Durum Carbon LP offers exposure to rapidly growing carbon credit asset class
Durum Capital Inc. today announced the launch of Durum Carbon LP, an investment vehicle created to provide financial exposure to global climate change policies while capturing the demands of environmentally conscious investors today. Canada’s transition to a low-carbon economy and tightening environmental regulations have led to the creation of a unique market opportunity for the purchase and sale of carbon credits in Canada. Durum Carbon LP ultimately seeks to participate in this market through the strategic acquisition and management of a carbon credit portfolio.
What are carbon credits and how do they work?
Climate change has become an increasingly important issue for many investors around the globe. Many governments around the world have implemented policies to incentivize heavy emitters to reduce greenhouse gas (“GHG”) output in an effort to slow the climate change trend.
Putting a price on carbon is widely recognized as one of the most efficient means to reduce GHG emissions while also driving innovation. A carbon credit system is a market-based mechanism that incentivizes organizations to reduce overall emissions through the buying and selling of “carbon credits.”
Carbon credits are tradable certificates that allow the holder to emit one tonne of carbon dioxide equivalent (“CO2e”) for each carbon credit utilized. For a visual comparison, one carbon credit would equal the carbon dioxide output of approximately 500 fire extinguishers combined. The cost of these emissions is equal to the cost of carbon credits in the market. As environmental regulations continue to tighten, it is expected that the value of carbon credits will increase, further raising the cost of GHG emissions.
Canada’s transition to a low-carbon economy, tightening environmental regulations, and ambitious emission reduction goals by corporations are expected to increase the demand and value for carbon credits over the decade.
Alberta’s Compliance Carbon Market
A carbon credit is created in one of two ways:
These carbon credits can then be sold to and utilized by emitters in the marketplace that exceed their allowable emissions threshold. The purchase of carbon credits will allow the emitter to achieve compliance with environmental regulations and avoid paying a penalty in the form of the TIER Fund Credit price or carbon price. Carbon credits trade over the counter and are typically priced at a discount to the prevailing government mandated carbon price, currently set at $50/tCO2e.
Durum Carbon LP strategy
The Government of Canada has proposed an increase in the carbon price of $15/tCO2e each year until 2030. From the current level of $50/tCO2e, this equates to an increase of 240%.
In a market known for its opaqueness and complexity, Durum Carbon LP’s strategy is a novelty in that it is both transparent and simple. Durum Carbon LP will purchase over-the-counter carbon credits, hold them and then sell them at a premium as the carbon price appreciates and when return targets are met. Management will actively monitor international compliance and voluntary markets to assess arbitrage opportunities and/or rebalance the carbon credit portfolio as global carbon markets mature. Through Durum Carbon LP, investors gain unique exposure to the rapidly growing asset class of carbon credits.
The importance of strong governance in an emerging asset class
Climate change and associated carbon markets have garnered the interests of some of the most influential organizations in the world: governments, insurance agencies, pension plans and even central banks. With that type of attention, there will inevitably be a variety of different carbon-related investment opportunities on the horizon. While Durum Carbon LP’s investment strategy is simple, the execution may not be. It is important to understand the different types of carbon credits and evolving policies governing the many different carbon markets around the globe today.
Durum Carbon LP is a listed entity on the Alberta Carbon Registry and currently purchases carbon credits under Alberta’s Technology Innovation and Emissions Reductions (TIER) regulatory framework.
Durum Carbon LP’s strong governance, robust credit strategy, extensive network and years of energy trading experience provides a competitive advantage in today’s thinly traded carbon market.
For additional information on Durum Carbon LP, carbon credits, and this rapidly growing asset class, please contact your authorized dealing representative.
About Durum Carbon LP
An investment vehicle created to provide investors with unique exposure to the rapidly growing asset class of carbon credits. Canada’s transition to a low-carbon economy and tightening environmental regulations have led to the creation of a unique market opportunity for the purchase and sale of carbon credits in Canada. Durum Carbon LP ultimately seeks to participate in this market through the strategic acquisition and management of a carbon credit portfolio.
About Durum Capital Inc.
Durum Capital Inc. is an asset manager focused on investments that require unique skills to uncover true value. Durum offers expertise in financing, governance, and operational efficiencies, ultimately creating alternatives to bring transparency to opaque situations in private markets.
Source: Durum Capital Inc.
Ceres Global Ag Corp. (TSX: CRP) ("Ceres" or the "Corporation") a global agricultural, energy and industrial products merchandising and supply chain company, announced today that its wholly owned subsidiary, Riverland Ag Corp. ("Riverland"), has entered into a letter of intent to acquire Columbia Grain International's 50% membership interest in Berthold Farmers Elevator, LLC, a grain originator and merchandiser with locations in Berthold, N.D. and Carpio, N.D. ("BFE"). Riverland will pay cash for the investment, coming from working capital and available debt capacity. The other 50% membership interest in BFE is owned by Berthold Farmers Elevator Company ("BFEC"), a farmer cooperative also based in Berthold, N.D.
The letter of intent contains a binding purchase option exercisable by Riverland through April 29, 2022, by which date the transaction is expected to close.
"Becoming a joint venture owner with Berthold Farmers Elevator Company advances our strategy to partner with growers and increase origination of our core products," said Mr. Robert Day, President and Chief Executive Officer at Ceres. "We look forward to connecting the hundreds of growers who make up the co-op in Berthold with Ceres and Riverland's customers and collaborating with all parties to bring solutions, starting from the farmgate and ending with consumers in the U.S. and internationally."
"Adding Riverland as a joint venture partner in Berthold Farmers Elevator, LLC opens new and meaningful possibilities for our growers" said Aaron Haaland of BFE's board. "With Riverland and Ceres's expertise in managing railroad programs and providing destination market access, Berthold Farmers Elevator Company will be well positioned to serve the needs of its growers and patrons for decades to come."
About Ceres Global Ag Corp. (ceresglobalagcorp.com)
Ceres and its subsidiaries ("Ceres") add value across agricultural, energy and industrial supply chains through efficient sourcing, storing, transporting and marketing of high-quality agricultural commodities, value-added products and raw materials. Leveraging its network of commodity logistics centers and team of industry experts, Ceres connects farmers to customers around the world.
Ceres is headquartered in Golden Valley, Minnesota, and together with its affiliated companies, operates 13 locations across Saskatchewan, Manitoba, Ontario, and Minnesota. These facilities have an aggregate grain and oilseed storage capacity of approximately 31 million bushels.
Ceres has a 50% interest in Savage Riverport, LLC (a joint venture with Consolidated Grain and Barge Co.), a 50% interest in Farmers Grain, LLC (a joint venture with Farmer's Cooperative Grain and Seed Association), a 50% interest in Gateway Energy Terminal (an unincorporated joint venture with Steel Reef Infrastructure Corp.), a 25% interest in Stewart Southern Railway Inc. (a short-line railway located in southeast Saskatchewan with a range of 130 kilometers), and a 17% interest in Canterra Seed Holdings Ltd. (a Canada-based seed development company).
About Berthold Farmers Elevator, LLC (www.bertholdfarmers.com)
Established in 2002, BFE provides grain merchandising and storage services to over 300 BFEC patrons and other growers across a 4-county area.
For more information about Ceres, please visit www.ceresglobalagcorp.com