Energy Risk Survey Dec09


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CF Partners does well in Energy Risk Survey

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Energy Risk Survey Dec09

  1. 1. commodit y risk management & tr ading Reprinted from december 2009 ReneweD ConfiDenCe CF Partners figures well in this year’s awards environmental rankings 2009
  2. 2. environmental rankings 2009 ReneweD ConfiDenCe Energy Risk carried out its second annual environmental Rankings survey this year in which respondents voted for their preferred players in emissions & renewables markets. Katie Holliday analyses the results and talks to market participants about their views C onfidence in the potential Morgan Stanley, CF Partners and of the environmental Element Markets, who all gained markets continues to be first places, as did Orbeo, a joint strong despite the absence venture between Société Générale of an international framework for a and Rhodia, and Carbon Trade & global carbon market and it looking Finance, a joint venture between increasingly likely a deal won’t investment bank Dresdner Kleinwort be reached at the United Nations and Gazprombank. The top-placed Climate Change Conference (COP- brokers were Icap, Evolution Markets 15) held in Copenhagen this month, and Tradition. say market participants. They hope that Copenhagen will Carbon markets give clarity to other issues such as This year has been a testing one for the shape of future carbon market the carbon markets due to the global mechanisms and which new countries economic recession and subsequent will sign up to the new Kyoto drop in the carbon price, and a lack of agreement, and that this will drive the available project finance. In February data, the global carbon market shrank markets forward. this year, the price of carbon in the by 21% to $30 billion in the third Against this backdrop, Energy Risk’s European Union Emissions Trading quarter of 2009, from $38 billion in second Environmental Rankings Scheme (EU ETS) dropped to €8 the second quarter of 2009, with the Survey provides a timely insight in to ($11.89) per tonne of carbon dioxide majority of the deterioration focussed how energy industry participants view (t/CO2 ), from highs of around €30 in on the European side of the market. the current state of play. The Survey the summer of 2008, according The North American markets and the had 461 valid responses this year, a to European Climate Exchange international offset markets 90% increase on last year, reflecting (ECX) data, causing critics to say grew, but not enough to compensate the increasing interest in these the price was too low to incentivise for the reduction in volumes traded growing markets. investment in clean technology and on the EU ETS. New Energy The dominant players from last year therefore that the scheme wasn’t Finance still expects the total value held on to most of the top positions working. Carbon is currently trading of the global carbon market to grow but a large amount of votes were cast on ECX at around €13 per t/CO2 . to $122 billion by the end of 2009, for a vast array of smaller players, According to New Energy Finance a 3% increase on the 2008 value of showing the current fragmentation and immaturity of some of these markets. Consolidation amongst A global recession will prompt a drop in smaller players is expected to be a trend in the coming years. prices. The carbon market reacted exactly Dominant players in the survey this year include Barclays Capital, as it should have done Deutsche Bank, JP Morgan, Louis Redshaw, head of environmental markets, Barclays Capital Reprinted from December 2009
  3. 3. $119 billion but almost double the reacted exactly as it should have According to David Costa-D’sa, value of 2007, which amounted to done,” says Redshaw. head of environmental financial $65 million, and quadruple the 2006 Deutsche Bank gained the top products structuring at Deutsche value of $35 billion. position for trading Certified Bank, a clearer framework for the Energy Risk’s Environmental Emissions Reductions (CERs), the trading of CERs should increase Rankings Survey first looked at the credits generated under the UN’s CDM volumes even further. “We trading of emissions allowances on Clean Development Mechanism need to know exactly what the rules the EU ETS. Barclays Capital topped (CDM) scheme, in both the are going to be,” he says. “We need to the dealer category for European primary and secondary markets, know whether or not we will have the Union Emission Allowances (EUAs), while BNP Paribas, Orbeo