Carbon Streaming is cashed up and ready to save the world

You may have heard numerous companies around the world talking about setting net-zero carbon emissions goals, in fact over 1,500 companies have announced plans to be carbon net-zero by 2050 or sooner. But how will they get to net-zero? In the interim, the plan is to offset the carbon they put into the atmosphere by buying carbon credits. A carbon credit represents one tonne of carbon dioxide or the carbon dioxide equivalent of another greenhouse gas (defined by the amount of heat it traps in the atmosphere) that is prevented from entering into or being absorbed from the atmosphere. Carbon credits are anticipated to be integral to meet global net-zero goals, especially in hard-to-abate sectors such as oil, aviation, steel and cement.

No matter how you slice it, the carbon credit world is big now and destined to get a lot bigger. The estimated size of the compliance/regulated market was US$261 billion in 2020, a five-fold increase from 2017. The voluntary carbon market was a much more modest US$473 million in 2020, although UN Special Envoy for Climate Action, Mark Carney, the former Governor of the Bank of England, has said that the voluntary market “needs to be $50-100 billion per annum.” And that’s where Carbon Streaming Corporation (NEO: NETZ) comes to the rescue, so to speak. Carbon Streaming is a unique, ESG principled, investment vehicle offering investors exposure to carbon credits. Its stated business model is to focus on acquiring, managing and growing a high-quality, diversified portfolio of investments in projects and/or companies that generate or are actively involved with carbon credits. The Company invests capital through carbon credit streaming arrangements, with project developers and owners, to accelerate the creation of carbon offset projects by bringing capital to projects that might not otherwise be developed.

Carbon Streaming has been raising capital and signing up projects to build up an inventory of carbon credits. In fact, in July the Company was able to raise an impressive US$104.9 million based on the momentum they had been gaining over the first half of 2021. The latest information from the website shows the Company has a near term opportunity pipeline of 16 projects around the world totaling roughly US$200 million in investments. Longer term the deal pipeline is over US$700 million and the best part is, the target IRR for these projects is greater than 15%.

Source

The value proposition at Carbon Streaming is three fold:

  1. Enter into streaming agreements with individuals, companies, and governments to stream carbon credits from their asset or property that can be sold in either the voluntary or in the compliance markets;
  2. Purchase carbon credits in the voluntary and compliance markets for long-term price appreciation with selective trading as opportunities arise; and
  3. Invest in or acquire companies, assets or properties involved in the origination, generation, monitoring or management of carbon credits (in other words M&A).

Strategy #1 is pretty straight forward, you simply sell your earned carbon credits to whatever market is willing to pay the most. Strategy #3 is probably similar to almost every publicly traded company on the planet. However, strategy #2 intrigues me the most from an upside potential. Having spent plenty of time in the trenches of commodity trading, I know that being long a commodity that is in demand can be very lucrative. If you are of the opinion that demand for carbon credits is potentially going to grow faster than supply, then having an enormous pipeline of carbon credits coming on stream (targeting 100 million per annum by 2025), can be a very good thing. A modest price swing can create huge leverage. Just look at natural gas prices over the last 4 months as an example for a much more than modest price swing.

The carbon emission contract that trades on the Intercontinental Exchange (ICE) known as EUAs (European Union Allowance) has a 52 week trading range of €23 to just under €66 on a per tonne of CO2 equivalent basis. If you have an inventory of 100 million of annual credits being generated each year, imagine if you keep 5% to float with the spot price (preferably with a floor in place to assure breakeven). A $5 move could add $25 million to your top line. That’s why I think Carbon Streaming could be in the right place at the right time, depending on how they manage their “selective trading”.

Upon the exercise of the special warrants issued to raise the above noted US$105 million, the Company will have roughly 231 million shares outstanding. Based on yesterday’s close of $2.38 that puts the market cap at $550 million with approximately $141 million (US$112) in cash at the end of August. Back of the envelope math suggests that with 20 million in carbon credits by year end, that could generate roughly $1.7 billion (US$1.36 billion) in top line revenue based on yesterday’s EUA close of €59. I don’t know what carbon price assumption Carbon Streaming is using to calculate their 15%+ IRR but it might be worth digging a little deeper to find out.




