Press release For immediate release 12 March 2009 Climate Exchange plc Preliminary results for the year ended 31 December 2008 2.6 times growth in volumes in 2008 - and still growing fast Climate Exchange plc (the "Group" or the "Company"), the world's leading specialist exchange for trading emissions and environmental products, announces its preliminary results for the year ending 31 December 2008. Unaudited Pro-Forma Financial Highlights for the year ended 31 December 2008 . Pro-forma pre-tax profit of GBP2.8 million (2007: GBP0.85 million) . Revenues from core businesses up 67 % to GBP22.7 million (2007: GBP1 3.6 million) . Core business operating profit GBP6.3 million (2007: GBP3.4 million) . Cash balances including short term investments GBP12.4 million at 31 December 2008 compared with GBP13.7 million at 31 December 2007 and no external borrowings . IFRS loss before tax GBP2.5 million (2007: GBP8.3 million) Strategic Highlights . Election of President Obama - U.S. now poised to commit to mandatory cap and trade . Triple digit growth in the European business during the first Kyoto year - EUAs firmly embedded as global carbon benchmark . Successful launch of CER futures and options . Open interest more than doubled in a year . ECX Spot trading to start March 2009 . Triple digit growth in U.S. based trading - successful product launches and growing diversity . International developments in China, Canada and Australia . Growing interest and new contracts launched in IFEX Operational Highlights . European Climate Exchange (ECX) annual volume increased 170% to 2.81 billion tonnes . ECX open interest finished the year at 356 million tonnes, more than double the previous year . ECX membership increased to 95 members, despite high levels of consolidation throughout the markets (2007 : 80) . Chicago Climate Futures Exchange (CCFE) average daily volume increased by 70 % to 1,899 contracts in 2008 from 1,117 contracts in 2007 . Chicago Climate Exchange (CCX) average daily volumes increased by 202% to 2,761 contracts in 2008 from 913 contracts in 2007 . CCX membership increased to 470 (2007: 401) Richard Sandor, Chairman of Climate Exchange plc, said: "Our company continues to blaze new trails while growing the business. The growth in both volumes and revenue has been outstanding and the first two months of 2009 have been even more auspicious. The success of RGGI futures and options and the launch of the "when issued" U.S. Allowance futures and options has positioned the company to emerge as the leader in any mandatory program in the United States, which appears to be more likely than ever." Neil Eckert, Chief Executive of Climate Exchange plc, said: "2008 was another exciting year for our business both in terms of continued growth in volume of contracts traded and the launch of successful new contracts. We especially look forward to the launch of the Spot contract in Europe on 13 March 2009, which will be another important development in our business." --ENDS-- There will be a live audio cast today of our Preliminary Results for the year to 31 December 2008 at 1.00 p.m. GMT/9.00 a.m. EST. Event title 'Climate Exchange plc Preliminary Results Presentation' To attend the audio cast, please go to our website at www.climateexchange.com and follow instructions at 'Events & Presentations' or direct by going to http://www.investorcalendar.com/IC/CEPage.asp?ID=141731 To dial into the conference call please use one of the following numbers UK Regular number 0208 609 0582 UK Toll Free number 0800 358 7034 US Toll Free number +1 866 388 1925 Contacts Climate Exchange plc Neil Eckert, CEO, 0207 382 7801 Matthew Whittell, CFO 0207 382 7802 Helene Crook, Investor Relations 0207 382 7807 Haggie Financial David Haggie / Alexandra Parry 0207 417 8989 Cenkos Securities plc 0207 397 8980 Ivonne Cantu / Nicholas Wells Notes to Editors: About Climate Exchange plc Climate Exchange plc is a holding company whose subsidiaries are principally engaged in owning, operating and developing exchanges to facilitate trading in environmental financial instruments including emissions reduction credits in both voluntary and mandatory markets. Its three main businesses are the European Climate Exchange (ECX) which operates the leading derivatives exchange focused on compliance certificates for the mandatory European Emissions TradingScheme, Chicago Climate Exchange (CCX) which operates a voluntary but contractually binding cap and trade system for greenhouse gas emissions in the U.S., and the Chicago Climate Futures Exchange (CCFE) the leading U.S. regulated environmental products exchange whose contracts include mandatory U.S. emissions such as SO2 , NOx and RGGI CO2. www.climateexchange.com About European Climate Exchange The European Climate Exchange (ECX) manages product development and marketing of Carbon Financial Instruments (CFI) futures and options contracts on CO2 EU allowances (EUAs) traded under the EU Emissions Trading Scheme and Certified Emission Reductions (CERs) issued under the Kyoto Protocol. ECX CFI contracts are listed and traded on the ICE Futures electronic platform, offering a central marketplace for emissions trading in Europe with standard contracts and clearing guarantees. ECX/ ICE Futures is the most liquid, pan-European Exchange for carbon emissions trading. More than 90 businesses have signed up for membership to trade ECX products. In addition, several thousand ICE clients can access the market via banks and brokers. www.ecx.eu About Chicago Climate Exchange, Inc. and Chicago Climate Futures Exchange Chicago Climate Exchange (CCX) is a financial services business whose objectives are to apply financial innovation and incentives to advance social, environmental and economic goals. CCX is the world's first and North America's only contractually binding rules-based