News

Methodology Clarification and Market Commentary

Dublin, Ireland – 15 May 2006

AgCert International plc (“AgCert” or “the Company”), (LSE AGC) a leader in the production and sale of agriculturally derived greenhouse gas emission reductions, today announces both a clarification of the different methodologies to be used for the measurement of Certified Emission Reductions (“CERs”) from animal waste management systems and also a commentary of the overall market.

Methodology Update – Summary

AgCert remains well positioned to provide CERs into the market. The Clean Development Mechanism’s (“CDM”) Executive Board’s decision to undertake a public review process of the proposed consolidated manure management methodologies is fully consistent with a request made by AgCert to the CDM Executive Board on 3 May 2006.

Furthermore, and most important, AgCert implemented an Executive Board approved alternative manure management methodology in late 2005 as a means to mitigate any methodological risk. Indeed the last 31 Project Design Documents (“PDDs”) have been generated using this methodology. As a result, AgCert does not expect to be adversely affected in any material respect by the Executive Board’s review.

Market Commentary – Summary

Given recent significant price volatility in the EU Emissions Trading Scheme (“ETS”) Phase I European Union Allowances (“EUA”), AgCert reiterates that it has sold its Phase I CER volumes at fixed prices, thereby eliminating price risk for CER deliveries in Phase I. In addition, Phase II EUA prices remain above our financial models. This is due to heightened expectations that Phase II reductions will be stricter than Phase I and the European Commission’s announcement that the market should expect an EU ETS Phase III.

Bill Haskell, Chief Executive of AgCert, said:

“In the light of the CDM Executive Board’s review, against a backdrop of recent Emissions Trading price volatility, some commentators have been quick to draw conclusions about ongoing manure management methodologies and market conditions. As an experienced and acknowledged leader in agricultural emissions reduction, AgCert is happy to reassure customers and investors not only that the EB’s decision and recent Phase I prices have no immediate impact on the Company, but also that it remains convinced of – and committed to – the continuing growth of the emissions trading industry.”

Methodology Update – Detail

The 20th meeting of the CDM Methodology Panel on 7 April 2006 recommended to the CDM Executive Board (“EB”) that it approve a consolidation of two methodologies: AM0016 (authored by AgCert); and AM0006, as shown in a draft version called ACM00xx.
On 26 April 2006, the International Emissions Trading Association (“IETA”), on behalf of AgCert, EcoSecurities and AgroSuper, sent a letter to the EB asking it to reconsider its decision and to undertake a public review process before making any changes.
On 3 May 2006, AgCert sent a letter to the EB presenting a thorough technical analysis of ACM00xx which outlined the technical shortcomings of the draft document and requested the EB to consider both referring the ACM00xx back to the Methodology Panel and initiating a public review process for the methodology consolidation.
On 12 May 2006, the EB decided to consider the information submitted to it prior to making any changes in the methodologies, as suggested by AgCert, IETA and others. AgCert was pleased to learn of this decision by the EB and looks forward to the possibility of working with the EB’s Methodology Panel and other stakeholders during a public review process. This process will take ACM00xx through at least one more cycle of both the Methodology Panel and EB, which defers the next review until July 2006 or later.

The Board of AgCert would like to further assure investors and the market that:

AgCert, prior to the EB’s Methodology Panel recommending a consolidation, had already committed to reducing its reliance on the AM0016 methodology by utilizing an applicable EB approved Small Scale Agricultural Methodology (“SSAM”) for its new PDDs.
AgCert’s transition away from AM0016 is clearly demonstrated by the fact that AgCert has, to date, written its last 31 Project Design Documents (“PDDs”) using the applicable SSAM. This SSAM was introduced subsequent to AM0016’s initial approval, and yields the same or better performance as that now obtained under AM0016 V3.
AgCert has demonstrated proficiency with this SSAM and has already registered projects using this approach. The combination of this proficiency and methodological performance make it clear AgCert will suffer no adverse consequences through a lengthy consolidation process.
AgCert expects no additional on-site capital expenditures, such as meters, that have already been installed since late 2004, to comply with either the current methodology being deployed or future consolidated methodologies.

Market Commentary Detail:

Since early May 2006 there has been significant price volatility in the EU ETS Phase I allowance prices. AgCert acknowledges that the Phase II allowance prices have been affected; but not to the extent of Phase I.
AgCert is insulated from Phase I pricing movements since it has committed 100% of its Phase I volumes at fixed prices.
Phase II market pricing remains above all of AgCert’s financial models.
The result of the EU being ‘long’ in Phase I will likely result in lower emission caps for Phase II (2008 to 2012), which we anticipate will be a net positive for AgCert; this is primarily a result of reduction requirements being based on actual emission data rather than on prior forecasts.
There is likely to be increased resolve for extending Kyoto globally as offset prices become more modest. Additionally, with countries not being adversely affected in Phase I, there will be less resistance to a cap-and-trade mechanism moving forward.
The European Commission restated its intent to move forward with EU ETS Phase III (2013 to 2020) at the May 2006 Carbon Expo. This bodes well for the continuation and stability of one of the world’s largest markets.
There is likely to be a growing gap between Phase I EUA prices and Phase II CERs as EUAs expire at the end of Phase I.
As the price of the EUA drops, AgCert is better positioned to re-balance its portfolio and address its Phase I and Phase II physical positions. To that end, AgCert has revised the provisions of its customer agreements, including modifying delivery schedules and coordinating a net price increase of €30 million (€60 million revenue and €30 million cost) to be recognized between 2006 and 2008.

For further information:

AgCert International
Bill Haskell, CEO	Tel: +353 1 245 7400
Paul D'Alton, CFO	www.agcert.com
Todd Jones

AgCert media inquiries:

Maitland
Liz Morley / Brian Hudspith	+ 44 (0) 20 7379 5151

About AgCert

AgCert International plc is listed on the London Stock Exchange. The Group was founded in 2002 to produce and sell reductions in greenhouse gas emissions (referred to as "Offsets") from agricultural sources on an industrial scale. These Offsets are intended to satisfy the requirements of the Kyoto Protocol and be capable of being traded on the newly established European cap and trade system, the European Union Emissions Trading Scheme ("EU-ETS").