Auction your carbon needs

Are you active or interested in buying or selling Carbon Emission Rights? The Climex Auction Platform can be of interest to you. The Climex Auction Platform is an initiative of New Values, a carbon exchange based in the Netherlands. What can the Climex Auction Platform provide you:
• An easy way to contact buyers and sellers of, and investors in CERs, ERUs, EUAs and VERs
• An efficient way to communicate your carbon rights or needs to the market
• A transparent way to get the best offer

What does the platform do?
The basic idea is simple; we communicate to the market what you want to buy or sell and invite potential counterparties to participate in an auction at a specific moment in time. The Climex Auction Platform is an internet based trading platform where potential counterparties can bid against each other so you, the participant, gets the best price for your offer. After the auction, it is up to you to decide with which counterparty you wish to do business with. Because it is an internet based platform, you can participate in the auction at any moment, at any time and with any potential counterparty all over the world.

In order to participate on the Climex Auction Platform, registration as a member is required. Membership is free and without any further obligations.
The free Climex membership offers you:
• the possibility to participate in auctions and tenders and receive the best possible price;
• a channel to reach a large number of counterparties without having to leave your desk;
• the lowest transaction costs and no additional fees;
• an easy step by step process which helps to structure negotiations and reduce negotiation time and
effort;
• the opportunity to sell or buy any volume you want, large or small;
• clear upfront communication of the conditions under which you want to sell or buy.

Which products can be auctioned?
The Climex Auction Platform is especially build to auction Carbon Credits. These can be European Allowances (EUAs), Certified Emission Rights (CERs), Emission Reduction Units (ERUs), Secondary CERs or Voluntary Emission Rights (VERs). Both buyers and sellers can organise auctions. Even investment needs can be put on the platform.

How does it work?
The auction consists of 4 phases.

Phase I: The definition phase
In this phase you can tailor-make your auction. You can:
• Define the conditions under which you wish to do business. What, for example, is the product, the
volume, the minimum price, type of payment, the underlying contract you want to use, etc. All these
conditions are laid down in a term sheet and are communicated to the market so that it is clear what it
is you want exactly and under which conditions.
• Ask a (potential) participant to sign up for your auction and provide you with information on the
company and/or the project and/or the rights etc. they want to put on offer. Based on this information
you can run a credit check, or any other processes you need to go through to be able to make a pre
selection. It is up to you to decide who is allowed to participate in the actual auction.
• Design the auction. Facilitated with our knowledge and experience you choose what kind of auction
you want:

o Single vs multiple sided
o Closed or open
o One price vs multiple price
o Upward vs downward
o Spot or Forward
• Select the time frame. When will the auction be communicated to the market? Until what time can
companies sign up? When will the auction take place? Etc. etc.

Phase II: The communication phase
In accordance with the defined time lines the communication with the market starts, companies are invited to sign up and the pre selection can commence.

Phase III: The execution phase
The companies you have approved are now asked to log in on the Climex Auction Trading Platform and to engage in the bidding process. Depending on the kind of auction you have chosen you can select the company with the best offer.

Phase IV: The signing of the contracts
The signing of the contract depends on whether you chose a Spot or a Forward auction.
• If you chose the spot auction then payment and delivery will take place immediately after the auction.
The contractual terms are laid down in the Participation Agreement and the Rules & Regulations of the
auction. Central counterparty for these auctions is the APX Group. The advantage here is that you
run no risk on your counterparty and payment or delivery of the rights are guaranteed.
• If you have chosen the Forward auction, payment and delivery will take place somewhere in the
future. The contract (ERPA) has to be signed after the auction. Depending on what has been
communicated with the participants it is either a fixed contract or it is possible that elements of the
contract can still be open to negotiation.

Examples

Seller offering a project for sale on the platform
Case: A CDM project has a PDD and host country approval and is currently undergoing validation. It would like to sell its credits at standard offset conditions if it receives a reasonable price.

How would this work:
In this situation the seller registers as a member (if he is not already a member). As soon as the Participation Contract has been signed the seller receives a login which gives access to the platform. Together with a New Values contact person the seller creates a Term Sheet in which the project, volumes and the terms and conditions under which the seller is offering the project are recorded. The seller can determine which auction form he chooses and according to which timeline and procedures the bidding will take place. The buyer can see this in the term sheet of the project. In this process the seller decides upon a number of things: (a) to which extent items will be fixed or still open to negotiation before entering into an auction with interested buyers, (b) the number of days or weeks the offer is valid for and (c) if he wants to create a questionnaire with conditions buyers need to meet before they can enter into negotiations with the seller.
Simultaneous with the creation of the Term Sheet basic due diligence will be executed and all the collected documents related to the project will be uploaded into the Register.
When all this is finalised the project will be put online and all members will be able to view the information. A summary of the project on offer will be visible to everyone on the New Values website. Buyers who are already members will be notified automatically of the new posting.
If completing a questionnaire was one of the conditions of the seller then the buyers will have to do so.
As soon as the deadline for the offer is reached, or when enough qualified buyers have reacted an auction will be organised. The auction is executed as designed by the seller and as communicated to all participants. At the end of an auction or an auction round the best bid is shown on screen. In every auction round buyers can improve the price offered in the previous round. (If chosen by the seller, it is also possible to negotiate multiple conditions during the auction and not only the price.)
The auction stops when there have not been any reactions for two rounds (or, when the last round has been reached in case the auction initiator has chosen a fixed amount of rounds). When there are no reactions in a certain round all buyers will be notified that the next round is the final round should nobody bid.
The seller is presented with an overview of all reactions and the best bid related to his terms and conditions. The seller has a fixed amount of time to accept or reject the bids. It is also possible that he does not accept any of the bids.
In case the seller accepts a bid, all the fixed terms from the Term Sheet and the terms negotiated during the auction will become a non negotiable part of the ERPA. If the seller still had flexible terms in his offer it is possible there are some remaining items which need to be negotiated. The seller and the buyer whose bid was accepted get a maximum of 60 days to finalise the ERPA.