greenhouse gas emissions allowance trading system, as well as the world's only global system for emissions trading based on all six greenhouse gases. CCX members are leaders in greenhouse gas management and represent all sectors of the global economy, as well as public sector innovators. Greenhouse gas emission reductions achieved through CCX are the only reductions in North America being achieved through a legally binding compliance regime. Independent third party verification is provided by FINRA. For a full list of CCX members, daily prices and other Exchange information please see the CCX website. The Chicago Climate Futures Exchange (CCFE), a wholly owned subsidiary of the Chicago Climate Exchange, is a CFTC designated contract market which offers standardized and cleared futures contracts on emission allowances and other environmental products. Clearing services are provided by The Clearing Corporation. Market surveillance services are provided by the National Futures Association, the industry wide, self-regulatory organization for the U.S. futures industry. www.chicagoclimateexchange.com www.ccfe.com EXECUTIVE CHAIRMAN'S STATEMENT "Do not go where the path may lead, go instead where there is no path and leave a trail" - Ralph Waldo Emerson It gives me great pleasure to report on another outstanding year for the Climate Exchange plc group of companies as evidenced by continuing volume growth in Europe as well as the significant developments in prospect for U.S. mandatory carbon markets following the presidential election. Your Company continues to blaze new trails. This has been a year where we made great strides in solidifying our positions in Europe and the U.S. through growth in membership and the launch of new products in both mandatory and voluntary markets. We are now active in every major established emissions trading regime around the world. Our most successful new contracts launched in 2008 were futures and options on Certified Emission Reductions (CERs) on the European Climate Exchange (ECX). These contracts have special significance as they have the potential to be a linking mechanism among various national systems. In the U.S., the Chicago Climate Futures Exchange (CCFE) successfully launched a Regional Greenhouse Gas Initiative (RGGI) futures and options contract - the first mandatory greenhouse gas cap and trade program in the country. ECX and CCFE have captured 87% and 99% market shares in these contracts, respectively. And more recently, we now have a presence in another emerging U.S. emissions market, California, with the launch of futures on California Climate Action Registry. Market interest has also led us to launch the first tool for directly hedging exposure under a potential mandatory U.S. greenhouse gas trading program, a "when issued" Carbon Financial Instrument (CFI-US). We have also expanded the franchise of environmental and sustainability-based products that reinforce our mandate as the premier exchange for all types of climate-related contracts. We have launched a futures contract on the Dow Jones Sustainability Index, marking a partnership with Dow Jones Indexes of which we are very proud. Also, the Insurance Futures Exchange (IFEX) has seen increased market interest, with two new contracts being offered this year. The international highlight of 2008 is the completion of the agreement for CCX to become a founding investor in China of the Tianjin Climate Exchange (TCX), China's first integrated exchange for trading of environmental financial instruments. China's use of markets to attain environmental objectives has the potential to be a transformational event in the environmental world. TCX has been granted a provincial license by the Ministry of the Environment and Ministry of Finance of the People's Republic of China to trade SO2, Energy Intensity and COD (water quality). 2008 was a remarkable year in many regards but will probably be remembered for the state of financial turmoil that occurred during the third and fourth quarters and still persists today. Climate Exchange plc is virtually unique in the exchange space in that throughout this turmoil we have continued to post month on month record volumes culminating with February 2009 setting new daily, weekly and monthly records for our Group. The Climate Exchange brand continues to grow. European Climate Exchange Volumes on ECX have been exceptionally strong. The membership base of clearing members, industrials and financial players that have access to the ECX market has not only expanded but also diversified beyond Europe. The latter contributes to our objective of becoming the premier brand in environmental markets worldwide. Chicago Climate Exchange In 2008, CCX membership increased to 470 from 401 in 2007. CCX Members represent 17% of the Dow Jones Industrials, 11% of the Fortune 100, and 20% of the largest CO2 emitting utilities in the US. CCX total baseline is approximately 600 million metric tonnes of CO2 equivalent, making it larger than Germany in terms of emissions under a cap. New member highlights for 2008 include a cross-section of industry ranging from utilities such as Mirant, Dynegy and CLECO to pharmaceuticals (Abbott Laboratories) and manufacturers (Bosch). These events continue to secure our leadership in cap and trade in what might become the largest carbon market in the world. Chicago Climate Futures Exchange CCFE exhibited tremendous growth in 2008 despite the fact that the Federal Court's ruling on the Clean Air Interstate Rules (CAIR) adversely affected SO2 and NOx emission trading. Fortunately, the outlook for 2009 is again positive as CAIR was reinstated in December 2008. In November 2008, CCFE launched its CFI-US Allowance Futures Contract (CFI-US). The contract offers the first tool for directly hedging exposure to possible future U.S. carbon