Overall, current marketprices continue to support our valuation and return projections and thecumulative build-up of historic price data and analyst forecasts only add weightto our previously cited expectations. The Board has also been of the opinion,now corroborated by current market pricing, that the 2008 CER contract has thepotential to trade at a premium to the later years, as a result of a short-termdeficiency in supply; I believe the Company is well positioned to profit fromthis tendency. During a period of increased volatility in both the capital and carbon markets,the Company's business model and structure has proved to be robust. Delays anduncertainties in the CDM project approval process have created considerablechallenges for the Company's competitors; however Trading Emissions' structureand capitalisation and approach to contracting and risk adjustment leave theCompany in a strong position relative to its class. The strong balance sheetwill leave the financial condition of the Company uncompromised as a result ofany delay in the EU's connection to the International Transaction Log, and weanticipate no cash flow concerns. As the market mechanisms designed to deliver flexibility during the first Kyotocompliance period mature, the demographic of the market continues to changethrough competition and consolidation. We expect to see increasing replicationof the Trading Emissions' model amongst market participants - of directinvestment and financing to leverage an attractive position in carbon credits. It is also our view that the carbon market is entering a fresh phase ofevolution and design beyond 2012, and that it is of fundamental importance bothto pay keen attention to policy drivers and to engage with government and keypolicy makers, through business and trade associations, in the policy makingprocess. The Company will continue to ensure that it its strategy evolves withand alongside new market developments. Politically, the world's eyes are now on North America. We feel that there is astrong likelihood of a mandatory cap and trade scheme passing through thelegislature during 2009. The aggregate scheme baseline could be as high as sixbillion tonnes, and we consider it likely that the scheme will allow the use ofinternational offsets. This, combined with evidence of increasing marketactivity in Australia, Canada, Japan, China and India bodes well for TradingEmissions. The Board notes the disparity between the Company's current share price and thenet asset value, if this persists the Board will closely consider taking actionto address what it believes to be a short term anomaly. In January 2008, the Company bought back 6,985,000 shares at an average price of142.70p representing 2.43% of the total issued share capital. In the light ofthis price disparity, the Board will consider further share buybacks. Neil EckertChairman 27 March 2008 Investment Adviser's Report________________________________________________________________________________ The Company continues to make progress on the conversion of its carbon creditportfolio from negotiation and exclusivity stages to final contract. Inaddition, the portfolio of ERPA, debt (carbon loan) and equity investmentopportunities has continued to grow, despite the focus on consolidation of theproject pipeline and an active management process to advance projects throughthe CDM process. Here we summarise the Company's investment and originationactivities by region and provide an update on Certified Emissions Reductions("CER") issuance and commercialisation activities for the six months followingthe Company's most recent financial year ended 30th June 2007 and the subsequentthree months to the date of this report. On 31st December 2007, the Company's risk adjusted CER portfolio underexclusivity and contract, for delivery prior to 30th April 2013 stood at57,041,000 CERs, of which 51,496,000 were under contract, and of these 1,394,000had been issued (table 1). The total risk adjusted pipeline under negotiation,exclusivity and contract stood at 65,086,000 CERs. Table 1- risk adjusted CER portfolio as of 31 December 2007('000 CERs) 30 Jun 07 change 31 Dec 07Category B (exclusivity) 18,249 -12,704 5,545Category C (contracted) 42,079 9,417 51,496Total 60,328 -3,287 57,041Of which issued (delivered) 640 754 1,394 The total portfolio under exclusivity and contract has been updated to57,097,000 CERs as of 26th March 2008. The Company has a risk adjusted volumeunder contract of 53,633,000 and holds 1,924,000 issued CERs (table 2). Thetotal risk adjusted pipeline under negotiation, exclusivity and contract