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The cash and stock agreement will see Pacific Hydro divest its 49% share in the company to REH. Pacific Hydro will receive a 14.5% stake in REH, a cash payment of GBP500,000, and further options.
Under the deal, Pacific Hydro managing director Jeff Harding will also be appointed to the REH board.
The Melbourne-based renewable energy company said REH was well placed to capitalise on the renewable power market in Europe, where emission trading has already begun.
The European Union has set a total renewable energy target of 22% of electricity consumed by 2010.
The Kyoto Protocol treaty, which comes into effect today, sets emission reduction targets for 124 countries, granting governments a fixed quota of carbon dioxide emissions per year. Countries and companies must purchase carbon credits if they wish to exceed their quota.
By 2010, Pacific Hydro will be producing more than three million tonnes of carbon allowances, valued late last year at nearly $12 a tonne.
Australia, the USA and China are among major industrialised countries that have so far refused to ratify the treaty.
