Carbon credited for dramatic increase in EKI shares
EKI Energy Services Ltd went public in November last year and raised just over 18.60 crore, selling one share for 102. Today, its stock is trading on BSE at around 878, allowing its investors to increase eightfold in less than a year. Its activity tripled between 2019-2020 and 2020-21 – from 66 crore to 191 crore; and the net profits went from ₹ 4.4 crore to ₹ 18.70 crore. In 2020-2021, the profit on each EKI share was 37.2.
And, there are good reasons to believe that this is just the beginning. The real benefits will occur in the years to come and could be sparked by an international meeting to be held in Glasgow, UK, in November. If things go well, you can bet your shirt on EKI.
The economic model
Now, what is EKI Energy Services, headquartered in Indore, and what is its activity?
The company specializes in facilitating the trading of carbon credits. If you implement a project, say a solar farm, that will fight global warming, you will get “carbon credits”, which are financial instruments tradable in the market. A carbon credit (generally) represents a tonne of carbon emission saved.
These people, like industries in developed Western countries, for whom saving a ton of carbon emissions is expensive, simply buy those carbon credits wherever saving a ton of carbon is cheaper – like in India.
Some may recall the “certified emission reductions,” or CERs, that many Indian companies have received for their projects. These were released in a framework that climate negotiators called the “Kyoto Protocol,” which has now (sort of) been replaced by the Paris Agreement. (Whether the value of CERs has fallen to next to nothing and is likely to extinguish altogether is another story.)
After the signing of the Paris Agreement in December 2015, countries decided to define rules for its operationalization. The Agreement officially entered into force last December; all but the rules for one aspect have been framed. The unfinished agenda sets the rules for carbon markets, which is crucial as carbon markets are what turns the money around for climate change mitigation efforts.
The next Conference of the Parties (CoP26) is scheduled for Glasgow and many are hoping that the rules in so-called Article 6, which deals with carbon markets, will emerge. This could mean the formal death of CERs issued under the Kyoto Protocol. But, if that happens, a bright future awaits the business of the Climate Warriors, hopefully. The carbon finance instruments that will be created are unclear; for the moment carbon credits are called ITMO, for Internationally Transfered Mitigation Outcomes. Earlier this month, a working group on scaling up voluntary carbon markets from the Institute of International Finance, a global financial industry association, released a report indicating that the market potential voluntary carbon credits will increase to $ 100 billion per year, by 2050.
It is in this context that EKI Energy Services, operating under the ‘Enking International’ brand, operates. The company has a number of renowned clients – ReNew Power, SB Energy, Adani, Greenko, Aditya Birla Group, Hindustan Zinc, Siemens India, among others. These companies generate carbon credits. EKI, which has 130 people working in 20 countries, helps companies sell the credits.
While waiting for the formulation of rules for carbon markets, there is only one type of buyer: those who “volunteer” to buy credits, without being obliged to do so. Hence “voluntary market”. These buyers are companies like Google and Apple that have pledged to achieve “zero emissions” by a target year – meaning that as of this year, none of the company’s operations, including the their entire supply and marketing chains, will emit an ounce of carbon.
If negotiators finalize the rules for carbon markets in Glasgow, it will open up the largest “compliance market” – governments themselves will buy carbon credits. Ideally, carbon markets should lead to a transfer of funds from developed countries – the primary carbon sinners – to developing countries.
EKI Energy has more than 2,000 customers, says Manish Dabkara, chief executive officer and CEO of the company. It plans to facilitate the trading of 150 million carbon credits this year, up from 55 million last year. When the “compliance market” opens, the debit will be “500 million credits, aaraam se“Dabkara said Activity area.
Apparently the stock market has taken notice of this.