Carbon Streaming offers ESG investors exposure to the carbon credits market

Environmental, Social, and Governance (“ESG”) investing has become a key theme this decade as companies and governments face greater scrutiny on their behavior by investors. One key part of ESG investing is the environment, and in particular, carbon credit trading.

A ‘carbon credit‘ (also called ‘carbon offset’ or ’emission credit/offset’) is a term for any tradable certificate or permit representing “the right to emit one tonne of carbon dioxide or the equivalent amount of a different greenhouse gas”. Essentially corporations, governments and individuals purchase carbon credits to offset their emissions from other companies that have earned credits from the government for reducing CO2 emissions. One well-known example of carbon credit trading occurred with Fiat Chrysler purchasing about US$2.4 billion worth of carbon credits from EV manufacturer Tesla from 2019 through 2021.

It is quite clear that carbon credit trading is rapidly growing to be a large industry in itself. Over 1,500 companies have announced plans to be “netzero” by 2050 or sooner. Carbon credits are anticipated to be integral to meet these goals, especially in hard to abate sectors such as oil, aviation, steel and cement. Even better is that retail investors can now invest in a carbon credit streaming business.

Today’s company is a listed company that offers a way for investors to invest into the growth of the carbon credit market. They act like an investment vehicle purchasing carbon credit revenue streams in return for an upfront payment. If the value of the carbon credits goes up or can be sold later at a profit then the stream becomes more valuable, thereby potentially boosting the value of the carbon streaming company. Revenues and profits will also depend on the quality and return on investment (“ROI”) of the streaming deals that are made.

How carbon emission trading works and the market size (US$261 billion in 2020) currently dominated by Europe

Source: Carbon Streaming Corporation investor presentation

Carbon Streaming Corporation (NEO: NETZ) (“Carbon Streaming”) is an ESG principled investment vehicle offering investors exposure to carbon credits. Carbon Streaming is among the first publicly traded carbon offset investment companies on any exchange in the world. Carbon Streaming listed on Canada’s NEO exchange on July 26, 2021, the Frankfurt Stock Exchange on July 30, 2021 and intends to list on a U.S. stock exchange, such as NASDAQ or the New York Stock Exchange, prior to the end of the year.

Carbon Streaming’s business model is to focus on acquiring, managing and growing a high-quality and diversified portfolio of investments in projects/companies that generate or are actively involved, directly or indirectly, with carbon credits.

The Company states: “Carbon Streaming is actively pursuing streaming arrangements with individuals, companies and governments to stream carbon credits from their assets or properties. We intend to provide investors with a diversified portfolio of carbon credit streams for long-term appreciation without the operational risk. We intend to participate in both the voluntary and compliance carbon markets, and also may make investments related to carbon credits.”

Carbon Streaming has sourced a potential deal pipeline of over US$585 million with its nearterm pipeline valued at approximately US$165 million at target IRRs of 15%+.

Carbon Streaming Corporation near term opportunity pipeline

Source: Carbon Streaming Corporation investor presentation

In recent news on August 3, 2021, Carbon Streaming announced a Carbon Credit Stream Agreement on the Rimba Raya Biodiversity Reserve (a 64,500-hectare peat forest in Central Kalimantan, Indonesia) and Strategic Partnership with Infinite-EARTH Founders. The Rimba Raya Project, for which InfiniteEARTH has exclusive carbon and marketing rights, is expected to create over 70 million credits over its remaining 20-year crediting period (approximately 3.5 million carbon credits per annum).

Carbon Streaming has now closed the above agreement paying an upfront cash investment of US$26.3 million consisting of US$22.3 million for the Carbon Stream with InfiniteEARTH and US$4.0 million for the strategic alliance agreement with the Founders (for consulting services, carbon project advisory, carbon credit marketing and sales). In return Carbon Streaming will receive:

“InfiniteEARTH will deliver 100% of the carbon credits created by the Rimba Raya Project, expected to be 70 million credits over the next 20 years, less up to 635,000 carbon credits per annum which are already committed to previous buyers. For the first four years, the amounts delivered under the Carbon Stream include 1,000,000 carbon credits per annum at a pre-agreed gross sale price of US$8.50……”

InfiniteEARTH is a Hong Kong-based project development company that develops and manages conservation land banks and provides environmental offsets and corporate social responsibility (CSR) solutions to companies across the globe. The full details of the deal can be viewed here.

