Ft Tre Discussion Threads

[papy02] 10/9/2010 13:31

Some large trades this am – 600k traded at 90p (so Sells?) in 3 blocks of 100k and one of 300k – presumably insto sells(?)


BTW, thank you Stemis and hoveite for your insights. I have read the historical RNS's and the results etc PDFs on their website till my eyes bled, but without much enlightenment.

My comments/q's for what little they're worth:

- Interesting comment by longtermreturns here

that based on the incentive plan details it's likely that TRE/EEA expectation is 130-140p (of which a fair chunk of PE assets passed to successor-entity, rather than realised cash).

- Re Stemis valuation of CERs – would those to be delivered after YE 2012 have contracts that allow TRE to sell or assign their rights? – if so they have some value (to be realised either by selling them to passing to successor entity)?

- Re the delta between your valuation and TRE's – it seems unlikely they would have hedged/forward-sold pre-2012 CERs at under 11.01 Euros, given the price history? (though it's unclear to me why post 2012 are valued by them so much lower at 7 Euros)

- Wonder if a parallel to SW10's law applies to the Pre-2012 CERs – ie actual delivery by the underlying projects may be delayed beyond 2012 – wonder what happens in that case – do we need to apply a further discount for that possibility?

- It is surprising that TRE BoD was recommending a merger that implicitly valued TRE shares at 88.6p on 17 Feb (or at least they did not withdraw their recommendation from 17 Dec when the implied TRE share price in the merger was 127.3p).

- Before placing any credence on TRE/EEA expectations on what can now be realised, I was trying to work out how they've done so far. Ie how much net cash have they taken from investors to date vs the current mkt cap or expected realisation values. But I've missed where they got from the 135m shares originally issued, to the 257(?)m now, so no idea.

- If they do spend the max £45m follow-on PE investments, the new position will be (Feb 16th figures. Corrected via Edit)

Private equity 72.6p
Other assets 71p (including 57.6p trading portfolio)
Total 143.6p

(After the running costs to YE2012 as per Stemis earlier, the non-PE assets would be 46.3p, assuming nothing else changes. Doesn't look that enticing! - eg need to realise 74% of the PE portfolio to return total of 100p in cash.)
Do we need to "unwind" the NPV discount, and offset the previously deferred and (proposed to be) cancelled Perf fees? And adjust for current CER prices and Euro ex-rate?

EGM Monday.

Cheers

[stemis] 05/9/2010 17:22

Interesting comments.

For clarification:-

The Company's outstanding bank guarantee in favour of the World Bank currently stands at EUR 40.7m

Why is the Company guaranteeing the World Bank?

The problem, as you correctly put it, is that we just don't really understand know what TRE's trading positions are.

[stemis] 04/9/2010 18:48

Although the NAV at 31 December 2010 was 142.7p we have to take account of the fact that there will be running costs between now and December 2012.

Excluding investment advisory fees, these are running at about £16 million. Add in investment advisory fees of £6 million pa and you get £22 million or £66 million over the next 3 years. That's about 25p a share. I'm presuming the wind up costs won't be material.

[stemis] 04/9/2010 18:36

The one area I struggle to understand valuation is the CER (Certified Emission Reductions). TRE have contracted with various projects to take delivery of these in the future (effectively as the projects create verfied emission reductions).

As at 31 December these comprise:-

For delivery up to Dec 2012 - 38.719 million (of which 6.858 million have been delivered)
For delivery after Dec 2012 - 10.688 million

Of course there is nothing certain about these numbers and they depend on the performance of the individual projects. They actually have contracted 58.7 million pre 2012 CERs and 29.6 million post 2012 CERs but apply a risk factor to them (which looks completely arbitrary to me).

TRE pay the projects a pre-determined rate per credit. That seems to be €7.46 per CER. They value them at €11.01 per CER for pre 2012 delivery.