allowance prices, as well as whether and when a U.S. federal greenhouse gas emission reduction mandate is established. The CFI-US calls for delivery of greenhouse gas emission allowances that would be usable for compliance under a mandatory federal U.S. cap and trade program. Delivery of other specified mandatory CO2 allowances would be required if a U.S. federal mandatory program is not enacted when contracts expire in 2013 and later. A diverse group of industrial and financial players were involved in the opening day of CCFE CFI-US futures transactions. This was a bold an innovative step by your Company. It has already begun to inform the debate in the U.S. on a mandatory cap and trade program. Public Policy Developments The work and progress of the CCX is well-known to many of the leading members of the Congress and the current Administration. We have intensified our educational outreach in Washington given the growing interest from members of the U.S. Congress on impending cap and trade legislation. CCX has met with the offices of over two dozen of the most active and prestigious Members of the House and the Senate currently involved in discussions to draft cap and trade bills, including briefings to members of important Congressional committees and their staff (e.g. Energy and Commerce, Agriculture). As the new Administration takes office, we are also in the process of briefing incoming members of the Executive Branch who will be directly involved in climate change policy from both a domestic and international angle. International Developments CLE has continued to make progress in establishing Climate Exchange as the leader in the design and development of emissions markets worldwide. In China, the China National Petroleum Corporation Asset Management Company, Ltd. (CNPC-AM), Tianjin Property Rights Exchange (TPRE) and CCX announced in September the opening of TCX. As a joint venture between CNPC-AM, the City of Tianjin and CCX, TCX intends to establish China as a pre-eminent center for environmental finance and the application of market-based mechanisms to environmental management and natural resource protection. In December 2008, TCX and Hong Kong Exchanges and Clearing Limited (HKEx) entered into discussions on possible avenues for cooperation in environmental emissions markets. Montreal Climate Exchange (MCEx) a joint venture between CCX and the Montreal Exchange was launched in May 2008. MCEx will serve the needs of the evolving Canadian emissions markets as policy guidelines continue to develop. In Australia, we have a 25% investment in enVex, which addresses the emerging Australian emissions markets. Outlook for 2009 President Obama has clearly stated his intention to implement a nationwide market-based cap and trade system and legislation is currently being discussed in the U.S. House of Representatives. The new Administration has also given clear signals that it intends to have the U.S. re-engage in the international climate change negotiation process particularly in light of the upcoming U.N. conference in Copenhagen in December 2009. Leading legislators involved in the discussion have indicated that a bill is likely to emerge out of Committee in the summer this year. Climate Exchange continues to apply financial innovation and incentives to advance environmental and economic goals. In the absence of national or local regulations, we design and implement emissions trading systems which have, in many instances, anticipated public policy. When a regulatory framework already exists, we operationalize the law through the use of a regulated and transparent platform which provides price discovery and a low-cost hedging mechanism. Despite the current financial turmoil, we believe the outlook for emissions trading markets and other forms of market-based solutions to environmental problems continues to be positive. Companies, governments and the public sector increasingly see the value of these instruments as a price-discovery mechanism for carbon and to help them and society achieve emissions control at the lowest possible cost. In conclusion, 2008 has solidified Climate Exchange's status as the leader among environmental exchanges in the world. Its success is ultimately due to our members and customers. Your management team in both Europe and North America has been outstanding and we are delighted to have welcomed Satish Nandapurkar as president of CCX in Chicago. On a personal note, special thanks are due to Neil Eckert the CEO of Climate Exchange plc. And of course my greatest debt of gratitude goes to my fellow shareholders who have been so supportive in helping us achieve our financial objectives and personal dreams. Richard L. Sandor Executive Chairman 12 March 2009 OPERATING AND FINANCIAL REVIEW We continue to drive growth in the group businesses. In addition to our three core businesses of ECX in Europe and CCX and CCFE in North America, we have a growing portfolio of international partnerships and investments which we manage as an international segment. Our core businesses are wholly owned subsidiaries of the Group while strategy and local regulation typically mean our international businesses are owned jointly with other local partners. In Europe, the ECX business, managed by Patrick Birley, is strongly focused on the development of growth in trading volumes. The 2008 volume performance speaks for itself. A major benefit of our strategic relationship with ICE in Europe is that growth can be sustained without significantly adding to our minimal headcount of five at ECX. The U.S. business, headed by Satish Nandapurkar, has a significantly greater staffing requirement owing to the business model of CCX where to date we have traded in the absence of federal regulation. This means we have to design and maintain our proprietary emissions reduction