Governments have pledged to reduce carbon emissions but as shown on the graph there is still a long way to go

Source: Carbon Streaming Corporation investor presentation

Closing remarks

Carbon credits is already a large business in Europe and it is likely to accelerate globally as governments get tougher on CO2 emissions and investors demand strong ESG efforts from companies. For investors that want to focus on ESG or simply invest money towards supporting carbon credits and hence the environment, then consider Carbon Streaming Corporation.




ESG Alert: No matter how you slice it, the carbon credit world is big now and destined to get a lot bigger…

With the current focus on climate change and the need to reduce our global carbon footprint it would probably make sense to have an economic way for nations and companies to commoditize carbon in order to better track and deal with this problem. Well there is and it may come as a surprise to learn that there has been a fungible carbon emissions trading market since 2005 – the EU Emissions Trading System. Also known as EUAs (European Union Allowance), similar to other commodities, EUAs trade on the Intercontinental Exchange (ICE). The carbon emission contract trades in Euro on a per tonne of CO2 equivalent basis, with yesterday’s closing price at just over €52 and a 52 week range of €23 to just under €57.

There are many companies around the world, including financial institutions, utilities, fossil fuel companies, and others, that actually have dedicated carbon emission trading desks transacting things like EUAs and have done so for a long time. However, today we are going to look at a different perspective on this market, one would suggest a natural evolution for a commodity, a streaming company that gives investors exposure to the world of EUAs. Carbon Streaming Corp. (OTC: MXVDF) is a unique ESG principled investment vehicle offering investors exposure to carbon credits, a key instrument used by both governments and corporations to achieve their carbon neutral and net-zero climate goals. The Company intends to invest capital through carbon credit streaming arrangements with project developers and owners to accelerate the creation of carbon offset projects by bringing capital to projects that might not otherwise be developed.

You may have heard several companies around the world talking about setting net-zero emissions goals, in fact over 1,500 companies have announced plans to be net-zero by 2050 or sooner. Obviously, that is going to prove to be very difficult for those involved in resource extraction, manufacturing and even bitcoin mining that require more energy than is presently available on a renewable basis. But how will they get to net-zero? In the interim the plan is to offset the carbon they put into the atmosphere by buying offsets like EUAs. This can become a pretty complex circle of (carbon) life so we’ll try to keep it simple here. You can break down carbon markets into two basic categories: compliance or regulated, where markets for carbon credits are created by the need to comply with a regulatory act; and voluntary, where corporations, governments and even individuals volunteer to offset their emissions by purchasing carbon credits.

No matter how you slice it, the carbon credit world is big now and destined to get a lot bigger. The estimated size for the compliance/regulated market was US$261 billion in 2020, a five-fold increase from 2017. The voluntary carbon market was a much more modest $320 million in 2019, although UN Special Envoy for Climate Action Mark Carney has said the voluntary market “needs to be a $50-100 billion per annum.” And that’s why Carbon Streaming has been raising capital and signing up projects to build up an inventory of carbon credits.

Since the start of 2021, Carbon Streaming has raised $46 million including $32.5 million in March and another $11.6 million in May. But the Company is not just sitting on that cash having recently announced commitments to invest in the MarVivo Blue Carbon Conservation Project in Magdalena Bay in Baja California Sur, Mexico, an exclusive term sheet to develop two carbon credit projects within the Bonobo Peace Forest located in the Democratic Republic of Congo and a strategic joint-venture partnership with an established First Nations business in British Columbia to source and finance investment opportunities in collaboration with First Nations and develop projects within their territories to combat climate change through the reduction of greenhouse gas emissions. In all, Carbon Streaming has sourced a potential deal pipeline of over US$500 million with its near-term pipeline valued at approximately US$170 million at target IRRs of 15%+.

