Carbon streaming company (“Carbon Streaming” or the “Company”), in partnership with Microsoft Corporation (“Microsoft”) and Rubicon Carbon Capital LLC (“Rubicon”), is pleased to announce that it has entered into a carbon credit streaming agreement ( the “Azuero Reforestation Stream”) with Azuero Reforestación Colectiva, SA (“ARC”), a wholly owned subsidiary of the leading project developer Ponterra Ltd. (“Ponterra”), for the ARC Restauro Azura project (the “Azuero Reforestation Project” or the “Project”) located in Panama.
The Azuero Reforestation Project is expected to restore 10,000 hectares of degraded tropical forest on Panama’s Azuero Peninsula, which has been converted into low-density cattle ranches over the past century. The project’s expected IRR is consistent with Carbon Streaming’s target IRR for other investments, and the addition of a long-term carbon credit bank, and deep community engagement.
The project will enable more than 100 local landowners to participate in and generate income from the reforestation activities through long-term annual payments and a share of carbon credit sales. Ponterra expects to plant more than six million trees and create more than 300 permanent local jobs in the local community. The project is designed to achieve the following UN Sustainable Development Goals: 1 (no poverty), 4 (quality education), 8 (decent work and economic growth), 13 (climate action), 15 (life on land) and 17 ( Partnerships for the Objectives). Given these strong social and environmental benefits, Verra has selected the project to participate in their new SD VISTA Nature Framework.
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The Azuero Reforestation Project is expected to remove 3.24 million tonnes of carbon dioxide equivalent (“tCO2e”) and generate an equivalent number of carbon credits under Verra’s latest Afforestation, Reforestation & Revegetation (ARR) methodology, VM0047. The project is financed by an investor group consisting of Carbon Streaming, Microsoft and Rubicon. The project has the potential to expand 5-10x, and the investor group has the right of first offer to finance project expansions. The project’s first issuance of carbon credits is expected in 2027.
“Ponterra’s mission to restore biodiversity and uplift local communities through the design and operation of high-integrity nature projects is coming to life today. We are pleased to partner with Carbon Streaming, one of the most respected and experienced investors in nature-based carbon credits on the market, to achieve the scale needed to make a meaningful impact on the dual biodiversity and climate crises,” said Celia Francis, CEO of Pontterra.
In one of the largest nature-based carbon removal efforts to date, Microsoft expects to receive approximately 1.6 million carbon credits from the Project, a portion of which will come from a long-term offtake agreement to purchase 100% of the carbon credits Carbon Streaming will receive approximately 311,500 carbon credits from the project until 2040. This is the second multi-year agreement that Carbon Streaming has signed with Microsoft in the past year.
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Justin Cochrane, CEO of Carbon Streaming, expressed his excitement about the deal, saying: “This stream with Ponterra represents a transformative step for Carbon Streaming and illustrates our commitment to high-quality carbon removal projects. By joining forces with valued co-investors and securing pre-contracted cash flows, we are demonstrating a deal structure that promises significant environmental impacts and predictable future cash flows.”
Brian Marrs, Senior Director of Energy and Carbon Removal at Microsoft said: “Microsoft is pleased to support the Azuero Reforestation Project in partnership with Ponterra, Rubicon Carbon and Carbon Streaming. This project has been designed with a community-first approach, building on the good work of long-time conservation leaders Pro Eco Azuero, ensuring that the positive impact of the project not only directly benefits local communities, but also continues.”
Under the terms of the Azuero Reforestation Stream, Carbon Streaming, together with Rubicon and Microsoft, will finance 100% of the project costs for seven years. Carbon Streaming will make an initial down payment of $0.315 million, with additional milestone payments of up to $6.750 million as the project reaches planting and sapling survival milestones.
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Carbon Streaming will receive 13.5% of the total credits, which is expected to be approximately 438,000 carbon credits until 2052. The closure of the Azuero Reforestation Stream is subject to customary conditions and closure is expected to occur by the end of the second quarter of 2024.
The project is the first streaming agreement where the majority of carbon credits Carbon Streaming will receive will be contracted upfront through an offtake agreement at closing, an investment model the company expects to replicate in the future.
Carbon Streaming has also entered into a marketing agreement with ARC, pursuant to which Carbon Streaming has been appointed as the sole marketer of ARC’s carbon credits for the duration of the project, other than those already committed to the co-investors in the Azuero Reforestation Stream.
The project’s expected IRR is consistent with Carbon Streaming’s target IRR for other investments, and the addition of a long-term carbon credit offtake partner in Microsoft has significantly reduced cash flows.
