Camco: benefiting from a positive regulatory environment for low carbon projects

Camco International (LON: CAO), the diversified green energy group, has had a busy few months since it announced its full-year results back in February.

Back then, the firm reported that it had moved back into the black. It has made further progress since.

After announcing the beginning of the construction of the biggest dairy biogas project in North America last month and its largest-ever carbon development agreement in March – not to mention reporting growth in both pre-2012 and post-2012 carbon project portfolio volumes in April – Camco today announced it “is seeing tangible benefit from the high rate of registration of emission reduction projects” by the Clean Development Mechanism (CDM) Executive Board.

A Kyoto Protocol ‘flexibility mechanism’, the CDM’s purpose is to promote projects aimed at reducing carbon emissions in developing countries, as well as oversee the market for carbon offset credits generated from these projects. Carbon offset credits can be bought by companies and organisations in order to balance the emissions they produce in the developed world. 

“We work with companies to develop these emissions reductions projects,” said Shirona Partem, Camco’s business development director, who explained to Proactive Investors that the process of creating carbon offset credits has been accelerated for two reasons. “Firstly, there’s been a general improvement in the CDM Executive Board’s system, but they have also now decided that when you submit the project for registration you can start counting the credits straight away.”

This has proved greatly beneficial to Camco because the company itself benefits when clients start generating carbon offset credits, pointed out Partem. “From the moment the project is registered – and a big part of that project’s risk is removed – we start receiving the benefit,” she said. “And it’s better for our clients. They can more easily predict how they will finance their projects.”

Indeed, Camco said last Thursday that four of its wind farm projects in China have reached registration in less than six months from the ‘Global Stakeholder Consultation’ stage. Only a year or so previously, the same exercise would have taken 17 months, according to the company.

The firm reckons that the rate of increase in registrations of CDM projects will only continue to accelerate.

The North American dairy biogas project announced last month will be the biggest scheme of its kind on the continent. Wholly owned by Camco, but operated by AgPower Group, the US$25 million Idaho-based project will see the installation of anaerobic digesters to convert cow manure into enough biogas to fuel 4.5 megawatts of generation capacity.

Previous to that, in March, the firm signed its largest-ever carbon development agreement, with Huaneng Renewables Corporation. The deal covers 20 of Huaneng’s wind power installations across China, which together have more than one gigawatt of generating capacity.

Last year saw Camco swing into profit, with pre-tax earnings coming in at €9.6 million (2009: €10.7 million loss) on revenue that increased 7.9 percent to €30 million. This turnaround was achieved partly through cost cutting but also because of an increasingly positive regulatory environment.

The firm’s results suffered in 2009 due to the adverse effect on low-carbon projects of the economic downturn.

More recently, in April, Camco said it had achieved an “excellent” start to 2011. "Camco has seen an excellent start to the new year with growth in both our pre-2012 and post-2012 portfolio volumes, a remarkable success for our origination business,” the firm’s CEO Scott McGregor. “The increasing forward price curve provides good prospects."

Camco could release further good news later in the summer. Last July, the company released a trading statement ahead of its September interim results.

Market: AIM

Symbol: CAO

Price: 22p

Market cap: £41.5m