Source: Corporate Presentation

So unless you happen to have a working model of a cold fusion generator that you’ve been keeping from the world, carbon credits are going to be with us for a while and likely to become even more commoditized than they already are. Carbon Streaming represents one of the few opportunities to participate in this space in today’s market without having to set up your futures trading account and transacting EUAs.




dynaCERT’s Jim Payne on Ranking #1, Eric Sprott’s Investment and Carbon Credits

In an InvestorIntel interview during PDAC last week, Tracy Weslosky secures an interview update with President, CEO & Director Jim Payne on dynaCERT Inc. (TSXV: DYA | OTCQB: DYFSF), a manufacturer and distributor of Carbon Emission Reduction Technology for use with internal combustion engines.

Jim started by saying that dynaCERT is the number 1 ranked company across all sectors on 2020 TSX Venture 50. He added that dynaCERT has a global solution to reduce pollution that people can adopt right now. The company is at the forefront of the carbon credits market and has recently attracted investors like Eric Sprott and Dr. Joerg Mosolf of Mosolf SE & CO. AG who have invested in the company. Jim continued, “Sustainability is a big thing today — with our technology, we have a solution now. We are reducing emissions very significantly for any internal combustion engine.”

The company is well capitalized and has a continued revenue stream. Jim also revealed that he has been asked to speak at the World Climate Summit in November in the UK on the future of the world’s carbon credits.

To access the complete interview, click here

Disclaimer: dynaCERT Inc. is an advertorial member of InvestorIntel Corp.




dynaCERT price surges 100% over the past ~2 months as Eric Sprott jumps onboard

dynaCERT Inc.‘s (TSXV: DYA | OTCQB: DYFSF) stock price is surging. Since I last wrote on them back on November 15, 2019, the stock price has surged higher by 100% (from C$0.48 to C$0.96). You can read that article here. In this article, I take a look at some of the reasons for the price surge and can it keep going.

dynaCERT’s flagship product ‘HydraGEN™’ reduces fuel use by up to 20% and carbon emissions by over 50%. Transportation that uses diesel urgently needs ‘HydraGEN™’ to reduce emissions as China and Europe tightened emission standards from January 1, 2020.

dynaCERT (TSXV: DYA) stock price surging higher

Why has dynaCERT stock surged by 100% over the past 2 months

There are several reasons for the stock price surge.

1. On November 28 it was announced that an entity controlled by Eric Sprott became a ‘significant new shareholder’. Effectively the Sprott entity bought 28,000,000 units at $0.50 per unit ($14,000,000). Each Unit consists of one (1) common share (a “Share”) and one-half (1/2) of one common share purchase warrant (exercisable at $0.65), on or before November 26, 2021.

Mr. Eric Sprott stated:

“dynaCERT presents an unusual once-in-a-lifetime opportunity to participate at the commercial stage of what is a proven and compelling transformative technology to reduce carbon emissions in diesel engines, globally. I support the successful international mission of dynaCERT and I see this new investment as a means to participate in the important world-wide demand for Carbon Credits resulting from socially-conscious users of mining equipment, trucking, transportation and power generation.”

2. DynaCERT announced a Strategic Investment by Mosolf in Europe. Mosolf SE & CO. AG  (“MOSOLF”), a significant European dealer of dynaCERT is making a strong and strategic financial commitment to the Company with the expansion of dealer operations across Germany and neighboring European countries. As well, Dr. Joerg Mosolf, President and Chief Executive Officer of MOSOLF, has made an additional personal equity investment of $1 million. Dr. Joerg Mosolf advises that MOSOLF has already hired twenty-three (23) new employees dedicated 100% full-time to the marketing, sales and installations of dynaCERT’s HydraGEN™ Technology in Germany, France, Benelux and Poland.

3. On January 1, 2020 the new European tougher emissions standards commenced. Added to this is China’s ramping up of their NEV credit scheme in 2020. From January 1, 2020, car manufacturers in both Europe and China need to significantly reduce emissions or face huge fines. One report estimates these fines could reach 34 billion euros (~US$37.5 billion) just in Europe if car manufacturers don’t rapidly reduce emissions.