So I would value these at €11.01 for those delivered and, presumably, paid for and €3.55 for those undelivered (€11.01 market value less €7.46 yet to be paid).

That amounts to €188.6 million. I'll exclude CERs for delivery post Dec 2012 because, well, the company won't be around then. Using the €/£ rate at the time of of 0.89 that equates to £168 million. TRE quote £141.8 million. That seems to be due to hedging or forward sales and the NPV discount?

Anyone see any flaws in this so far?

[stemis] 03/9/2010 22:13

If I knew they'd achieve 190p I'd buy. In fact if I was pretty happy they achieve 150p I'd buy. However I'm struggling to understand the valuation of CERs and I'm concerned how much value will be left in the private equity portfolio. They might attribute a certain value to it in any successor company, but its not guaranteed that the stock market will. I'm not really interested in owning a private equity fund, just looking to make money on the liquidation. The cheaper TRE gets of course, the less this becomes an issue.

I'll try and post a few more thoughts over the weekend.

[papy02] 03/9/2010 21:06

Hi Stemis. I for one would be interested in more discussion on TRE. As per TMF post (as HGfool) I have recently bought a small position at 93p. The risk/reward profile appears good at first glance from that price-level. (But I don't have a good feel for the likelihood of the various possible levels of return. I'm hoping to do more (i.e. some!) research prior to taking a more material (to me) position - so am hoping price stays down for now).

You say you haven't invested - have you decided not to? or waiting for a lower entry? or ..? Would be interested in your rationale.

If they achieve 190p by YE2012 (mid-way in the proposed new incentive for the Adviser), that gives an annualised compound return of 36%pa to YE2012, though with an expectation that a chunk of the PE portfolio will not be realised but passed on to a successor-entity (and counted at some notional value for the Adviser's incentive purposes), so the likely realisable return will be less.

Clearly the Priv Equity portfolio valuation is subject to overall market risk. Would you agree the rest (CER portfolio and cash etc) is relatively insensitive to overall FTSE market levels?

Cheers

[stemis] 03/9/2010 14:01

Doesn't seem a lot of support for this share.

[edwardt] 04/6/2010 08:15

with the takeover by barclays of a similar cer outfit, the shares are likely to attract bid interest. EEA are obviously in salvage mode. I think the performance fee restructuring is their last attempt to keep their snout in the trough. Shareholders will see this and be very receptive to a bid...

[jambo172] 28/5/2010 14:47

To coin a well known song - Die, Die my Darling.

Good riddence

[wormcatcher] 28/5/2010 12:51

Interesting - I like this bit

"...In return a performance fee of up to GBP10 million in aggregate
will become payable to EEA based on realised and received returns to TEP
shareholders of between 150 and 230 pence per TEP share calculated on a straight line basis."

[edwardt] 18/5/2010 13:38

TRE has for some inexplicable reason undergone a severe dislocation with the CER price that is up over 20% sine Jan 1. The shares look very cheap in the near term as a result of this anomaly with an estimated NAV of circa £1.65. Also the divi is pretty attractive coming exclusively from the private equity component of the business @6%. Sterling weakness must be helping here too. One to tuck away for me as the shareholder vote in 2011 is just round the corner!

[wormcatcher] 04/5/2010 10:11

lol yes Jambo - but that was totally Barmy :)

[jambo172] 30/4/2010 17:07

Worm
Aye but down from £20 at its high.

[wormcatcher] 30/4/2010 14:43

Let's hope so - 750p a share for CLE is quite astounding.

[jambo172] 30/4/2010 12:34

Climate Exchange being bid for.
Any read across here do you think?

[wormcatcher] 16/4/2010 18:15

Almost back to the £1 again now that we've got all that takeover rubbish out of the way.

[wormcatcher] 31/3/2010 12:33

NAV 142.7p
Dividend up

Looks very good - just unloved atm

[johnsoho] 31/3/2010 08:17

Looks ok to me!!!

