Rhodia to keep CER supply stable in 2009
French chemical company Rhodia revealed on Wednesday that it has already hedged the average price of more than half of its 2009 output of Certified Emission Reductions (CERs) at €15.5/tonne of CO2 equivalent (tCO2e). This is almost double the price that CERs currently fetch over the counter in the secondary market, according to ICIS Heren data.
Rhodia, one of the biggest players in the carbon credits market, is set to deliver around 13m CERs in 2009 through Orbeo, its joint venture with French investment bank Societe Generale, the company said.
This means that Rhodia has not revised its expected sales of CERs downwards in response to the current bearishness in the market, making it an exception among the big carbon credit merchants. Project developers like British Camco and Swedish Tricorona have already said that they would put off sales in 2009 in the hope that secondary prices recover.
Rhodia executives batted off concerns that the two main Clean Development Mechanism (CER) projects generating its carbon credit portfolio would be hit by production cuts and become unable to churn out the expected volumes of credits.
Rhodia has warned that industry overcapacity in some of its core chemical markets might force it to restructure and produce less. The company is currently in the red and has committed to slashing costs.
As credits generated by CDM projects correspond to the amount of greenhouse emissions avoided during production, less output would mean fewer credits. But Rhodia CEO Jean-Pierre Clamadieu said during a briefing session that he was “confident” Rhodia would stick to the promised volumes, which are even on the upper scale of its normal annual target of 11m–13m CERs. The credits would not only come from its core projects in South Korea and Brazil, but also from newer, smaller projects, Clamadieu said. He admitted that sales volumes had been unusually low in the first quarter of 2009, however.
Rhodia is not alone in having hedged the price of primary CERs. Other developers mention that they have locked in prices at an average of €8/tCO2e – the historic Chinese floor price – plus a percentage linked to market prices. It is unclear whether other companies have managed to hedge its portfolio to the same extent as Rhodia. Only 45% of the company’s sales will be exposed to market prices in 2009.
Clamadieu hinted that €9/tCO2e might become a floor price for many sellers. Prices are currently almost €1/tCO2e below this level, but Rhodia’s CEO said he doubted this could continue, as these levels imply selling at a loss for many participants.
CER trading contributed €158m to the company’s earnings before interest, tax, depreciation and amortisation in 2008, up by 17% year on year. IS
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