ICE buys way into carbon market with £395m Climate Exchange deal

New York-listed IntercontinentalExchange (ICE) has today announced that it has agreed to acquire London-based Climate Exchange plc in a £395m cash deal that will give the futures exchange operator a powerful presence in the global carbon market.

AIM-listed Climate Exchange is one of the world's leading players in the carbon market and currently operates the European Climate Exchange, the Chicago Climate Exchange and the Chicago Climate Futures Exchange.

ICE said that it expected the deal to close, subject to regulatory approval, by the end of July. It added that after the merger both companies would continue to operate under their existing brand names, with Climate Exchange continuing as a wholly owned subsidiary of its US parent.

ICE first snapped up a 4.8 per cent stake in June last year and both companies were keen to stress that they have already worked closely together and have a number of contracts in place that have seen ICE provide trading platform technology to Climate Exchange.

Jeffrey C Sprecher, chairman and chief executive at ICE, said the acquisition would allow the company to accelerate its push into the fast-expanding global carbon market.

"The combination of Climate Exchange's emissions markets and ICE's futures and OTC energy markets is an important and logical strategic combination for our customers and shareholders, and clearly an exciting opportunity for ICE to grow and further diversify our revenues," he said in a statement, adding that the company saw "continued growth opportunities" in both the EU and nascent carbon markets such as the US and Asia.

The deal comes at a time of mixed signals across the global carbon market.

The flagship EU emissions trading scheme is in the midst of a bull run, ha ving seen the price of EU emission allowances soar almost 20 per cent in recent weeks, breaking through the €15 (£13) mark for the first time this year. Moreover, analysts predict that the run is likely to be sustained in the long term as the scheme enters its next phase in 2012 and the cap that governs the price of carbon begins to come down.

In contrast, proposed emissions trading schemes in the US, Japan and Australia have all descended into uncertainty over the past month as the Japanese and Australian governments have delayed plans for national cap-and-trade schemes and the US climate bill has fallen foul of political wrangling.

Meanwhile, existing regional cap-and-trade schemes in the US also face an uncertain future following reports that the draft climate bill would effectively ban regional schemes and replace them with a nationwide scheme covering emissions from utility firms.

Alessandro Vitelli, director of strategy and intelligence at analyst IDEAcarbon, said the acqusition looked like a good "speculative investment" that would also help ICE compete with arch rival NYMEX's new green exchange.

"It looks like a good time to buy," he said. "Volumes are on the up in Europe, while there is still this uncertainty around the political situation in the US – either way it will strengthen ICE's competitive position."