CEZ says good time to buy carbon credits

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PRAGUE (Reuters) - Carbon prices are attractive and it is good time to buy pollution credits for future use, Czech power firm CEZ Sales Director Alan Svoboda said on Tuesday.

He said the time was right to buy as financially weak companies were shorting their positions, adding that he saw prices climbing back to above 30 euros over several years.

“It is a great opportunity to go out and buy today,” he told an energy conference in Prague, adding producers could hedge or secure carbon credits for future power generation.

Prices of the credits have dropped from last year’s peaks above 30 euros to 11.75 on Tuesday, copying the fall in power prices and a decline in European manufacturing activity.

Svoboda said some companies, strapped for cash after banks choked off credit, were selling their allocated allowances to raise funds needed for operations, opening a short position.

“Companies are realizing that when they cannot get cash from banks, and they have nothing tangible left to use as collateral or for lease-back, they come to this (permits) account and sell,” he later told Reuters on the fringes of the conference.

“They will need to get them back next March, but that is the last thing they are interested in, because they need cash.”

Companies releasing carbon dioxide into the atmosphere get allowances from their governments, and must buy extra ones on the market if they produce more carbon emissions.

The current allocation is valid until 2012. After that, all permits will gradually be auctioned, and fewer will be made available to promote investment in clean technology.

Svoboda said CEZ took a long-term view of its needs, which reflects the fact that the company will keep producing power in polluting coal plants for years.

He said the firm was buying permits and futures now to hedge its production even after the year 2012.

“Prices have reached a level that it is worth it to buy and there is a rule you can bank the allowances into the next period (keep them until after 2012),” he said. “The market is operating today as if the rule was not there.”

He said he saw prices climbing above the 30 euro level as markets realize the cost of investments needed to bring down carbon dioxide emissions.

“Those who buy for 9 or 10 today will save expenditure of 30 or more euros in future.”

The power group said last week that the lower price of emission credits would allow higher production in its coal units, helping boost 2009 earnings.