Give Credit Where Carbon Credit’s Due

CRITERION From:The Australian June 06, 2013 AS the two listed providers of carbon sinks — growing trees to generate carbon credits — Carbon Conscious (CCF, 2.8c) and CO2 (COZ, 9.5c) have endured the pall of political uncertainty around the abatement issue. But they may be in a better than anticipated position when (barring a Ruddy miracle) Tony Abbott and his climate sceptics storm the frontbenches in September. It’s widely assumed that given the Coalition has pledged to abolish the carbon tax — Senate willing — there’s no incentive for companies to invest in carbon-soaking schemes. Indeed, Carbon Conscious client Origin Energy last year declined to extend a tree-planting deal. But there’s bipartisan agreement to reduce Australia’s emissions by 5 per cent by 2020, with the Coalition pledging to set aside $1.5 billion over three years to buy credits generated by polluters. This equates to a somewhat theoretical price of $15 a tonne, compared with the current temporary floor price of $23/t. Given the slowdown in sequestration investment, CO2’s Andrew Grant says the government may struggle to obtain local credits, in which case the market will push up the price. And, no, dirt-cheap European credits can’t be imported. CO2 yesterday announced the first issue of Australian Carbon Credit Units (ACCUs) from a reforestation project, on behalf of goldminer Newmont. In other words, Newmont can now offset any carbon tax liability from its two Australian mines and avoid paying the carbon tax. Carbon Conscious also announced its method for measuring the carbon-soaking abilities of its 18,000ha of forests had been approved by the clean energy regulator. Carbon Conscious chief executive Andrew McBain expects this acreage to generate 300,000 ACCUs over the next 10 to 15 years, with 10 per cent owned by the company and the rest by clients. “The revenue potential is substantial, especially for a smaller company like ourselves,” McBain says. CO2’s tapestry is more complex as it derives revenue from eco investments and advice and is building a low-cost tiger prawn hatchery in Western Australia. Grant is unfazed by the abysmal listed history of aquaculture plays.”Collingwood doesn’t benchmark itself against Melbourne,” he says. Like the hapless Demons, both stocks are chalking up nasty losses, but we give them credit for being years ahead of sequestration rivals. We’ll avoid Carbon Conscious (market cap $2.9m) in favour of the bigger CO2 ($43m). ISS Group (ISS) 32c MICROEQUITIES’ Carlos Gil has a sense of deja vu as he saddles up to ward off a US takeover attempt at a local mining-focused house. P2ES Holdings is offering 33c a share for ISS, which boasts a proprietary IT system for the oil and gas sector called BabelFish. Microequities owns 9 per cent of ISS and Gil reckons the offer price (a 50 per cent premium on Tuesday’s close) doesn’t reflect the value of the “great little software”. In 2011 Microequities fought in vain to prevent Triple Point from taking over QMastor, but not before the suitor improved its offer. This time around it’s trickier because the offer is board-endorsed, but Gil reckons he can still get the 25.1 per cent support to stymie the scheme of arrangement. We had ISS as a spec buy at 17c and now call the stock a hold. For the record, Gil would accept 40c a share. Given the Hitchhiker’s Guide to the Galaxy allusion to BabelFish, let’s make it 42. Macmahon Holdings (MAH) 16c THE mining contractor yesterday had no idea why Swiss giant Glencore had dumped it from a $110m project — and by sunset was still as bemused as a lost puppy. Investors won’t give mining-service plays the benefit of the doubt and Macmahon’s already trashed shares lost another 2c (11 per cent). The terminated assignment — extending the main shaft of the CSA copper mine near Cobar — was minor in the scheme of Macmahon’s $1.4bn revenues and $3.9bn job book. On a brokers’ trip to the Pilbara last month, Fortescue reps waxed lyrical about Macmahon’s prosecution of the $1.8bn Christmas Creek expansion. Macmahon has guided to a full-year loss of up to $20m. CSA won’t be the last shafted mining project, but we believe the Macmahon sell-off has been overdone and rate the stock a buy. borehamt@theaustralian.com.au The Australian accepts no responsibility for stock recommendations. Readers should contact a licensed financial adviser. The author does not own shares in any of the companies mentioned. Taylor Scott International