Trading Mandate Catalogue

TradingMandate
Catalogue
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Index
AboutALLCOT
EmissionsTradingCatalogue
EmissionsTrading ALLCOTTradingRa<onale PriceDevelopment
RiskManagement InvestmentFramework
TradingMandate ContactALLCOT 3
5
6
12
13
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16
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AboutALLCOT
Ver<cally Integrated Carbon Asset Management
Company.
IntegratedCarbonAsset
Management
Carbon
Investment
Advisory
Sales
&
Trading
Carbon
Credits
por;olio
manage
ment
Carbon
Finance
CarbonAssetDevelopment
(ProjectSourcing&Development)
Innova<ve Carbon Bou<que: Carbon Credits
Origina<on, Carbon financing, Carbon trading and
execu<on.
Offers solu<ons for renewable energy and energy
efficiency projects through a combina<on of Clean
D e v e l o p m e n t M e c h a n i s m s ( C D M ) p r o j e c t s
development and Cer<fied Emission Reduc<on (CER)
porYoliomanagement.
Offers custom carbon credit porYolio solu<ons for
compliancebuyersandvoluntaryoffseZng.
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AboutALLCOT
Created in 2009, ALLCOT is a group of companies specializing in end-to-end sustainability solu<ons for
businessesofallsizes.Wedevelop,manageandtradeinallsectorsrelatedtoclimatemi<ga<on.
Our award winning sustainability programs enable companies a clear roadmap to incorpora<ng sustainable
businessprac<cesintheiropera<onswithouthighfinancialorstructuralinterven<on.
CarbonPor;olioManagementandTrading
ALLCOT Group has evolved from a strong background in the compliance markets where we have been and
remain an ac<ve par<cipant since our crea<on. To support our commitment to working in the compliance
markets, ALLCOT is a member of Interna<onal Emission Trading Associa<on (IETA) and the Climate Markets
andInvestmentAssocia<on(CMIA).
Disciplined investment process and a solid risk management framework provides net worth to our
counterpartswhowouldprefertoseetheirassetsworkforthemratherthanhavevaluablecompliancecarbon
assetsidleandnon-produc<ve.
CarbonFinance
As a carbon project developer ourselves we realize the importance in the deployment of the sales phase of
projectmanagement.Inshort,securingtheeconomicincen<vesofprojectdevelopment,mone<za<on.
Hereourprimaryroleistomaximizethevisibilityoftheprojectthroughmarke<ngac<vi<esandtobringthe
project to market in a sustainable fashion and through the right channels to augment the economic and
marke<ngvalue.
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EmissionsTradingCatalogue
ProacHvecarbonpor;olioandasset
management
Disciplined investment process and a solid risk
managementframeworkprovidesnetworthtoour
counterpartswhowouldprefertoseetheirassets
work for them rather than have valuable
compliancecarbonassetsidleandnon-produc<ve.
Structuredproducts:LendingOperaHons
With Lending, the client allows ALLCOT the use of
its unused allowances in return for interest rate
payments for a predetermined <me, under an
agreementtoreceivethembacklater.
Lending is used when allowances are unused and
the owner seeks to receive addi<onal cash flows
withoutengaginginspecula<on.
Structuredproducts:Swaps
Structuredproducts:RepoAgreement
TheswapistheexchangeofEUAsintoCERsorvisa
versa.
Theswapisusedtominimizecompliancecostsby
fullyexploi<ngthebenefitsofthelinkingdirec<ve
or to seek increased liquidity or higher returns
fromothermarkets.
The Repo Agreement is a form of borrowing in
which the client sells the allowances (EUAs or
CERs)toALLCOTandagreestobuythembackata
predetermineddate.
The Repo agreement is generally used to increase
short-termworkingcapitalwithouttakingonprice
risk,tobecercondi<onsthanstandardbankloans.