Trading Emissions PLC

Results for the six months ended 31 December 2009

Trading Emissions PLC ("TEP" or "the Company"), a closed end investment company
that specialises in renewable energy projects and emissions instruments such as
carbon credits, today announces its results for the six months ended 31 December
2009.


Financial Highlights

· Valuation: The Group's Net Asset Value stood at 142.7 pence per share
based on the Company's risk adjusted CER portfolio and ECX CER futures prices at
31 December 2009. Loss per Share of 7.2 pence from 30 June 2009.

· Carbon portfolio: GBP141.8m or 55.1 pence per share at 31 December 2009
(61.2 pence per share as at 30 June 2009)

· Private equity portfolio: GBP115.1m or 44.7 pence per share at 31
December 2009 (35.6 pence per share as at 30 June 2009)

· Cash: GBP157.6m or 61.2 pence per share at 31 December 2009 (GBP178.1m or
69.8 pence per share at 30 June 2009). Cash at 31 March 2010: GBP142.6m or 55.4
pence per share.

· Dividend: The Company makes an interim dividend payment today of 1.65
pence per share. The board expects to recommend a final dividend of 3.85 pence
per share for 2010 making a total of 5.5 pence for the year (2009 total dividend
was 4.5 pence per share)


Operational Highlights

· Risk adjusted portfolio: The Company's total risk adjusted portfolio
stands at 49.9m CERs at 31 March 2010, of which 38.7m is for delivery pre-2012.
7.1m CERs have been delivered.

· Portfolio progress through CDM registration: 81% of the pre-2012
portfolio has been successfully registered (31.3m CERs), with a further 16% in
validation or registration (as at 31 March 2010).

· GBP120.7m of private equity and loan investments: Additional
diversification through equity investments in clean energy assets, project
development, carbon services and trading companies (as at 31 March 2010).

· Commercialisation: The Company has sold or hedged 27% of its pre-2012 CER
portfolio - 14% has been hedged and 13% has been swapped or sold and delivered.

· Merger with Leaf Clean Energy: A merger between Trading Emissions PLC and
Leaf Clean Energy did not proceed despite a majority of approximately 67% of
votes cast by the Company's shareholders being in favour of the merger. The
transaction was structured as a scheme of arrangement requiring 75% approval.

· Future of the Company: A discussion will be initiated before the Annual
General Meeting following the year ending 30 June 2011 and shareholders will be
given the opportunity to vote on the future of the Company. At this time the
Board expects to have further demonstrated the Company's significant capacity to
return cash to shareholders, and believes the Company will also be enjoying
greater clarity on international and particularly US climate change policy.


Neil Eckert, Chairman of Trading Emissions PLC said "It is a measure of the
strength of Trading Emissions PLC that in the difficult conditions of the first
half of our financial year, with a disappointing Copenhagen summit in December
2009 and stagnation in US policy, the business can support increasing capital
repatriation while maintaining a very solid cash position. We look forward to
the second half, particularly in light of a more encouraging political
environment in the US, and we are confident of prospects for returning
increasing cash to shareholders."

[wormcatcher] 19/2/2010 15:02

A good thing in the end that this merger did not go ahead in my opinion.

[wormcatcher] 15/2/2010 16:43

This Crystal Amber Fund is slowly building up a stake - almost 4m shares now.

[wormcatcher] 12/2/2010 15:00

Crytal Amber Fund now have 3.6m shares.

Welcome to Crystal Amber Fund
An activist fund taking stakes in undervalued companies and taking action to enhance value.



Interesting

[wormcatcher] 12/2/2010 14:57

We seem to have a lot of institutions buying again - something in the offing perhaps? Far too cheap atm anyway. Company appears to be being outflanked.

[wormcatcher] 12/2/2010 08:02

Interesting that Moore have been gradually increasing their holding then come out and say they will not support the merger.

[nick129] 11/2/2010 21:49

Hmm...wonder if the merger is going to go ahead!!!