system, a significant task by itself, and also sell the concept and its commercial and environmental benefits to potential and current members. At the same time, this model gives us two additional revenue lines, being membership dues and offset registration fees. We also have a thriving futures business in Chicago whose main ongoing source of income will be trading volumes. CCFE is our CTFC regulated derivatives exchange in the U.S. and trades an extensive range of contracts which include CCX carbon futures, SOx and NOx futures, catastrophe insurance futures together with various fledgling environmental equity options and other related commodities. The total headcount in the U.S. is 49. In the medium term, we expect the U.S. to be our largest growth market. The third leg of the business is the international arm which include our joint ventures or minority holdings in a range of territories. These include MCEx in Canada, TCX in China, enVex in Australia, and the India Climate Exchange Advisory Board (ICX) in India. We are engaged in discussions to launch contracts in other important markets. European Climate Exchange (ECX) Volumes 2008 will be remembered as a true turning point for ECX - a year where we saw a jump-shift in trading activity. Volumes on ECX have been exceptionally strong with trading levels nearly three times the same period last year. Full year volumes increased 170% over 2007. In 2008, ECX captured a 92% market share of EUA futures and options traded and 87% market share for CERs. For 2009, we begin the year with 355,505 contracts in open interest in comparison to 176,386 at the start of 2008. ECX has solidified its position as the price reference for the largest environmental market in the world in both EUAs and CERs. The membership base of clearing members, industrials and financial players that have access to the ECX market has not only expanded but also diversified beyond Europe. The volume traded in each month of 2008 exceeded the highest monthly volume in any of the years since our launch (the previous highest monthly volume was 126,000 in July 2007, whilst the lowest volume month in 2008 was March, when 128,000 contracts traded). The peak volume month was October when we traded 412,000 contracts, only slightly below the total traded volume for the full year 2006. Products The launch of our second key product, CER futures, in March followed a frustrating period of conflict with our previous clearing provider. Thankfully the delays in getting to market did not impact on success and the CER contracts gained immediate traction. The volumes achieved during the first year of operation make it a notable success as we achieved a market share of 87% by the year end. The futures were followed closely by CER options in May 2008 and these too attracted immediate and significant volumes. The combination of EUA and CER derivatives on the same platform has given rise to arbitrage opportunities, with transparent pricing and increasing liquidity across all products. Prices Market prices of both EUA and CER products fell sharply, particularly in the latter part of 2008. These falls are generally correlated to price declines in other commodity markets and although the falls have not impacted volumes, it is a concern that they move the market price further from the marginal cost of abatement. Volatility levels in the emissions options are around 60% and these no longer stand out as particularly high amongst other commodity or financial derivatives. Clearing transfer The transfer of all ECX products to ICE Clear Europe from LCH.Clearnet was completed without incident in November. The move will hopefully put ECX, together with our partners ICE, on a more dynamic footing with respect to future product launches. The importance of clearing mechanisms has been driven home during the recent financial turmoil and ECX has been pleased to be able to provide a platform for activity that might previously have been done bi-laterally. We are grateful to all those who support our products so enthusiastically. Competition A number of competitive offerings came and went during the year but, despite this, ECX grew its market share of emissions futures and options during the period. In the second half of the year (and most notably in the last quarter) spot trading in EUAs (and to a lesser extent CERs) picked up significantly. Following consultation with a broad range of users, ECX has announced the launch of spot products during Q1 2009. We believe that these contracts, trading alongside the existing futures, offer significant benefits to customers. Current trading We remain bullish about the opportunity for further growth in trading activity on ECX. The continued volatility in prices, combined with new spot products and the ever-growing developments in emissions trading both from the U.S. and Asia all give good reasons for optimism. Additionally, as we move towards COP15 in Copenhagen in December we hope to get greater clarity regarding the post-Kyoto emissions regime and this is likely to significantly increase the tradability of our longer-term contracts. From an internal perspective, in 2009 ECX (together with our partner ICE) will be aiming to improve the time to market of new products in order to better meet user requirements. We also hope to start being able to offer cross margining against other ICE products to assist members with their capital efficiency, a move that has already started with coal contracts in March 2009. Click on, or paste the following link into your web browser, to view the associated PDF document. http://www.rns-pdf.londonstockexchange.com/rns/7285O_1-2009-3-11.pdf This information is provided by RNS The company news service from the London Stock Exchange END
Contact Information: Contacts: RNS Customer Services 0044-207797-4400 http://www.rns.com