Rhodia's CO2 Credit Trading Venture Draws Interest
Date: 19-Jun-06
Country: FRANCE
"We have received a lot of interest from potential clients," Philippe Rosier, head of Rhodia Energy Services, told Reuters on the sidelines of a meeting at Rhodia's polyamide plant in Chalampe, France, on Friday. He said that about 50 clients, mostly electricity companies, across Europe had been in touch.
Rhodia Energy Services, a unit of the French specialty chemicals maker, and the French bank are creating a joint venture to sell the Carbon Emission Receipts (CERs) that Rhodia is to receive from cutting greenhouse gas emissions.
Rhodia can earn the CERs from the United Nations from 2007 to 2012 under the United Nations's Kyoto Treaty by slashing carbon dioxide (CO2) emissions at its two plants in Brazil and South Korea.
But although the CERs are separate to the European Union's own CO2 trading, Rhodia's shares have been subject to price developments on the new market, which took a hit when EU member states' CO2 emissions in 2005 were far below initial estimates.
"It's been a healthy reaction. Prices of 15 to 20 euros (per tonne for CERs) seem to be more reasonable ... Thirty euros to us seemed not to be sustainable for the long run," Rosier said. "The market is still young, but it has shown that it works."
The EU's Emissions Trading Scheme is the first market where pollution cutting credits are traded, since last year, and is part of attempts to cut CO2 emissions under the Kyoto Treaty. The EU's trading mechanism first runs from 2005 to 2007 and then from 2008 to 2012 -- the period when Kyoto becomes binding.
Rhodia's plants in South Korea and Brazil aim to decompose nitrogen oxide, a major contributor to greenhouse gas emissions, which is released with the production of adipic acid -- a chemical compound used in plastics or soles of sport shoes.
Rhodia is the world's third-largest maker of polyamide, which goes into nylon or car dashboards, with sales of 1.75 billion euros (US$2.22 billion) last year. It forecasts the entire 25-billion-euro polyamide market to grow an annual 2.4 percent until 2010.
"Demand for polyamide is strong and sustained, but we are faced with rising raw material prices," head of Rhodia Polyamide Laurent Schmitt said, referring to high oil prices.
"Given our market position, we are confident that we can pass on prices to our customers. We are now in a situation where necessary price increases can be implemented," he said.
Rhodia's plant in Chalampe, in the eastern Alsace region bordering Germany, is the biggest producer of semifinished polyamides in the world.
Rhodia's volatile shares closed 0.7 percent lower at 1.38 euros on Friday, having underperformed the DJ Stoxx European chemicals index's by almost 3 percent this year.
The company's shares have shed almost 24 percent this year, having reached a year high of 2.42 euros in February, when CO2 trading prospects helped boost investor confidence in the restructuring company which aims to return to profit this year.
Rhodia said in March it had sold forward 8 million tonnes in CERs of which 6.5 million would be sold for 15 euros per tonne in 2007 and 2008, earning it almost 50 million euros a year.
It has estimated that cutting CO2 emissions would give it 11 million to 13 million tonnes credits to trade from 2007 and it plans to use the cash to help cut its debt and pay for investments.
EU member states have until June 30 to submit their draft plans for how many pollution permits they want to allocate to industry in the second phase of the EU's trading program.
(US$1=.7897 Euro)
