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Emissions credits sale expected to generate Ft 2.5 bln

The sale of 1.2 million emissions units by the state at an auction on December 11 should generate Ft 2.5 billion in revenue, according to industry insiders.

The Finance Ministry announced the sale a week earlier. The transaction will be made using the Emissions Trade System (ETS) on www.euets.com, a trading platform powered by Vertis Környezetvédelmi Pénzügyi Tanácsadó. Vertis will also manage the transaction. Vertis analyst Gergely Szabó said the auction would be the largest ever since the ETS was introduced. It will also be the first such transaction made online. Hungary is just one of four EU members to set aside part of their emissions credits to sell at auction. Ireland sold 250,000 credits at an auction in February 2006 and it will offer another 963,000 credits on December 4. Denmark and Lithuania will also offer some credits at auction, thought details of the sales have not been announced. On the day of the auction, bidders will have an hour to make offers on www.euets.com, and these offers will be evaluated by the Finance Ministry within an hour as well. The minimum purchase amount price is 1,000 units, and the minimum price is €0.9 under the prevailing price for a December 2007 call -- which was about €9 per credit on Wednesday.

The system will accept the highest offers until the first 1.2 million units are sold, however, all successful parties will pay the lowest accepted offer. Szabó said banks and Western European power stations would show the most demand for the credits. The EU allows Hungary to reserve 800,000 emission units for auctions every year in the three-year testing phase of the ETS between 2005 and 2007. About 12,000 companies have been allocated emissions credits in EU member states, including 220 companies in Hungary. Some 2.1 billion emissions credits have been allocated EU-wide, including 31 million to Hungarian companies. Emissions credits have traded as high as €30 in 2005 and they bottomed out at €8.4 in mid-November. Industry insiders expect the price to fall because of oversupply.

European Union emission permits for prompt delivery fell to a record low, as factories and power stations sell surplus permits. Permits for prompt delivery fell as much as 65 cents, or 8%, to €7.5 a metric ton today, according to data on Bloomberg from the Powernext exchange in Paris. That's a record low for that contract. They were at €7.60 at about 11:05 a.m. local time. Permits for December 2008 fell 65 cents to €17.8, according to the European Climate Exchange in Amsterdam. The fall in the prompt price “is an acceleration of surplus permits coming to market,” Gerhard Mulder, a commodities derivatives marketer at ABN Amro in Amsterdam, said today by telephone. Sellers have “realized they missed out” on high prices, Mulder said. Prices for 2006 reached a record high of €31 in April, ECX figures show. (Mti-Eco, Bloomberg)