standsat 78,027,000 CERs, conservatively risk adjusted from a gross portfolio of151,918,000 CERs. Table 2 - risk adjusted CER portfolio as of 26 March 2008('000 CERs) 31 Dec 07 change 26 Mar 08Category B (exclusivity) 5,545 -2,081 3,464Category C (contracted) 51,496 2,137 53,633Total 57,041 56 57,097Of which issued (delivered) 1,394 530 1,924 Of the contracted portfolio, the Company's registered projects are expected todeliver a total of 14,475,000 CERs, validated projects currently in theregistration process are expected to deliver a further 14,253,000 CERs, andprojects currently undergoing validation or at an earlier stage of CDMdevelopment are expected to deliver 24,905,000 CERs, demonstrating the Company'ssteady progression of deals through the CDM process. Like all market participants, the Company has experienced significant delay tothe project validation and registration processes. This is due in part toresource constraints amongst consultants, but in particular with DesignatedOperational Entities (DOEs) and the UNFCCC. The situation has been exacerbatedby the increased frequency of Executive Board Requests for Review, delayingregistration and adding to DOE work load. A recently published UNFCCC Validationand Verification Manual sets out improved criteria for validation and should gosome way to alleviate this problem. Although it is difficult to mitigate against such delays, the Company hasdiversified its use of DOEs and continues to ensure that the reported portfoliois appropriately risk adjusted. In addition, the Advisor has built an in-houseteam to provide PDD preparation and consulting services. This enables theAdvisor to have better visibility and control over the CDM project process. China China remains the focus of the Company's ERPA portfolio. The portfolio includesa diverse range of project types including wind, hydro, biomass, waste heatrecovery, heat and power generation from natural gas, landfill gas, and N2O andHFC-23 destruction. During the reporting period further progress has been madein converting the pipeline of live deals, in particular the conversion ofexisting term-sheets to final contracts. During the period the Company entered into a further sixteen CER purchasecontracts in China, including hydroelectric and biomass power generation, wasteheat utilisation for power generation, waste gas utilisation at steel works forpower generation, landfill gas utilisation and coal mine methane utilisation.These sixteen projects are currently expected to deliver 10,100,000 CERs to 2012on a risk adjusted basis. The Company has five large natural gas projects under contract in China whichare maturing through the CDM project cycle. During the reporting period thefirst of these projects was considered for registration by the Executive Board.Registration was approved in December 2007 subject to corrections to the PDD andvalidation report. These amendments were subsequently made and the project isexpected to be approved by the end of March 2008, with registration valid fromDecember 2007. In January 2008 a further two natural gas projects were acceptedfor registration subject to corrections. These corrections have been made andare being reviewed by the DOE. The remaining two natural gas projects are invalidation. The Company has ten registered projects (two HFC-23 reduction, three wind power,three natural gas, one hydropower and one biomass power) and a further tenprojects submitted for registration. Of the registered projects, five arealready issuing credits. The Company is in the latter stages of finalising investments in a 49.5MW windfarm, a number of small scale hydro schemes and several waste heat recoveryprojects. The first of these investments is expected to close in April. South East Asia Korat Waste to Energy_____________________KWTE, the Company's largest individual project in the region, continues to meetits performance targets. It is currently undergoing its first verification, withissuance expected in the third quarter of this year. Asia Biogas Company___________________A substantial proportion of the Company's projects under development with AsiaBiogas have now been, or are close to being, commissioned. New investments arebeing made on an ongoing basis and the number of projects in development,commissioning and operation exceeds fifty. The CDM approval process in theregion is improving; most of the advanced projects are in validation and amajority have received host nation Letters of Approval. The Company continues to originate ERPA opportunities, particularly a number ofhighly sustainable small scale projects, currently