and CF CDM in its current format or whether while Orbeo also gained first place for Partners also featured highly in the we will have a sectoral system post- a second year running for the trading dealer category for CERs. Global 2012, or some combination of the of EUA options. brokerage Tradition gained first place two. A lot will depend on what role According to Louis Redshaw, head for CER broking. the US decides to play,” he adds. of environmental markets at Barclays The CDM market was valued Amit Oza, senior emissions Capital, this year’s drop in the price of at $32.8 billion in 2008 by the broker at TFS Green, Tradition’s carbon shows that the EU ETS was World Bank. Primary CDM environmental team, is also eager © Joyner functioning properly. “Anyone who transactions in 2008 were valued for clarity. “It’s vitally important to says the market isn’t working, while at $6.5 billion, equivalent to 289 have an idea of what role CERs will the price is falling during a recession, million tonnes of carbon dioxide play post-2012. Though there will be is contradicting themselves, because a (CO2 ) and trading in the secondary continuing debates about India and global recession will prompt a drop in CDM market totalled $26.3 billion, China taking on reduction targets, prices. Therefore the carbon market equivalent to 1,072 Mt/CO2 . there are many other CDM countries December 2009
  4. 4. environmental rankings 2009 that will not undertake reduction Simon Glossop, company partner targets; these countries are most likely at CF partners, which gained to continue to play a role in developing first place in the brokers of ERUs emissions reductions projects in the category, is confident that clarity long-term,” adds Oza. on the future of the ERU market Oza attributes Tradition’s post 2012 will lead to an increase success in CER broking down to in trading activity and interest from its continued commitment to the compliance buyers. origination of projects. “We have As a diversified company CF a strong supply line coming out partners isn’t concerned about the of Latin America and Africa as uncertainty surrounding future well. We’re also working on new carbon market mechanisms: “We are areas, such as the UN’s programme a focused environmental advisory, for Reducing Emissions from trading and investments firm. We Deforestation and Forest Degradation offer a variety of different services, (REDD), where we’ve seen strong demand from companies in Europe, the US and Australia looking to The importance of JI will grow going purchase these credits,” he says. forward since the number of countries with In terms of the market for Emission Reduction Units (ERUs), emissions caps will grow. A future climate credits generated from the Kyoto Protocol’s Joint Implementation (JI) agreement therefore becomes pivotal mechanism, Carbon Trade Finance Ingo Ramming, executive director, Carbon Trade Finance gained first place in the dealer category, while Deutsche Bank came in second. In the broker category, at Deutsche Bank, says they have from buying and selling credits, fund CF Partners were voted first with typically viewed JI as a “single management, arranging structure Evolution Markets and Tradition market” scheme to 2012. “There transactions, mergers and acquisitions coming second and third. are many proposals on the table at and advisory”, says Glossop. So far, the market for JI projects Copenhagen and it is far from certain Evolution Markets gained first has not grown as much as was that JI in its current form will be place in the broker category for originally anticipated in comparison extended into the next phase of the SO2 and NOx and US RECs, while with the CDM markets. The JI Kyoto Protocol or its replacement,” Tradition gained first place for RGGI market was valued at $294 million, says Lawless. and Evolution Markets topped the equivalent to 20Mt/CO 2 in 2008, Carbon Trade Finance’s broker category for US VERs. according to the World Bank, a executive director, Ingo Ramming, The US voluntary markets have figure vastly overshadowed by the has a more optimistic outlook for the suffered a decline this year. Trading of CDM’s $32.8 billion. future of trading ERUs. “Of course, Carbon Financial Instruments (CFIs) Experts blame the lack of the CDM market is much bigger on the Chicago Climate Exchange development in this area of the than the JI market, but this is because (CCX) has decreased, for example. market on political wrangling over ERUs could only be generated from A total of 3.2 million contracts operational procedure. Russia and 2008,” he