EcoSecurities Group plc

AGM Statement


Source: EcoSecurities Group plc

EcoSecurities Group plc (the “Group” or “EcoSecurities”), one of the world’s leading originators of projects which have the potential to generate carbon credits, will hold its Annual General Meeting in Dublin, Ireland today at 10.00. At the meeting Mark Nicholls, Chairman, will make the following statements:

“EcoSecurities made considerable progress in the 2005 financial year, culminating in its successful listing on AIM in December. Progress has been maintained in 2006, and the business remains on course to implement its business plan, notwithstanding the recent, well publicised turbulence in the market for carbon credits.

The commercialisation of the Group’s carbon credit portfolio and overall performance of the business to date is in line with previous expectations. Furthermore, recent volatility in carbon prices has reinforced the strength of the Group’s business model, based on early stage project origination which enables the Group to acquire low cost Certified Emission Reductions (a CER being equal to one metric tonne of CO2e emission reductions) and maintain attractive margins at a wide range of sale prices. In addition, it is important to highlight the fact that the Group’s portfolio is valued in relation to the 2008-2012 Kyoto Protocol commitment period and current prices for delivery in that period are higher than our forecasts.

Our business model has been designed to be extremely robust, being underpinned by conservative assumptions about the prices at which the Group will be able to sell carbon credits in the First Commitment Period of the Kyoto Protocol and Phase 2 of the European Union Emissions Trading Scheme (“EU ETS”), which runs from 2008-2012. Prevailing prices in Phase 2 of the EU ETS have recently stabilised around 20 Euro per tonne, well above the price assumed by the Group at the IPO.

A number of significant milestones have been achieved since the financial year-end, as follows:

• Origination performance has been strong with gross contract volume of the Group’s projects increasing to over 121 million CER’s at present - an increase of 70% since the IPO in 2005. However, it should be noted that gross project volume does not adjust for the risks that any given project faces before the delivery of the estimated volume of CERs, nor does it account for any splitting of volumes with project partners and developers. Recent growth in the portfolio was based on principal contracts which now represent 64% of the total volume under contract or term sheet and over 80% of forecast net revenues.

• The project portfolio remains highly diversified by geography, technology and Clean Development Mechanism (“CDM”) methodology, with a total of 195 projects today, up from 121 at the IPO. The Company has also recently added projects that reduce emissions of industrial gases, representing additional technological diversification of its portfolio. We believe that project diversification, as well as our excellent track record in project implementation, significantly enhances our ability to generate consistent production of CER’s from our growing project portfolio.

• In order to continue expansion of the Company’s origination efforts, the Group has established 6 new legal entities in China, the Philippines, Malaysia, India, Thailand and Mexico this year. Further new legal entities will be formalized in Chile and Indonesia during the second half of 2006. Additional representatives have been added this year in Morocco , South Africa and Pakistan and further growth opportunities are under consideration.

• Implementation continues to progress steadily. Of the 195 projects at contract or term sheet stage, over 150 are now financed, over 70 have completed Project Design Documents and 53 have been validated. At present, 16 projects have been registered with the CDM Executive Board, up from 8 at the IPO.

• Demand for CERs from corporate buyers with 2008-2012 compliance obligations continues to grow, with the number of new corporate buyers in Europe increasing significantly. To date the Group has pre-sold 140 million Euro of CERs to predominantly large highly rated corporate and government buyers which represents a steady stream of revenues for the Group through to 2012. A majority of transactions in the year to date have been completed above 15 Euro, which is significantly higher than transactions completed last year due in part to our stronger balance sheet post IPO as well as strong market demand. We continue to be active in the market and have a policy to pre-sell approximately 50% of our portfolio by year end 2006, with the vast majority of the pre-sold volume contracted for delivery from 2008 to 2012.

• The Group had a net cash balance at 30 April 2006 of 66 million Euro which is in line with our expected cash flow forecasts. The Group has maintained a cost efficient structure despite rapid expansion and has sufficient capital to sustain operations through the point at which positive cash flow is generated from operations. The Group’s ongoing business performance, international expertise and successful track record mean that despite recent market volatility EcoSecurities is well on track to achieve its business objectives. The Board believes market volatility highlights EcoSecurities experience and capabilities to both project developers and carbon credit buyers, thereby enhancing our ability to execute the growth plan.

EcoSecurities target for the balance of the year is to maintain our core focus on originating, implementing and commercialising our highly diversified portfolio of emissions reductions projects. Despite recent market events, prices for carbon credits in the Kyoto commitment period remain strong and the conservative forward price assumptions underpinning our strategy remain unchanged. The continued growth in the Group’s contract volume, achieved while retaining attractive margins, demonstrates the success of the business model and underpins our confidence in the Group’s future prospects.”

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