Base Carbon: Investor Call Notes
Notes from BCBN's investor call on 12/16/24.
Company Updates
As of September 30th, Base had $13 million in cash.
The company has repurchased over 15 million shares through its NCIB to date. Given their cash levels, they may choose to buy shares even faster through a substantial issuer bid (SIB), which acts as a tender offer to buy back a specified number of shares.
The STX Group investment fund is still in the works. Some of the contacts Base worked with at the firm have left. So, that seemed to cause some delays.
The main issue has been sourcing offtakes to reduce risk for the portfolio of projects, but the good news is that this partnership is still progressing.
Project Updates
Base expects the next issuance of credits (the fourth issuance) from Vietnam will be received before the end of Q1 2025.
As noted in the October investor call, the profits from this last tranche of credits will be split 50/50 with the project developer, SIPCO. After profit sharing, Base should get another $5 million in revenue from this issuance.
This issuance will essentially fulfill Citi's offtake for 7.4 million credits.
The company has 1.7 million carbon credits from Rwanda sitting in inventory, with the fieldwork for the next issuance set to be submitted to Verra for review in the near term.
The India reforestation project only requires an additional $3.3 million of capex. Vietnam and Rwanda do not require any further investment. So, nearly all capital commitments have been fulfilled for the company’s existing projects.
The reforestation project has now planted 6.5 million trees. According to previous guidance, the India project would start generating carbon credits in Q1 2025.
Base has not announced an investment in a new carbon project since August 2023. We can take this as a testament to either:
Management is extremely careful about what they choose to invest in.
Or there aren’t many great carbon projects to get involved with. It might be a bit of both.
Once again, management has emphasized that they’re looking into biochar, having looked at over 100 opportunities. We’ll see if anything pans out there.
CORSIA Uncertainty
I was waiting to hear more clarification about this situation before posting about it, but it seems we will not get more details on next steps until later.
On December 12th, it was announced that ICAO approved Verra for CORSIA eligibility but did not approve most existing cookstove projects, among some other project types.
The international system overseeing carbon emissions in the aviation industry, CORSIA, will likely play a significant role in carbon markets over time. Inclusion in this program would allow your carbon credits to garner a significant pricing premium.
For reference, according to Viridios, the vast majority of cookstove carbon credits trade for $4-8 per ton. Compare that to a recent block trade between Mercuria and HNK Alpha, which was done for 50 lots of CORSIA Phase 1 carbon credits at $24 per ton…
The pricing differential is immense. CORSIA is heavily undersupplied at the moment.
This decision to not allow the cookstove methodology negatively impacts both the Vietnam and Rwanda projects, which are currently using Verra’s VMR0006 cookstove crediting methodology.
But that doesn’t necessarily mean Base got screwed…
While VMR0006 isn’t allowed… Verra’s latest cookstove methodology, VM0050, is approved for use in the CORSIA scheme.
This means there’s still a path to Base’s credits being eligible for trading under the CORSIA platform.
It’s now up to the project developers SIPCO (Vietnam) and Del Agua (Rwanda) to decide if they want to take the time to qualify for the new methodology.
Also, remember that the number of credits issued to these projects will likely be lower if they decide to undergo more stringent requirements in VM0050. This is the same thing that happened when they originally transferred to the VMR0006 protocols.
The vast pricing differentials will likely justify swapping to the latest methodology. Still, it’s uncertain if the developers will decide to do it… and how long of a delay this will cause.
Personally, I remain optimistic, and I’m grateful to hear that Base still has a path to get included in CORSIA. Original media leaks made it sound like Base might not have had a path for inclusion at all.
Disclaimer: I’m long Base Carbon. I hold an equity position that was acquired at an average share price of $0.35. I was not compensated by the company to create this post.
The owner of Green Investing is not a licensed investment professional. Nothing produced under the Green Investing brand should be construed as investment advice. My content is made for entertainment and educational purposes. Do your own research.