says. were traded in October 2008, while the Ukraine are viewed to be the Ramming says he expects 2.6 million were traded in the same hotspots for JI development, but approximately 300 million tonnes month this year. while the Ukrainian market has of CO2 reductions to be generated Barcap’s Redshaw says it is likely generated a number of projects, the through JI from 2008 to 2012. “The that the voluntary markets, both in Russian government stalled over importance of JI will grow going the US and Europe, will be eclipsed finalising legislative procedures forward since the number of countries by mandatory schemes. “Trading of and projects only very recently with emissions caps will grow. A voluntary credits will continue for have begun to be approved. Many future climate agreement therefore corporate social responsibility (CSR) industry experts are sceptical as to becomes pivotal,” he says. obligations, so we’ll continue to see whether the JI projects will continue Ramming puts Carbon Trade companies offsetting in that, but by as a carbon market mechanism once Finance’s success down to its and large the voluntary sector will be a new global carbon agreement is focussed approach. “We believe it is superseded,” he says. “The question finalised post-2012. extremely difficult to develop projects is, what emissions credits will count Martin Lawless, head of across the globe and focus therefore under the US scheme? And will the environmental financial products solely on JI,” he says. voluntary credits count within a US Reprinted from December 2009
  5. 5. environmental rankings 2009 cap-and-trade scheme?” he adds. sectors. This year the results for best market for energy efficiency credits Angela Schwarz, president and supplier were varied, with no one is one to watch. “We have recently chief operating officer of Element supplier dominating the renewables participated with transactions Markets says the shape of the US’s space. Spanish utility Iberdrola taking place in Connecticut, and we mandatory cap-and-trade scheme is topped the wind power category, continue to monitor other states as now viewed as an eventuality rather while global solar developer SunPower we foresee this as a potential high than a possibility, but reiterates Corporation gained first place for growth market,” she says. this does not mean that the current solar power. Spanish multinational In terms of green energy project US compliance markets should be corporation Abengoa was ranked the finance, CF Partners was voted ignored. “While the SO2 and NOx best supplier of biofuels. best advisor in this category, while markets are not viewed as high In terms of investment, Spanish JP Morgan was the most highly growth markets in comparison to ranked investment bank for both carbon, we do not expect regulatory project finance and green energy changes to occur over the next two funds and indexes. years to buoy the markets,” she says. CF Partners performed well this The US REC market is still year across the renewables advisory fragmented, with approximately 30 categories, gaining first place for wind US states now having introduced and biofuels. Global accountancy firm renewable portfolio standards Deloitte gained second place in both (RPSs), but a lack of uniformity these categories but surpassed CF in RPS design makes it difficult to Partners in the solar power category trade across state lines. But this year, and gained first place. the Waxman-Markey Bill, which Roman Webber, head of the was approved by the US House of renewable energy team at Deloitte, Representatives in June but is yet to says that despite the unlikelihood of be voted on in the Senate, brought a deal being reached in Copenhagen, the US closer to establishing a federal mandate for renewable energy generation. It’s vitally important to have an idea of Schwarz says REC trading in what role CERs will play post-2012. India the US is set to explode. “US REC trading is extremely complex and and China are most likely to continue rules-based. We have extensive research capability that tracks and to play a role in developing emissions analyses developments across the reductions projects in the long-term new and existing REC markets as Amit Oza, senior emissions broker, TFS Green we move closer to a national RPS,” Schwarz says. Over in the UK, Morgan Stanley gained first place for UK Renewables investment bank Banco Santander the environmental community Obligation Certificates (ROCs) gained first place for the wind, solar remains upbeat about an international in the dealer category, while CF and biofuels