under negotiation. South America The Investment Advisor established a permanent presence in the region in Rio andcontinues to grow a pipeline of ERPA, debt and equity opportunities, principallyin the areas of energy efficiency, animal and municipal solid waste andrenewable energy. Bionasa - Brazil________________The Company made a R$125M equity investment in July 2007 for a 25% stake inBionasa Combustivel Natural, which has been used to finance the construction ofa 200,000 tonnes per year, non-edible feedstock biodiesel plant. Construction isunderway and a total of R$69M had been disbursed to the project by 31st December2007. Commissioning is expected by Q4 2008. Santa Rita - Peru_________________The project continues to progress, with the project team at Electricidad Andinafocussed on the finalisation of EPC contracts for civil and electromechanicalwork. Three high quality submissions were received in response to the civil worktender and detailed contract negotiations are expected to conclude in Q2 2008. Econergy International Corporation__________________________________The Company received 36,169 issued CERs in September 2007, the scheduled portionof CER loan repayment against Econergy's US$4m carbon loan. The credits arebeing held in trust by Econergy in the UN CDM registry. North America and other regions Element Markets_______________Element Markets manages a Trading Emissions investment of $10m in US EmissionReduction Credit markets. A significant portion of funds contributed have beeninvested, and performance has so far exceeded expectations. The expansion of theNorth American emissions markets and growth of petrochemicals, power andagricultural sectors in the US has created a raft of new opportunities, leadingto an exciting position for the fund. The Company has made a further US$10minvestment in January 2008. Environmental Credit Corp (ECC)_______________________________The Company completed an expansion of its initial investment through thepurchase of common stock in July 2007, and now owns 76% of ECC. Since this date,ECC has continued to expand its services and operations within the VoluntaryMarket, opening a new office in Ithaca, NY and hiring staff for businessdevelopment, project delivery and related support. ECC launched a subsidiary, AgCarbon Management ("ACM"), to focus exclusively on developing agriculturalmethane capture projects in the United States. To date ACM has executed letters of intent representing over 300,000 animalunits, and has completed final contracts and begun project construction on itsfirst five projects. ECC also completed its first landfill gas capture projectand ethanol fuel switch project, both of which have now received credits.Through these activities, ECC is well positioned for credit delivery against a4.6 million credit off-take contract with American Electric Power. SunBiofuels - Africa____________________The Company completed the acquisition of minority shareholders' interests inSunBiofuels in October 2007, giving the Company majority control of thebusiness. SunBiofuels has been reorganised and continues to proceed withdevelopment of Tanzanian and Mozambique plantation opportunities. We continue to expand the portfolio in all regions previously covered, as wellas a more recent focus on the Middle East, where we see the potential for asignificant supply of credits. Commercialisation To date, the Company has received 1,924,000 issued CERs, and expects this totalto have risen to at least 5 million CERs by the end of April 2009. Chicago Climate Futures Exchange________________________________Trading Emissions completed the first transaction on Chicago Climate FuturesExchange (CCFE), a wholly owned subsidiary of Chicago Climate Exchange (CCX), onthe exchange's launch date, 24th August 2007. The transaction was cleared byNewEdge Group. Subsequent transactions through CCFE have totalled 65,000 CERs,sold at an average price of US$24.02 / CER, for delivery in December 2008. Government Carbon Offset Fund_____________________________The Company completed a high profile transaction with the UK Government, toprovide CERs from small-scale, highly sustainable projects which will be retiredby the Government to offset ministerial and civil servant air travel fromvarious Government departments. The Company will deliver 255,000 CERs to theGovernment by 30th April 2009, with a call option for a further 50,000 CERs infavour of the Government. The price agreed at the time of the tender in December2006 was 90% of the prevailing EUA price, £9.76 / CER. CER / EUA Swaps_______________Through a cooperation with