Chinese specialist carbon companies are turning to the OTC (over the counter) equity market for external cash injections to stay afloat while seeking to gain a foothold in the emerging emissions market in its uncertain early days.
Zhejiang-headquartered Chaoteng Carbon Asset Management Corp. on Thursday in Beijing celebrated its listing on China’s OTC equity exchange, known as the “new third board”, a market where brokers trade to fund small- and medium-sized companies.
More than 3,500 companies have been listed on the exchange since it opened in 2012, and Chaoteng became the second carbon specialist firm to join after Hanergy, both aiming to raise funds.
Chaoteng issued 4 million shares to six owners in August, each at a value of 1 yuan ($0.16).
“We plan to offer another one million shares by the end of the year through private placement, at 20 yuan each,” Tina Wang, a company director, said.
While China is gearing up to launch a national ETS in early 2017, revenue is uncertain for many of the companies seeking a place in the market because there are only limited opportunities to earn money so far.
Chaoteng has developed 500,000 CCERs for China’s domestic carbon market, and has reached out to five provinces without pilot schemes to offer help building market infrastructure and providing advisory services to local industrial emitters on CO2 inventory analysis and portfolio management.
“We have signed contracts with some cement factories to manage their CO2 emissions,” Wang said.
Chinese carbon firms have had difficult times financially since demand for CERs from European buyers withered earlier this decade, and many have been forced to close down. The immature and illiquid Chinese pilot markets have not been sufficient to fund the industry.
Chaoteng managed to increase its net profit tenfold in H1 2015 thanks to winning contracts to verify emissions in Jiangxi and Zhejiang provinces, but that still amounted to only 1 million yuan.
The other listed carbon company, Hanergy Carbon Asset Management, reported a net loss of 8.7 million yuan in 2014, primarily due to a fierce price war among firms eager to establish themselves in a fledgling market with significant downside risk.
Aware of the plights of new SMEs in non-traditional markets, the government subsidises those who successfully list on the new third board, but even then some experts say the thinly-traded OTC equity market might not be enough to guarantee that every firm survives.
By Stian Reklev – stian@carbon-pulse.com
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