Clearly all these events combined to send the stock price 100% higher the past 2 months. My closing comment back in the November article was:

“2020 will be a remarkable year for dynaCERT as Europe, China and others make significant moves to reduce vehicle emissions. The past week of new orders and deals should be just a warm up for 2020.”

dynaCERT – ‘Driving for a better future’

What’s next for dynaCERT?

The MOSOLF dealership should boost European orders. MOSOLF is one of the largest truck servicing companies in Europe. MOSOLF has agreed to purchase one thousand HydraGEN units in 2020. Targeting Europe in 2020 is a great move, and perhaps China will be next.

dynaCERT has ~40 dealers around the world selling their products to small and large truck owners, fleets, and government organizations that use diesel engines. With a billion diesel engines in the world, and 100 million new diesel engines built worldwide every year; dynaCERT’s green emission technology is in big demand.

dynaCERT’s target markets

There is no doubt the 2020s will bring huge business for innovative companies such as dynaCERT given the global push towards greener energy and less harmful emissions. dynaCERT has already expanded into the large key markets such as Canada, USA, South America, Europe, South Asia, and the Middle East. 2020 should see further orders and global expansion as more and more countries seek to reduce emissions.

dynaCERT now has a market cap of C$323 million, so given the enormous market opportunity, there is still potential for plenty more upside. The latest analysts estimate target price is C$2.00, representing 108% upside.




Cleantech: The Essential Investment

iStock_000030990370_SmallThose who are in the majority today, globally, of policy making believe that the climate is changing due to human activity (anthropogenic causation) and they also at the same time believe that humanity cannot adapt to such changes (as it has, in fact, always done when no human agency was involved or contemplated in such changes) are once again now listening to and sounding an alarm that if investment patterns in energy production do not change immediately then the earth’s average annual temperature will rise by 2 degrees centigrade in the near term no matter what else we do in the future.

A leading authority at Oxford University, Professor Cameron Hepburn, Professor of Environmental Economics based at INET Oxford and the Smith School in the UK, has just published a paper in which he makes two statements that need our attention:

  1. “Investors putting money into new carbon-emitting infrastructure need to ask hard questions about how long those assets will operate for, and assess the risk of future shut-downs and write-offs,” and
  2. “For policy makers who think of climate change as a long-term future issue this should be a wake-up call. Whether we succeed or fail in containing warming to 2°C is determined by what we do now, not in future decades.”

If this carbon investment reduction alarm is taken seriously by the world’s political and financial elites, then there will need to be a permanent policy shift in governmental participation in energy investments with regard both to the types of investments and the quantity and length of time of the capitalization of pollution.

China is well underway in adapting its investment patterns to support the alarmist view of climate change, but I think that this is due more to the immediacy of China’s vast industrially caused pollution than any adherence to a global climate change emergency-orthodoxy. The result is the same though: The concentration of investment in China into low carbon energy production and storage.

I am discussing today how the climate change alarm is being acted upon in China and how it MUST be acted upon in the rest of the world if the projected worst case scenario is to be avoided. This does not mean that I believe in climate change alarmism, but it does mean that I accept it as a powerful societal force that is driving policy making globally.

I believe that the majority of the world’s leaders now believe that they must act and that they will have to adopt the Chinese low carbon investment model to do so.

This will require outside of China a regulation of capitalism such as never before been attempted other than in the failed models of fascism and Soviet Communism, both of which resulted in vastly increased pollution. But to be fair neither model contemplated such an eventuality.

It has been announced in China that the General Secretary of the Chinese Communist Party, and therefore  the Party, also, have adopted, with Chinese characteristics, the “Supply-side Economics’” policy, which was utilized 30 years ago by both Ronald Reagan and Margaret Thatcher to successfully revive the economies of the USA and the United Kingdom, and that he (President Xi) will utilize its precepts to reform Chinese State Owned Industry to eliminate both zombie companies living only on credit and those with long histories of overcapacity. This is the lead story in the English language version of the China Daily for Sunday, March 27, 2016.

Anyone who still conflates the contemporary version of Chinese Communism with the communism of Joseph Stalin or Mao Zedong is out of touch and wrong. The economic policies of the former Soviet Union, which measured success by total production of goods and services chosen by state bureaucrats rather than by sales or demand by the “market”, were a complete failure, and today the grotesque misery from the continuation of those policies persists only in Cuba and North Korea.