Vertis Environmental Finance in Hungary, the Companyhas completed a number of EUA / CER swap agreements with various EU ETSoperators in Central and Eastern Europe. By 31st December 2007, seven suchcontracts had been completed, which require the Company to deliver 996,000 CERsbetween 2008-12 and with corresponding receipt of 956,000 EU Allowances. Thesetransactions are of two types: either an equal number of CERs and EUAs aredelivered by the Company and counterparty respectively, with a cash premium alsopaid by the Company to the counterparty, or, a larger number of CERs aredelivered to the counterparty, equivalent to the market value of the cashpremium. Since year end, the Company has entered into a further nine swaptransactions, with delivery obligations for a further 915,000 CERs andcorresponding receipt of 877,000 EUAs. These guaranteed commercialisation contracts for secondary CER delivery aresummarised in the table 3 below. Table 3 - Company secondary CER obligations___________________________________________________________________________________________! Contract type ! Date of ! CER Volume under ! Delivery date ! Price !! ! contract ! contract ! ! !! ! signature ! ! ! !!____________________!____________!______________________!_________________!_____________!! Government Carbon ! November ! 255,000 plus a call ! 30th April 2009 ! £9.76 / CER !! Offset Fund (GCOF) ! 2007 ! option in favour of ! ! !! ! ! GCOF for a further ! ! !! ! ! 50,000 CERs ! ! !!____________________!____________!______________________!_________________!_____________! ! Chicago Climate ! Various ! 65,000 CERs ! Dec 08 contract ! US$24.02 !! Futures Exchange ! ! ! ! /CER !!____________________!____________!______________________!_________________!_____________!! CER / EUA swaps ! Up to 31st ! 996,000 CERs to be ! Various ! Various !! ! Dec 2007 ! delivered, and ! ! !! ! ! 956,000 EUAs to be ! ! !! ! ! received ! ! !!____________________!____________!______________________!_________________!_____________!! CER / EUA swaps ! Up to 26th ! 1,911,000 CERs to be ! Various ! Various !! ! March ! delivered, and ! ! !! ! 2008 ! 1,833,000 EUAs to ! ! !! ! ! be received ! ! !!____________________!____________!______________________!_________________!_____________!! Total CER delivery ! ! ! ! !! obligation ! ! 2,281,000 CERs ! ! !!____________________!____________!______________________!_________________!_____________! Of this 2,281,000 CER delivery obligation, 724,000 CERs are under contract fordelivery prior to 30th April 2009. The Company has prepared the documentation and infrastructure to begin a muchlarger scale secondary CER trading operation. A number of master contracts withinvestment grade CER buyers are at various stages of negotiation and completion,with the intention of scaling up commercialisation efforts over the comingtwelve months. EEA Fund management27 March 2008 Consolidated Income Statement for the six months ended 31 December 2007 Six months to Six months to Year to 30 31 December 31 December June 2007 2006 2007 (unaudited) (unaudited) (audited) £000 £000 £000 Revenue Sales 618 - - Interest income 7,083 6,562 13,828 Dividend income 1,545 663 1,243 Other income 396 - 29 Net gain on financial assets and liabilities at fair value through profit or loss 72,124 1,056 174,646 ______________________________________________ Total investment income 81,766 8,281 189,746 ______________________________________________ Expenses Investment advisory fees (3,640) (2,999) (5,730) Performance fee - - (26,173) Administration and custodian fees (186) (325) (383) Directors' fees (75) (77) (150) Auditors' remuneration (139) (119) (213) Net foreign exchange gains / (losses) 881 (44) (2,227) Impairment charges (2,257) - - Other operating expenses (1,987) (1,772) (3,027) ______________________________________________ Total operating expenses (7,403) (5,336) (37,903) ______________________________________________ Profit before taxation 74,363 2,945 151,843 Income tax expense (47) (18) - ______________________________________________ Profit after taxation 74,316 2,927 151,843 ______________________________________________ Attributable to: Equity holders of the Company 74,445 2,937 151,876 Minority interest (129) (10) (33) ______________________________________________ 74,316 2,927 151,843 ______________________________________________ Earnings per share for profit attributable to the equity holders of the Company during the period (expressed in pence per share) Basic and diluted per ordinary share 25.94p 0.89p 65.64p ______________________________________________ Basic and diluted