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EmissionsTrading
SituaHon
•  Increasingcostsforemissionrights:
• 
• 
Pricesincreasedduringthelast24monthsby150%
Pricevola<lityisintherangeof35%
•  Cost of covering emission is part of Industrial EU ETS par<cipant core business: a liquid
market
• 
• 
• 
OverallprofitablyofIndustrialEUETSindustryisdirectlyaffectedbythecostofemission
Yearlyemicedvolumeisdependingontheproduc<onplanofthecorebusinessandthereforehas
tobemanagedinadynamicwaythroughouttheproduc<onyear
Emissioncostshavetobeaccountedintheirbusinessplan
•  Cost and price uncertain<es of such emission rights can be managed e.g. by means of
EuropeanEmissionAllowanceswhicharetradedonregulatedemissionmarkets
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EmissionsTrading
ComplicaHon
•  Increasingcostsandincreasingvola<lityofemissionrightscomplicatese.g.thebudge<ng
processandlimitsroomforfutureinvestments
•  Budgetgetsmorevola<le;anydecisionmakinginvolveshigheruncertainty
SoluHon
•  Stabiliza<onoffurtherincreasingcostsofemissionrights
•  Reduc<onofcostvola<litybymeansofstructuredprocurementanddynamicmanagement
oftheemissionporYolio
DynamicmanagementoftheemissionporYoliostabilizesoverallproduc<on
costsandimprovestheaccuracyinbusinessdevelopment
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EmissionsTrading
Concept
•  Based on the produc<on plan and thereof the derived forecast of CO2 emission, price
targetforemissionrightsprocurementandriskappe<teisdetermined
• 
Price vola<lity not only has nega<ve aspects but also offers opportunity to achieve low cost
prices
•  Based on this tailor made purchase strategy, the exposure is dynamically managed and
thepriceriskissecuredwhilemaintainingthepossibilitytoop<mizecosts
Lowriskstrategy
Mediumriskstrategy
Atrisk
secured
2016
secled
Forecastedamount
ofrequired
emissionrights
Q1
secured
Q2
Atrisk
2016
•  Such “structured procurement” is done by means of hedging the exposure by
tradingfinancialcontracts
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EmissionsTrading
Por;oliodiversificaHon
•  Suchrela<vemovementsoccuronlongterm
aswellasonshortterm<mehorizons
13'000
10
12'000
8
11'000
10'000
6
9'000
4
8'000
2
7'000
•  Inves<ng in non-correlated assets can
enhance the diversifica<on of a investment
porYolio
Inves<nginanac<velymanagedEmission
exposurecanenhancediversifica<onof
yourporYolio
6'000
Jan12
Jan13
Jan14
Jan15
Emission
DAX
Non-correlatedperiods
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EUR/t
•  Price development of emission allowances
showsperiodswithbrokencorrela<ontothe
worldeconomics(e.g.toDAX)
EmissionsTrading
Investmentapproaches
•  Marketopportuni<esaretakenbymeansofdiscre<onarytrading
Market assessment
•  Investment process is based on a profound understanding of
fundamentalfactorsanddisciplinedmarketassessments
•  In addi<on, technical models are used to capture short term
momentumand-trends
•  Asolidriskmanagementframeworkensuresappropriaterisktaking
•  Proven front and back processes as well as end of day repor<ng
guaran<eshighopera<onalquality
Disciplinedinvestmentprocessandasolidrisk
managementframeworkprovidesnetworthto
investors
Risk taking analysis
Overnight exposure
Trade processing
End of day
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EmissionsTrading
TheMandate
•  Ingeneral,currentmarketvola<lityallowstogenerate10%to15%returnoninvestment
•  Theinvestmentmandatecanbetailormadeupontheriskappe<teoftheinvestorandcan
focusone.g.
• 
• 
Lowdownside
Highsharpra<o
aswellasonproducts/counterpar<estobeinvestedin,e.g.
• 
• 
• 
EmissionAllowances(EUA)
Shortop<onstrategies
Onlyclearedinvestments
Tailormadeinvestmentmandatesprovide
transparencyandtrusttotheinvestor
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ALLCOTTradingRaHonale
Ahighlyexperienced
managementteam
and
anintegrated
approach
AuniqueposiHon
inthe
ClimateChange
derivaHvemarkets
Strongandpredictable
cashflowgeneraHon:
Linesofbusiness
Ø  Abalancedmixofprofessionalpersonnelwithasignificantpresenceinthesectorandastrongtrackrecordof
achievements.
Ø  Strong relaHonships with key market players and extensive reach to primary originaHon project allowing
profitablemoneHzaHonofprojects.
Ø  Local presence and support from the ALLCOT group of companies that offers integrated climate change
derivaHvesoluHons,fromsourcingandimplemenHngprojectstotradingexecuHon.