Today’s stubborn adherents to the American “Progressive” policy of ever increasing but, of course, always benign government intervention and regulation (i.e., control) continue to wear the blinkers of an almost religious fanaticism so that they can avoid admitting that their intellectual antecedents admired Soviet Communism.  An unfortunate consequence of this arrogance is a total disregard for and avoidance of any aspects of industrial planning that have actually worked for the Chinese Communist Party and might well be emulated here in the USA to our advantage.

The taint of America’s New Deal “industrial planning” (The National Recovery Administration) and of the discredited (as fascism) corporatist states (Germany, Italy, Spain) from the 1930s, followed by the long “cold war” against the Soviet Union and its central planning,” and finally now by the installation of centrally planned (and so far successful) production and allocation of natural resources  in China is seen as the enemy of free-market capitalism and has prevented the US Federal government from adopting a rational approach to domestic self-sufficiency in natural resources and a reduction in “carbon production”.

Resource production equilibrium, which I define as the production of necessary and sufficient resources to maintain and grow (at a reasonable rate) a diversified economy, is a moving target, and it requires that the essential investments to achieve and/or maintain it be speculative with regard to both the necessary volume and the time-frame in which that volume is required. These judgements as they are partially subjective are therefore to a large degree political as well as economic assessments.  The accuracy of these types of assessments apparently creates enough of a risk to make such investments, although essential, uninteresting, perhaps even not feasible, to the private economy, which needs to know the time of return on investment.

No one today believes that capitalism and communism are exact opposite positions in the agenda to distribute a country’s wealth fairly. But adherence to this black and white view of political economy has severely damaged the future potential of the American economy both to guaranty and to improve the quality of life of the average American, or to safeguard us from the perceived climate change catastrophe.

Politicians mostly select labels on an opportunistic basis, but even the most hardened of American partisans steers clear of any label indicating support for industrial central planning by government.

An Orwellian choice of descriptive terms is ingrained in the vocabulary of the American political class in order to avoid comparison, analysis, and even deconstruction of terms brought into the vocabulary by a century of progressivism, socialism, and communism.

Thus the political definition of infrastructure has been purposefully and arbitrarily limited to manufactured objects and the distribution of the energy required to build and operate them. Therefore, politicians, since they have no other reference definition, simply cannot understand the details, much less the interconnectivity, of the basic resource infrastructure needed to maintain and construct the mechanical and energy infrastructures.

Just a tiny portion of the amount of money wasted and to be wasted on the politically correct action or projects such as high speed rail to nowhere in California would if properly deployed make America self-sufficient in critical natural resources permanently.

Yet no one in government speaks positively about funding, or national underwriting of, the construction of as environmentally sound as currently possible mines, mineral processing facilities, or cleaner fossil fuel sources. Anyone suggesting such a policy is denounced as a communist, fascist, or even more ludicrously as a “tool of Wall Street” or an advocate of “Big Government.” The internal contradiction of such conflicting labels is simply ignored a la Orwell’s Newspeak.

The Chinese Communist Party seems to have chosen to revive and continue FDR’s new deal as a path to the improvement across the board of the quality of life of every Chinese. The Chinese government states that it has adapted Capitalism as a method of moving the nation first towards a Chinese socialism and then a Chinese Communism.

The USA needs to adopt the necessary aspects of industrial planning in order to reignite economic growth, and to adopt policies towards wealth creation that favor ONLY productive investment. Financialization may well be the final stage of the evolution of classical capitalism that Karl Marx described and that Thomas Piketty is telling us is causing an unhealthy inequality.

The climate change alarmists say that if we don’t act now our future “wealth” will be consumed in repairing the damage from climate change and thus growth will be inhibited or stopped by being starved of productive capital.

The climate change alarmists are now in the majority of policy making positions in most nations.

There has never been a better time to invest in Cleantech.

[Note from the Publisher: Jack Lifton will be participating as a panelist at the Cleantech & Technology Metals Summit – Invest in the Cleantech Revolution on May 10-11th in Toronto, ON. For more information, go to CTMS2016.com]