per C share 22.53p 0.99p 36.15p ______________________________________________ Consolidated Balance Sheet at 31 December 2007 As at As at As at 31 December 31 December 30 June 2007 2006 2007 (unaudited) (unaudited) (audited) £000 £000 £000 ASSETS Non-current assets Intangible assets 4,308 51 495 Property, plant and equipment 9,122 1,534 4,626 Financial assets at fair value through profit or loss 289,814 27,817 199,322 Trade and other receivables 405 2,734 254 __________________________________________ 303,649 32,136 204,697 __________________________________________ Current assets Financial assets at fair value through profit or loss 16,934 6,701 8,595 Trade and other receivables 13,599 893 4,312 Inventory 18 - - Cash and cash equivalents 200,554 271,196 266,619 __________________________________________ 231,105 278,790 279,526 __________________________________________ LIABILITIES Current liabilities Trade and other payables (4,828) (2,496) (29,649) Financial liabilities at fair value through profit or loss (14) (1,330) - __________________________________________ Total liabilities (4,842) (3,826) (29,649) __________________________________________ __________________________________________ Net current assets 226,263 274,964 249,877 __________________________________________ Non current liabilities Other payables (476) - (385) Financial liabilities at fair value through profit or loss (218) - - __________________________________________ (694) - (385) __________________________________________ __________________________________________ Net assets 529,218 307,100 454,189 __________________________________________ SHAREHOLDERS' EQUITY Share capital 2,870 3,100 3,100 Share premium 297,061 296,831 296,831 Retained earnings 227,361 7,266 154,868 Translation reserve 525 (228) (761) __________________________________________ Total shareholders' equity 527,817 306,969 454,038 Minority interest 1,401 131 151 __________________________________________ Total equity 529,218 307,100 454,189 __________________________________________ Consolidated Statements of Changes in Equity For the six months ended 31 December 2007(unaudited) Attributable to equity holders of the Company ________________________________________________________________ Share Share Retained Translation Minority Capital Premium Earnings Reserve Total Interest Total Equity £000 £000 £000 £000 £000 £000 £000 Balance at 1 July 2007 3,100 296,831 154,868 (761) 454,038 151 454,189 Profit for the period - - 74,445 - 74,445 (129) 74,316 Loss on acquisition - - (1,952) - (1,952) - (1,952)Exchange differences on translating foreign operations - - - 1,286 1,286 20 1,306 ___________________________________________________________________________________________Total recognised income and expense 3,100 296,831 227,361 525 527,817 42 527,859 Share conversion (230) 230 - - - - -Minority interest arising onbusiness combinations - - - - - 1,359 1,359 ___________________________________________________________________________________________Balance at 31 December2007 2,870 297,061 227,361 525 527,817 1,401 529,218 ___________________________________________________________________________________________ For the six months ended 31 December 2006(unaudited) Attributable to equity holders of the Company ________________________________________________________________ Share Share Retained Translation Minority Capital Premium Earnings Reserve Total Interest Total Equity £000 £000 £000 £000 £000 £000 £000 Balance at 1 July 2006 3,100 296,831 4,500 (252) 304,179 145 304,324 Profit for the period - - 2,937 - 2,937 (10) 2,927Exchange differences on translating foreign operations - - - 24 24 - 24 ___________________________________________________________________________________________Total recognised income and expense 3,100 296,831 7,437 (228) 307,140 135 307,275Business combinations - - (171) - (171) (4) (175) ___________________________________________________________________________________________Balance at 31 December 3,100 296,831 7,266 (228) 306,969 131 307,1002006 ___________________________________________________________________________________________ Consolidated Statements of Changes in Equity (continued) For the year ended 30 June 2007(audited) Attributable to equity holders of the Company ________________________________________________________________ Share Share Retained Translation Minority Capital Premium Earnings Reserve Total Interest Total Equity £000 £000 £000 £000 £000 £000 £000 Balance at 1 July 2006 3,100 296,831 4,500 (251) 304,180 144 304,324 Profit for the period - - 151,876 - 