European Climate Exchange

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The European Climate Exchange (ECX) is a sister company of the Chicago Climate Exchange that manages sales and marketing of environmental instruments in Europe. More specifically, these are ECX Carbon Financial Instruments (ECX CFIS), which are listed on the International Petroleum Exchange (IPE) (the name has now been changed to ICE Futures). The European Climate Exchange provides futures contracts and options contracts under the EU Emissions Trading Scheme. EU emissions trading began in January of 2005, to help members meet commitments to the Kyoto Protocol. Emission trading is market based, and has demonstrated an economically efficient means of providing incentives to cut pollution. It does so by incorporating external costs of fossil fuel use into costs of production. The price of a one-tonne carbon dioxide emission allowance started around at about US$9 in January 2005 and has since surged to US$34 on July 4, 2005.

The European Climate Exchange (ECX) manages the product development and marketing for ECX Carbon Financial Instruments (ECX CFIs), listed and admitted to trading on the ICE Futures electronic platform. It is no longer a subsidiary of the Chicago Climate Exchange. ECX/ ICE Futures ([1]) is the most liquid, pan-European platform for carbon emissions trading, with its futures contract on EU Allowances attracting over 80% of the exchange-traded volume in the market. ECX contracts are standardised and all trades are cleared by LCH.Clearnet. 70 leading businesses, including global companies such as Barclays, BP, Calyon, E.ON UK, Endesa, Fortis, Goldman Sachs, Morgan Stanley and Shell have signed up for membership to trade ECX products. In addition, several hundred clients can access the market daily via banks and brokers. ECX is a member of the Climate Exchange Plc group of companies. Other member companies include the Chicago Climate Exchange (“CCX”). Climate Exchange Plc is listed on AIM on the London Stock Exchange.

CCX ACQUISITION

The Board of Climate Exchange Plc (“CLE” or “Climate Exchange”) is pleased to announce that Climate Exchange has entered into a merger agreement through which it will acquire the 60% of the issued share capital in Chicago Climate Exchange, Inc. (“CCX” or "Chicago Climate Exchange") that it does not already own (the “Acquisition”). As CCX also owns the 51% of European Climate Exchange (“ECX”) not already owned by Climate Exchange, the Acquisition brings full ownership of CCX and ECX within the Climate Exchange group.

Climate Exchange will pay approximately £6.2 million in cash and issue up to 10,555,117 Climate Exchange shares as consideration for the Acquisition (comprising an initial 6,918,754 CLE shares and conditional deferred consideration of up to 3,636,363 CLE shares). The deferred consideration shares will be issued in the event that CCX meets certain pre-defined performance targets over the next three financial years. An additional cash payment together with the issuance of CLE shares will also be made to the current option holders in CCX. The transaction is subject to the approval of CCX Shareholders.

PLACING OF SHARES WITH GOLDMAN SACHS

Goldman Sachs has agreed to subscribe for 4,174,467 new Ordinary Shares at a price of 293 pence, (the “Placing”) representing approximately 10.1 per cent of the enlarged issued share capital of Climate Exchange immediately following the Acquisition and the Placing.

The Acquisition and the Placing are inter-conditional and the Placing is also conditional, amongst other things, upon the new shares being admitted to trading on AIM. The Acquisition and Placing are expected to complete on or around 26 September 2006.