categories. UK-based agreement being reached in the Partners surpassed Tradition and electric power station Drax gained future. “What is likely to emerge is Evolution Markets for the best first place for best utility in terms of some sort of ‘agreement to agree’. broker of ROCs. This year, the biofuels production. While we are more likely to have a UK government boosted trading US energy services company political rather than legally binding of ROCs through a change to the Ameresco gained first place for agreement, the latter is not that far allocation of ROCs in May. Offshore preferred firm in the energy efficiency off,” he says. “I expect to see China wind developers now receive 1.5 category. US-based research firm and the US agreeing to be part of a ROCs per megawatt hour (MWh) Sustainability International gained future global pact at Copenhagen,” of wind power rather than 1 ROC. the top position for best advisor in the he adds. Onshore wind projects receive 1 energy efficiency. Webber says having a carbon price ROC per MWh. The trading of energy efficiency is an indirect driver for the renewables credits, or white certificates as sector incentivising investment. Clean and efficient they are often termed, has been Roman Webber, “A global agreement on carbon, and The survey also looked at supply and described as a potential new growth head of the a rise in the price of carbon, will be investment in the renewables, clean market by some experts. Element renewable energy positive for the renewables industry technology and energy efficiency Markets’ Schwarz says the US team at Deloitte long-term,” he says. n December 2009
  6. 6. environmental rankings Carbon trading European Union ETS Allowances (EUAs) 2009 2008 Dealer % 2009 2008 Broker 1 1 Barclays Capital 18 1 1 ICAP 2 3 Deutsche Bank 15 2 – Tradition 3 2 Orbeo 12 3 3 Evolution Markets 4 – BNP Paribas 8 4 – CF Partners 5 – Credit Suisse 6 Emissions rEnEwablEs EUA options UK Renewable Obligation Certificates 2009 2008 Dealer % 2009 2008 Broker 2009 2008 Dealer % 2009 2008 Broker 1 1 Orbeo 19 1 – Evolution Markets 1 2 Morgan Stanley 23 1 – CF Partners 2 – Deutsche Bank 13 2 3 Tradition 2 =3 Scottish Power 10 2 3 Tradition 3 – JP Morgan 12 3 1 Tullett Prebon =3 – Centrica 8 3 – Evolution Markets 4 – BNP Paribas 8 4 – Spectron =3 =3 EDF Trading 8 CERs – primary (CDM) EnErgy EffiCiEnCy 2009 2008 Dealer % 2009 2008 Broker 1 1 Deutsche Bank 22 1 – Tradition Preferred firm % Preferred advisory 2 – BNP Paribas 18 2 – Evolution Markets Ameresco 10 Sustainability International 3 – CF Partners 12 3 – CF Partners Nextant 8 – 4 2 Orbeo 10 CERs – secondary (CDM) 2009 2008 Dealer % 2009 2008 Broker finanCials 1 1 Deutsche Bank 19 1 3 Tradition Green energy project finance 2 2 Orbeo 15 2 – CF Partners 2009 2008 Investment bank % Advisory 3 – CF Partners 14 3 2 Evolution Markets 1 1 JP Morgan 22 CF Partners 4 – BNP Paribas 10 4 – Tullett Prebon 2 – Morgan Stanley 18 Baker McKenzie =5 4 Barclays Capital 8 3 3 Deutsche Bank 12 =5 – Morgan Stanley 8 =4 – Goldman Sachs 10 =4 – BoA Merrill Lynch 10 ERUs – primary (JI) 2009 2008 Dealer % 2009 2008 Broker Green energy funds/indices 1 1 Carbon Trade Finance 25 1 – CF Partners 2009 2008 Investment bank % 2 3 Deutsche Bank 18 2 3 Evolution Markets 1 – JP Morgan 15 3 – CF Partners 15 3 1 Tradition 2 – SGCIB 10 4 _ Citigroup 10 3 – Deutsche Bank 7 Reprinted from December 2009
  7. 7. environmental rankings Emissions rEnEwablEs ctd European Voluntary Emissions Reductions 2009 2008 Dealer % 2009 2008 Broker 1 CF Partners 15 1 Tradition 2 Deutsche Bank 10 2 Evolution Markets n/a n/a 3 ClimateCare(JPMorgan) 6 3 EcoSecurities 4 First Climate 5 4 CantorCO2e US Voluntary Emissions Reductions 2009 2008 Dealer % 2009 2008 Broker 1 Element Markets 20 1 Evolution Markets environmental rankings 2009 2 n/a 3 Degrees 18 2 n/a Tradition 3 Morgan Stanley 10 3 CantorCO2e rEnEwablEs Wind power 2009 2008 Best supplier % 2009 2008 Best investor Best advisor 1 2 Iberdrola 15 1 – Banco Santander CF Partners 2 – Gamesa Energy 8 2 – Morgan Stanley Deloitte 3 – Horizon Wind 6 3 – Element Markets Baker McKenzie 4 Andrews Kurth Solar power 2009 2008 Best supplier % 2009 2008 Best investor Best advisor 1 – Sunpower Corp 12 1 – Banco Santander Deloitte =2 – First Solar 10 2 – Element Markets CF Partners =2 – SunEdison 8 3 – McDermott, Will Emery Biofuels 2009 2008 Best supplier % 2009 Best utility Best investor Best advisor 1 – Abengoa 8 1 Drax Banco Santander CF Partners © 2 – Green Circle 7 2 RWE Morgan Stanley Deloitte 3 Repsol Deutsche Bank Baker McKenzie December 2009