151,876 (33) 151,843 Loss on acquisition - - (1,508) - (1,508) - (1,508)Exchange differences on translating foreign operations - - - (510) (510) 25 (485) ___________________________________________________________________________________________Total recognised income and expense 3,100 296,831 154,868 (761) 454,038 136 454,174Minority interest arising onbusiness combinations - - - - - 15 15 ___________________________________________________________________________________________Balance at 30 June 2007 3,100 296,831 154,868 (761) 454,038 151 454,189 ___________________________________________________________________________________________ Consolidated Cash Flow Statement Six months to Six months to Year to 30 31 December 31 December June 2007 2006 2007 (unaudited) (unaudited) (audited) Cash flows from operating activities £000 £000 £000 Profit for the period 74,316 2,927 151,843 Adjustment for: - interest income (7,083) (6,562) (13,828) - dividend income (1,545) (663) (1,243) - tax expense - 18 - - depreciation and amortisation 286 1 44 - exchange (gains) / losses (881) (44) 2,227 - impairment charges 2,257 - - Changes in working capital - Net increase in financial assets at fair value through profit or loss (100,554) (6,702) (181,641) - Net increase/(decrease) in financial liabilities at fair value through profit or loss 231 1,271 (59) - Net (decrease) / increase in trade and other payables (25,825) 1,105 28,141 - Net (increase) / decrease in trade and other receivables (7,132) 24 (933) _________________________________________________ Cash used in operations (65,930) (8,625) (15,449) Interest received 6,464 6,424 13,968 _________________________________________________ Net cash used in operating activities (59,466) (2,201) (1,481) _________________________________________________ Cash flows from investing activities Acquisition of subsidiaries net of cash acquired (4,753) - (38) Purchase of intangible assets (35) - (147) Loan repayments from third parties 299 - - Loans granted to third parties - (589) (144) Purchase of property, plant and equipment (2,654) (467) (3,707) _________________________________________________ Net cash used in investing activities (7,143) (1,056) (4,036) _________________________________________________ Financing activities Repayment of borrowings (40) - - _________________________________________________ Net cash used in financing activities (40) - - _________________________________________________ Net decrease in cash and cash equivalents (66,649) (3,257) (5,517) Cash and cash equivalents at start of period 266,619 274,923 274,923 Exchange difference on cash and cash equivalents 584 (470) (2,787) _________________________________________________ Cash and cash equivalents at end of period 200,554 271,196 266,619 _________________________________________________ Notes to the consolidated interim financial statements 1 Operations Trading Emissions PLC (the 'Company') invests in environmental and emissionsassets, companies providing products and services related to reduction of greenhouse gas (GHG) emissions and associated financial products. The Company alsoaims to provide shareholders with opportunities to invest in environmentalventures that offer potential returns with a view to the realisation of eachinvestment through future trade sale, flotation or other exit route. The Company is a closed-ended investment company domiciled in the Isle of Man.It was incorporated on 15 March 2005 in the Isle of Man as a public limitedcompany and is quoted on the Alternative Investment Market (AIM) operated andregulated by the London Stock Exchange. 2 Basis of preparation The consolidated interim financial statements of the company for the six monthsended 31 December 2007 comprise the results of the Company and its subsidiaries,and have been prepared consistent with the accounting policies applied by theCompany in the preparation of its audited consolidated financial statements forthe year ended 30 June 2007. The audited consolidated financial statements forthe period ended 30 June 2007 are available at www.tradingemissionsplc.com. The consolidated interim financial statements for the six months ended 31December 2007 have not been audited. 3 Net asset value per share The net asset value per share is calculated by dividing the net assetsattributable to the ordinary shares and the C shares by the number of ordinaryshares and C shares in issue respectively. On 13 November 2007, each of the Company's C share converted into 0.8683ordinary share. 