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2023 Results Show Leverage of Business Model; 2024 Set to See Significant Cash Flow Growth

Base Carbon reported 2023 results that highlight the milestone year for the company, which saw the first issuance of carbon credits from one of its projects, cash received from the sale of its credits to a third party, and the diversification into carbon removal projects. Net profit was $98.3 million, driven by $6.4 million realized and $104.7 million in unrealized gains in its carbon credit projects portfolio. Vietnam project expected to deliver ~$29.1 million in cash flow in 2024. This is in addition to the $6.4 million of cash received in 2023 and is well in excess of Base Carbon’s total committed investment of US$20.8 million. Only ~$1.6 million of committed capital (~8%) remains to be spent and the entire fleet of clean cooking devices (cookstoves and water purifiers) has been fully distributed by the company’s project partner. Further, Base Carbon holds an option over all remaining credits generated by the project. Initial credits from the Rwanda project issued. We see potential pricing upside from the Corresponding Adjustment (CA) label. Base Carbon recently received the first 717,558 credits from the project, which were issued with a CA label from carbon registry Verra (Verra’s first). The company has stated that the CA expands the pool of potential buyers. These credits will see better pricing as buyers look for the highest-quality credits and the CA protects against double counting. Base Carbon’s project structure helps minimize risk. In addition to using a comprehensive and selective underwriting process, most of the material risks in its projects are known upfront. This leaves little variability in costs that can affect the overall expected value of the project, which is in contrast to many other types of upstream investments, such as resource plays, where much of the project capital is expended in proving the reserves or spent producing the asset. The Rwanda project’s committed capital is fully deployed, while 92% of the Vietnam project has been spent to date. The India ARR project, which began in 2H23, has already planted 5 million of the 6.5 million trees and Base Carbon has spent about one-third of the $13.6 million of committed capital. Buybacks continue. In 2023, the company repurchased and retired another 4.98 million shares, bringing the total shares repurchased under the Normal Course Issuer Bid to 9.3 million (~8% of total issued). The company still has authorization to repurchase ~6 million more shares as part of the program that was renewed in June 2023.