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Navin's Value May Fall Amid Carbon Probe, Crisil Says (Update2)
2010-10-28 12:48:52.746 GMT
(Updates with share price in fifth paragraph.)
By Natalie Obiko Pearson
Oct. 28 (Bloomberg) -- Navin Fluorine International Ltd.,
named by Forbes magazine as one of Asia's top-performing small
businesses, may lose 20 percent of its value if a UN probe ends
up slashing carbon credits the company can earn, a report said.
"These developments could pose a threat to Navin's
profitability in the medium term," Crisil Ltd., the Indian unit
of Standard & Poor's, said today in the report.
An unfavorable outcome to the investigation may pull down
Navin Fluorine's "fair value" to 240 rupees ($5.39) a share
from 300 rupees currently, Crisil said. The stock fell as much
as 4.4 percent and closed down 1.7 percent at 285.05 rupees in
Mumbai trading. The benchmark Sensitive Index fell 0.3 percent.
The Indian company makes chemicals and industrial gases
used in pharmaceuticals, agriculture, refrigerators and air-
conditioners. Under a United Nations-administered program, it
has earned sellable credits for a factory in Surat that burns a
byproduct called HFC-23, reducing its potency as a greenhouse
gas, rather than releasing it directly into the air.
The company has been unable to earn any new credits since
May from the UN, which caused a 31 percent drop in revenue in
the quarter ended Sept. 30 compared with the previous year,
Crisil said.
The UN Clean Development Mechanism awards credits to
projects that reduce greenhouse gases in developing countries.
Project owners can sell those credits to factories and
refineries in Europe and elsewhere where they are used to offset
excess emissions in order to comply with local pollution rules.
'Bogus' Credits Claim
UN regulators began a probe of HFC-23 projects on July 30
after environmental group CDM Watch said some companies have won
"bogus" credits by exploiting the system. A UN panel on July 1
recommended investigating claims that the system may incentivize
plants to produce more HFCs than necessary to win more credits,
extend the life of old plants, and displace more efficient
entrants, according to the panel's findings on the UN website.
Mumbai-based Navin Fluorine earned 6.1 million UN credits
since 2007, making it India's third-most productive project to
date under the UN program, according to Bloomberg data.
Other companies earning credits from HFC projects include
tire-maker SRF Ltd., Gujarat Fluorochemicals Ltd., and Chemplast
Sanmar Ltd., according to data compiled by Bloomberg.
Navin Fluorine was named by Forbes magazine as one of
Asia's 200 top-performing businesses with revenue under $1
billion, one of 39 Indian companies that made the 2010 list
published on Sept. 1.
HFCs gained favor in the 1970s as an alternative to
chlorofluorocarbons, or CFCs, which scientists linked to
depletion of the ozone layer. While HFCs don't interfere as much
with the earth's shield against damaging sunrays, they trap heat
and are believed to contribute to global warming.
HFC-23 can trap 11,700 times more heat per molecule than
carbon dioxide and linger in the atmosphere for as long as 260
years, according to the U.S. Environmental Protection Agency.
For Related News and Information:
Emission market news: NI ECREDITS <GO>
Top environment stories: GREEN <GO>
Top energy stories: ETOP <GO>
Sustainability, environmental indexes: SEI <GO>
--Editors: Todd White, Mike Anderson
To contact the reporter on this story:
Natalie Obiko Pearson in Mumbai at +91-22-6612-9107 or
npearson7@bloomberg.net.
To contact the editor responsible for this story:
Clyde Russell at +65-6311-2423 or crussell7@bloomberg.net.