Buyer expresses a buying interest
Case: A large VER buyer who is creating a portfolio of VERs for a company wide carbon neutral programme enters a buying interest (tender) on the platform.

How would this work:
The buyer registers as a member (if he is not already a member). As soon as the Participation Contract has been signed the buyer receives a login which gives access to the platform. The buyer can look if there are any projects for sale which meet his requirements. If this is the case the buyer can enter the bidding process for these projects directly.
If there are no projects that meet his requirements the buyer can place a buying interest on the platform. In a Term Sheet the buyer describes the type of project(s) and volumes he requires and the terms and conditions he is prepared to offer. In this process the buyer decides upon a number of things: (a) the extent to which he wants to fix the conditions or leave them still open to negotiation before entering into an auction with interested sellers, (b) the date until which the request will be valid and (c) if he wishes to create a questionnaire with conditions sellers need to meet before they can enter into negotiations with the buyer or if he wants sellers to send a proposal.
When all this is finalised a buying request will be put online (anonymously) and all members will be able to view the information. A summary of the buying request will be visible to everyone on the New Values website.
The buyer also has the opportunity to invite specific sellers who are not yet a member of the platform. If sellers are invited they can become a one time only member for free and their access will be limited to the buying request of the inviter. Sellers who are already a member will be automatically notified of the new posting.
Sellers can express their interest in the buying request anonymously online. The buyer will receive these messages.
If one of the conditions of the buyer was for the sellers to have to prepare their starting proposals or fill in the questionnaires, they will have to do so. A registered seller can put the project documentation, questionnaire and/or proposal into the project register and give the buyer exclusive viewing rights. An e-mail will go out to the buyer with an invitation to look at the information. At this moment the seller looses its anonymity. Based on the information received from the seller the buyer can decide to invite a seller to participate in the auction.
When the deadline is reached, or when enough qualified sellers have reacted an auction will be organised in line with the design of the buyer. The auction stops when there have not been any reactions for two rounds (or, when the last round has been reached in case the auction initiator has chosen a fixed number of rounds). When there are no reactions in a certain round all sellers will be notified that the next round will be the final round if nobody is reacting.
The buyer is presented with an overview of all reactions and the best offer in relation to his terms and conditions. The buyer has a fixed amount of time to accept or reject the offers. It is also possible that he does not accept any offer.
In case the buyer accepts an offer, all the fixed terms of the Term Sheet and the sellers proposal will become non negotiable parts of the ERPA. If the buyer left flexible terms in his buying request it is possible there are some remaining items which need to be negotiated still. The buyer and the seller selected by the buyer get a maximum of 60 days to finalise the ERPA.

Seller with a project still seeking finance
Case: A project developer and a seller of a potential CDM project have together developed a PDD. They have asked for registration with the UNFCCC and the project is ‘under review’. The project developer does not want to continue any further until an investor/financing for the project has been found.

How this would work:
In this situation the project developer (and/or seller) registers as a member (if they are not a member yet). As soon as the Participation Contract has been signed the project developer receives a login which gives access to the platform. The project developer can look if there are any investors who have expressed an interest in the type of projects the project developer is looking to develop. If this is the case the project developer can contact the investor directly. If the project developer cannot find an investor who is actively searching he can put a financing request on the platform without disclosing the name or exact location of the project. For a financing request a brief description of the project (country, methodology, technology, financial structure and securities, funds needed, information available, etc.) is given, which will be visible to all members. More detailed and background information will be uploaded into the Register. A summary of the financing request will be visible to everyone on the New Values website.
The project developer can also invite investors who are not yet members for a free one time membership with access to this particular project only. Investors/financers who are already a member will be automatically notified of the new posting.
If an investor and/or potential buyer who also finances is interested in the project he can send a message to the project developer/seller, disclosing name, company name and the interest. The project developer/seller decides if he gives the interested party access to the detailed information. If based on the detailed information the investor/financer is still interested and all questions which can be dealt with via e-mail have been answered, the two parties can decide to enter into serious and further negotiations off-line. If the negotiations end successfully the parties pay a percentage of the investment to New Values.
When becoming a member the parties sign a clause guaranteeing they will actively inform New Values of the outcomes of their negotiations and pay the Use Related Fee if the outcome of the negotiations is positive.

Frequently asked questions

How can I participate in an auction?
Participating in the auction is currently free. The only thing necessary is to become a member.
You can register on the website www.newvalues.net and we will send you the participation contract and the Rules and Regulations. As soon as you have sent us the signed Participation Contract together with the required enclosures you are a member and will receive a login to the platform.

What does it cost to become a member?
At the moment becoming a member is free.
From 1 January 2007 onwards the costs will be Euro 1000,-
Further costs will only be incurred if transactions are completed successfully.
The Use Related fees over the total sum of the transacted amount are:

In which language is the auction?
The auction platform is available in English and will soon be available in Spanish and Central European languages. New Values is constantly working on expanding the languages in which the auction platform will be available. If a large party or a group of (potential) participants from a certain country or region approaches us asking for a specific language we are always willing to look into this.

Where can I get more information?
Call the New Values Customer Service Desk at +31 (0)20 -305 4073,
send an e-mail to csdesk@newvalues.net or,
look at www.newvalues.net.

Sascha Bloemhoff

Sales Manager