3.1 Net asset value per ordinary share As at As at As at 31 December 31 December 30 June 2007 2006 2007 (unaudited) (unaudited) (audited) £000 £000 £000 Net assets attributable to ordinary shareholders (£000) 529,178 134,820 220,515Ordinary shares in issue (number) 286,952 135,000 135,000 ________________________________________________Net asset value per ordinary share (in pence) 184.41p 99.87p 163.34p ________________________________________________ 3.2 Net asset value per C share As at As at As at 31 December 31 December 30 June 2007 2006 2007 (unaudited) (unaudited) (audited) £000 £000 £000 Net assets attributable to C shares (£000) - 172,149 233,523C shares in issue (number) - 175,000 175,000 ________________________________________________Net asset value per C share (in pence) - 98.37p 133.44p ________________________________________________ Notes to the consolidated interim financial statements (continued) On 13 November 2007, the Company's C Shares were converted to Ordinary Shares ata ratio of one C Share to 0.8683 Ordinary Share. The resulting number ofOrdinary Shares was 286,952,500 after the conversion. During the process,23,047,500 Deferred Shares were created and subsequently redeemed by the Companyat £0.01 each to share premium during the period in accordance with theCompany's Articles of Association. 4 Earnings per share (a) Basic The basic earnings per ordinary share and C share are calculated by dividing theprofit attributable to the ordinary shareholders and the profit attributable tothe C shareholders by the weighted average number of ordinary shares and Cshares in issue during each period. Six months to Six months to Year to 31 December 31 December 30 June 2007 2006 2007 (unaudited) (unaudited) (audited) £000 £000 £000Ordinary shares Profit attributable to equity holders of the ordinary shares (£) 45,579 1,201 88,613Weighted average number of ordinary shares in issue (number) 175,687 135,000 135,000 _____________________________________________Basic earnings per ordinary share (in pence) 25.94p 0.89p 65.64p _____________________________________________ C sharesProfit attributable to equity holders of the C shares (£) 28,866 1,736 63,263Weighted average number of C shares in issue (number) 128,142 175,000 175,000 _____________________________________________Basic earnings per C share (in pence) 22.53p 0.99p 36.15p _____________________________________________ (b) DilutedDiluted earnings per share is calculated by adjusting the weighted averagenumber of ordinary shares and C shares outstanding to assume conversion of alldilutive potential ordinary shares and C shares. The Company does not have anydilutive potential ordinary shares or C shares and therefore diluted earningsper ordinary share and diluted earnings per C share are the same as the basicearnings per ordinary share and C share. 5 Share capital The total number of authorised and issued ordinary shares and C shares of theCompany is as follows. Authorised 31 December 31 December 30 June 2007 2006 2007In thousandsOrdinary shares (number) 460,000 200,000 200,000Ordinary shares of £0.01 par value 4,600 2,000 2,000 ================================================= C Shares (number) - 260,000 260,000C Shares of £0.01 par value - 2,600 2,600 ================================================= Notes to the consolidated interim financial statements (continued) 5 Share capital (continued) Issued and fully paid 31 December 31 December 30 June 2007 2006 2007In thousandsOrdinary shares of £0.01 par value (number) 286,952 135,000 135,000 C shares of £0.01 par value (number) - 175,000 175,000 _______________________________________________ 286,952 310,000 310,000 _______________________________________________ 6 Statutory financial statements The financial information contained within this report is unaudited and does notconstitute statutory financial statements. The comparative figures for theperiod ended 30 June 2007 have been extracted from the Company's auditedconsolidated financial statements for the financial year ended 30 June 2007. The consolidated financial statements for the financial period ended 30 June2007 were reported on by the Company's auditors without qualification ofopinion. 7 Subsequent Events Subsequent to the year end the Company purchased and cancelled 6,985,000 of itsown shares at a cost of £9,966,822. As at the 26 March 2008 the number of ordinary shares the Company had in issuewas 279,967,500 8 Approval of consolidated interim financial statements The consolidated interim financial statements were approved by the Board ofDirectors on 26 March 2008. This information is provided by RNS The company news service from the London Stock Exchange