FEATURE: Analyst estimates put earnings for Carbon Done Right in the black by 2027

21 Mar 2024

Quantum Commodity Intelligence – Earnings for a Canada-based project developer are expected to move into the black in 2027, after several years in the red, and hit more than $14 million by the end of the decade, according to an analyst report seen by Quantum.

Carbon Done Right’s adjusted earnings before interest, taxes, depreciation, and amortization (EBTIDA) are estimated to be $0.09 million in 2027, rising to $4.51 million the following year, $9.06 million in 2029 and $14.44 million in 2030, analysis by London-based wealth and asset manager Shard Capital said.

Adjusted EBITDA at the carbon company, formerly known as Klimat X, will remain in the red until 2026, estimated as an operating loss of $2.07 million in that year, with losses expected in the preceding years – estimated at $3.84 in 2025 and $3.88 million in 2024, and reported losses of $1.67 million in 2023 and $4.72 million in 2022.

Revenue

Carbon Done Right’s revenue is expected to grow across the decade as a result of income from its reforestation projects and in 2026 also coming from its Carbon Quantification System (CQS) proprietary remote sensing and monitoring technology, Shard Capital said.

Reported revenue was $0.48 million in 2023, which came solely from its carbon projects, and revenue is estimated to be $0.67 million this year, $3.61 million the next, before reaching $7.55 million in 2026 – with $1.50 million then also coming from CQS.

Revenue is estimated by the analysts to continue rising for the rest of the decade with the impact of CQS growing to account for $16.98 million of the $34.58 million expected in 2030. Project revenue is based on an average base year price of $20 a tonne of carbon dioxide equivalent (tCO2e) and 3% annual price inflation.

The report noted Carbon Done Right’s current pipeline of seven projects covering about 80,000 hectares (ha) that could deliver carbon credits equivalent to over 46 million tCO2e. But, it added, in the medium to longer term the company has “identified target sites and projects with the potential for expansion to 225,000 ha” over a 30 to 50-year timeframe.

Carbon Done Right announced its name change last week, alongside plans to dual list on the London Stock Exchange’s AIM market as well as already being listed on the Toronto Stock Exchange in Canada.

It also unveiled plans in early March to acquire blockchain-based carbon trading platform London Carbon Exchange (LCE) from Supernova Digital Assets in a move aimed at expanding the developer’s market reach.

Carbon Done Right chief executive James Tansey told Quantum that initially the marketplace and the CQS system will only be used for the company’s projects to “establish a standard and baseline pricing”. But, he added, in time the “system will become accessible to other project developers that agree to the same standards”.

Reforestation

Carbon Done Right is developing a large-scale rewilding reforestation project in Sierra Leone, for an initial area of 5,000 ha, which can be extended by a further 20,000 ha. The company expects the initial 5,000 ha to produce up to 1.9 million tonnes of validated and verified Verra carbon credits over 30 years.

The 25,000-ha project could eventually deliver carbon credits totalling 15.56 million tCO2e, according to the Shard Capital report, which estimates project average productivity at 12.5 tCO2e per ha per year and the average carbon cost at $16.8/tCO2e.

In December last year, BP Carbon Trading was revealed as the Fortune 100 company that had concluded a pre-payment agreement for carbon credits from the first 5,000 ha.

The Shard Capital report said that it expects “pre-purchase to remain an important component of the Carbon Done Right business model, priming initial project capital outlay, licensing and implementation costs”.

But, it added, this will decline as a “proportion of total revenue as project carbon credit revenue comes on stream augmented by income from Carbon Done Right land development, consulting services and Carbon Exchange income”.

The report estimated the total cost of implementation of the seven projects underway at about $110 million over nine years, of which pre-purchase is expected to cover 90% of outlay, “with credits available at a discount to market price”.

“The purchaser receives an estimated 7-15% of the carbon credits generated over the lifespan of each project with the balance available for sale in the open market, plus an option to purchase further credits at a market-related price,” it said.

Carbon Done Right has a second Sierra Leone rewilding reforestation project covering 32,000 ha, which is estimated to deliver credits totalling 19.58 million tCO2e over its lifetime.

This project is estimated to have average productivity at 12.2 tCO2e per ha per year (ha/y) and an average carbon cost at $15.9/tCO2e by Shard Capital.

Two mangrove restoration projects, also planned for the African country, across 5,000 and 3,000 ha are estimated to generate 2.03 million and 1.5 million credits, respectively, in the report.

The 5,000-ha development is estimated by Shard to have average productivity of 13.5 tCO2e/ha/y, with an average cost of $10.5/tCO2e. This compares with average productivity of 16.6 tCO2e per ha per year, with an average cost of $12.8/tCO2e estimated for the 3,000 ha project.

Interestingly, Shard puts the internal rate of return (IRR) for that latter project at 81.4%, which compares with IRR of 15.9% for the 5,000-ha project and 14.8% (25,000 ha) and 15.4% (32,000 ha) for the rewilding schemes in the African country.

A 10,000-ha mangrove project in Mexico’s Yucatan region is estimated to deliver 4.4 million credits – with the potential to expand to 40,000 ha – while a Suriname mangrove project is projected to create 3.64 million credits, with the potential to grow to 30,000 ha.

The first stage of the Yucatan project is over 5,000 ha before expanding to deliver estimated average output of 14.7tCO2e/ha/y. The cost of carbon is put at $11.3/tCO2e and the IRR at 16.2%. No data projections are made for the possible expansion to 40,000 ha.

Average productivity for the Suriname project is estimated at 24tCO2e/ha/y, with the average cost $11.2/tCO2e and IRR at 24.9%. Again there are no projections for the potential expansion of this project to 30,000 ha.

Carbon Done Right is also working on a project in Guyana, which is initially for the production of coconut water.

The report said the project is a collaboration with Pomeroon Trading – 66% owned by Carbon Done Right – to “rehabilitate coconut plantations for the production of coconut water, develop mixed agriculture and provide the basis for future carbon capture projects”. No details are provided on what the “future carbon capture projects” might be.