Base Carbon Inc. (NEO:BCBN) is pleased to announce it has executed an agreement, through Base Carbon Capital Partners Corp. (“Base Carbon Capital”), to facilitate the development of a cookstove and water purifier carbon reduction project in Vietnam with Sustainability Investment Promotion and Development Joint Stock Company (“SIPCO”), as in-country project developer. Citigroup Global Markets Limited is the carbon credit offtaker to SIPCO for the Project.

Highlights:

• Entered into project agreement with SIPCO to develop a cookstove and water purifier carbon reduction project in Vietnam;
• Facilitated a Project offtake agreement between Citigroup and SIPCO;
• Anticipated initial investment of approximately US$20.8 million over 24 months;
• Expected Project generation of approximately 26.6 million carbon credits over a 10-year period;
• Project documentation with SIPCO provides for an anticipated Project net present value (“NPV”)* of US$78.6 million and internal rate of return (“IRR”)* of 66% at US$10.00 (illustrative) carbon credit price; and
• 2.75-year anticipated payback on aggregate capital commitment (from first dollar deployed) irrespective of market-based carbon pricing.

The Project is expected to generate approximately 26.6 million voluntary carbon credits over an estimated 10-year period from the distribution of approximately 850,000 cookstoves and 364,000 water purifiers to participating households in Vietnam. Cookstoves improve household energy efficiency through a reduction in combustible biomass needed for daily household activities such as cooking and heating, while water purifiers can eliminate the need to boil water for safe consumption. Both types of devices are recognized under well-established carbon reduction methodologies with additional and far-reaching social benefits. The Project has been registered with Verra’s VCS program under Project IDs 2548 and 2557.

Base Carbon Capital will advance an aggregate purchase price prepayment for Project carbon credits of approximately US$20.8 million in regular payment tranches anticipated over the next 24 months. Pursuant to the terms of the Project agreement with SIPCO, the advanced purchase price payment will primarily finance the manufacturing and distribution of the cookstoves and water purifiers as well as certain costs related to initial distribution and Project monitoring. Each prepayment will be conditional upon key development milestones and conditions such as the delivery and distribution of devices to participating households.

Based on Project documentation, SIPCO will buy back the first 7.4 million carbon credits from the Project for offtake. Further to this, approximately 19.2 million additional carbon credits are expected to be generated which may be sold by Base Carbon Capital to either SIPCO, pursuant to an option agreement, or into the open voluntary carbon credit market (or a combination thereof).  

Based on Project documentation with SIPCO and carbon credit generation projections, Base Carbon Capital expects to achieve a 2.75-year payback on aggregate capital deployed and, based on an illustrative sale price of US$10.00 per carbon credit for the anticipated 19.2 million additional credits, Base Carbon Capital’s attributable Project NPV* is estimated to be US$78.6 million in aggregate with an IRR* of 66%. For clarity, a carbon credit sale price of US$10.00 is only illustrative, and the price that the carbon credits on the market may be higher or lower at the time of sale.

“The Project is a core addition to Base Carbon’s project portfolio and our commitment to the development of the Project furthers our efforts to become the trusted developer, producer, and financier of carbon credits. This capital commitment provides Base Carbon stakeholders with exposure to a carbon reduction asset with expected multiple of money capital returns, sized to Base’s balance sheet, with mitigated capital at risk through (i) attractive payback periods, (ii) a partnership with our experienced in-country Project partners, SIPCO, and (iii) a contracted carbon credit offtake between SIPCO and Citigroup. We look forward to furthering our partnership with SIPCO as we collectively see the Project through to completion,” said Michael Costa, Chief Executive Officer of Base Carbon.

“The Project is aligned with Base Carbon’s business model which is focused on identifying and developing high-quality carbon reduction projects. Base seeks to maximise the combination of economic, environmental and social returns while assisting our partners with their energy transition goals. This transaction structure of the Project will enable our in-country partner, SIPCO, to participate in anticipated Project returns while delivering a noteworthy and measurable social impact in Vietnam,” noted Philip Hardwick, Chief Operating Officer of Base Carbon.

Source: Base Carbon

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