Ø  DiversificaHon in all climate change derivaHve markets acHviHes, throughout the value chain in the
compliance market, including originaHon and trading in the physical and financial (spot and deriva-ves)
marketsaswellasprojectdevelopmentinordertomiHgateexposureandmaximizinginvestmentreturn.
Ø  Trading acHviHes covering all internaHonal Climate Change derivaHves from carbon credits to energy
cerHficates worldwide on the naHonal and internaHonal exchanges and bilaterally with established
counterparHes.
Ø  OriginaHon&ImplementaHon:sourcing,developmentandregistraHonofprojectsoriginaHngClimateChange
derivaHves in order to ensure assets maximizaHon and effecHve diversificaHon of the por;olio in terms of
stockflowandvalues.
Ø  Forward purchase of Climate Change derivaHves directly from project developers with an aTracHve price
discountinrelaHontoindexduringthewholecrediHngperiod.
Ø  Sales,Swap&TradingofavarietyofClimateChangederivaHves.
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PriceDevelopment
•  ismakingyourporYoliomoreefficient
- the returns do not systema<cally
correlatewithtradi<onalfinancialand
commoditymarkets.
Thus, Emission Allowances are ideal to
diversifyaninvestmentporYoliowithan
alterna<veasset
Risk–Returncharacteris<c
50%
abs.ann.Return
EmissionAllowances….
•  shows market price risk – return
characteris<cs way above equity
indexes
EUA
40%
CrudeOil
30%
DAX
20%
10%
DJ
SMI
0%
0%
5%
10%
15%
20%
25%
30%
35%
ann.Volatility
Correla<on
EUA
DJ
5%
DAX
3%
SMI
2%
CrudeOil
6%
Annualized daily risk-return figures
from January 2013 to May 2015
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RiskManagement
Commoditytradingisconfrontedwith:
ü  marketrisk
ü  liquidityrisk
ü  opera<onalrisk
We
ü  useapprovedmethodologies
ü  relyonstableanddedicatedsystems
ü  workaccordingtowelldefinedprocesses
RiskManagementCommiTeeconsistsof
ü  Dr.BernhardBolliger(trading)
ü  MarkLewis(marketintelligence)
ü  DanaHanby(regula5ons)
ü  AlexisLeroy(management)
RiskManagementCommicee
Approvesandmonitors(ongoing)
ü  Methodologies
ü  Systems
ü  Processes
ü  Limits
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InvestmentFramework
Stateoftheartinvestmentframeworktoachievestablereturns
Deliveringhighandstablereturns
Investment
management
Riskmanagement
Investment
manager
Investmentstrategy
Marketrisk
Trackrecord
Bookstructure
Productliquidityrisk
Know-how
Investmentmodels
Stoplossprocedures
Experience
Systems&processes
Systems/Processes
Investmentapproach
Personali<es
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TradingMandate
Nextsteps
•  UnderstandingEmissionPorYolio
•  Elabora<ngprocurementstrategy •  Pricetarget
•  Riskappe<te
•  DefiningappropriateinstrumentsinordertomanagetheemissionporYolio
•  Es<matecollateralrequirements
•  Fixingopera<onalprocesses,repor<ng,etc.
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AboutALLCOT
ALLCOT is a company specializing in end to end sustainability solu<ons for businesses of all sizes. We
develop,manageandtradeinallsectorsrelatedtoclimatemi<ga<oninEurope,Asia-Pacific,theU.S.and
La<nAmerica.Wethriveinbuildingsuccessfulpartnershipswithcompanieswhovaluetheirenvironment.
ALLCOT is an IETA and CMIA member and operate operates under the Quality Management System ISO
9001:2008cer<fiedbyLloydsRegister.
Ourservicesinclude:
Carbon Credits & Climate Change Deriva<ves Trading | Carbon Credit PorYolio Management | Project
Consul<ng&Development|SustainabilityAssessment|EUAborrowingcontracts
Toknowmoreaboutus,visitusat:www.allcot.com
Mailingdetails:
ALLCOTAG
Steinhauserstrasse74
CH-6300Zug,Switzerland
Contacts:
CasianaFometescu
StrategyEasternEurope
Mob.+40744760710 E-Mail:[email protected]
Dr.BernhardBolliger
HeadofTrading
Tel.+41796411076
E-Mail:[email protected]
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