Many hardtech entrepreneurs develop a technology and then figure out how to commercialize it. What happens if you find an industry with potential and then engineer a solution to open an entirely new market to them?
Today's show is with two of the cofounders of CO280: Natalie Khtikian, the Chief Commercial Officer, and Jonathan Rhone, the Chief Executive Officer.
Natalie and John explain what it's like working with an industry as established as pulp and paper, structuring joint venture deals with them, and showing them the potential upside to opening business lines in carbon removal.
The deal mechanics of joint ventures for carbon removal are discussed (though probably deserve their own full show!), and Natalie shares some reasons why she is optimistic about carbon removal despite some of the headwinds the industry is currently experiencing.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
This is the Reversing Climate Change podcast.
I'm Ross Kenny, and I'm the hostof the show.
Today's sponsor is Our Bonics. We need a lot more forestry
projects in order to prevent theworst of climate change.
Forestry is not an easy thing toget right.
I come from the world of soil organic carbon, also a tricky
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terrosphere hold more carbon forlonger.
(00:21):
I'm honored to share that goal with our Bonics, who's doing
amazing work in Europe for forestry.
They're actually not that many forestry projects within carbon
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At this point in 2024, there's only .5% of the 13 million
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so it's pretty rare. Arbonics is one of the few
groups out there trying to make credible high quality forestry
(00:45):
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(01:08):
Comparing against methodologies and registries and figuring out
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understand. If you're ACSO, you're working
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(01:31):
quickly understand forestry projects in Europe.
How do they actually work, and of the choices that are
available, what you should choose and for what, Go check
out Arbonics. Check out their report.
I'll put the link in the show notes for that to listen to the
episode I did with Lizette. And thanks so much for
listening. Here is your show.
(01:54):
Hello. Thank you for all the listeners.
My name is Ross Kenyon. I am a carbon removal
entrepreneur and the host of Reversing Climate Change.
Thanks for listening to the podcast.
If you love this show, please give it a great rating and
review in Apple Podcast or Spotify.
Just open the app real quick anddo that.
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(02:17):
Go ahead and join support the show.
It is very much appreciated and thanks for helping me keep this
thing going. I love doing it.
Presumably love listening. Thank you for doing so.
And OK, I'm going to introduce the show now.
Today's show is with CO280. If you follow carbon removal,
you almost without a doubt know CO280.
They are high on the leaderboardon CDRFYI for tons sold.
(02:40):
They keep announcing big off takes and they are helping the
pulp and paper industry practicecarbon removal.
Emissions from pulp and paper inthe processing of biogenic
materials. It represents a very large
amount of carbon. We talked about this in the
show. The founders of CO280 noticed
this and said how do we help this industry decarbonize and
(03:05):
practice carbon removal? It's funny because I think a lot
of entrepreneurs go the other direction where they become
enamoured of a certain technology and then they're
trying to figure out how to go to market.
I suspect if anyone is listeningas a carbon removal entrepreneur
or even a climate tech entrepreneur, you probably got
super into biochar or you are a material scientist who developed
some sort of new sorbent or something like that.
(03:28):
And then the trick is to figure out, how do you commercialize
this tech? I'm really excited by people
coming into carbon removal from the opposite direction where
they are just saying, all right,how do I engineer a solution for
this exact industry that has a problem that they actually would
like to be solved? We're seeing a lot more of that
now. And I think that's one of the
most powerfully positive things that's happening in carbon
(03:48):
removal right now. If you want to start a company,
but you haven't yet, I would advise you to potentially look
at doing that yourself. I don't know what it is about
hard tech, deep tech, frontier tech, whatever we want to call
this that makes people come at it from this way.
I suspect because so much comes out of universities and tech
transfer offices and just like, you know, serious STEM people
(04:11):
who want to commercialize the stuff that they've discovered or
advanced in the lab. But it doesn't actually have to
be that way. There's another way to go.
In any case, today's shows with John Roan, the Co founder and
CEO of CEO 280 and Natalie Kotickian who is the Co founder
and chief commercial officer of CO280.
I'm really glad to have had themon.
(04:31):
I've admired their work for a very long time.
I think the go to market is verysmart and worth a very serious
think. Well done to CO280 for so many
of these big off takes and getting an industry that I think
a lot of people were not thinking about or looking at
that closely, very, very deep into carbon removal.
Maybe that's one of the thing I can put you on to too, that if
(04:53):
you're listening, if you can help turn an industry on to
carbon removal to see opportunity there, that's
probably some of the most important work that you could
do. OK, enough Prologue.
Here is your show. Thanks for listening.
Rate and review on Apple Podcast, Spotify, become a paid
subscriber or otherwise just listen to the show.
That's good. We can just get right to that.
Thanks for listening. And here it is.
(05:19):
Natalie and John, thanks for being here.
Yeah. Thanks for having us, Ross.
Yeah. Thank you, Ross.
I'm very happy to have you. CO280 has certainly made a huge
splash. I like the fact that you're
working with an industry that I think it's one of those fields
that people take for granted. Not a lot of people think about
pulp and paper unless you're in it, but then just sort of
outflanked everyone in carbon removal and making these
(05:42):
enormous deals that have very wide backing.
I can give a little bit of background into how we, how we
kind of started CO280, but I think before that, you know, we
are we amongst a group of, of big Cdr companies.
I wouldn't say we're necessarilythe biggest or the best, but we
are, you know, doing doing the best we can to remove a bunch of
(06:05):
carbon so. Some lot of Natalie, some
enormous deals. Yeah, they're, they are enormous
deals for sure. And we have a lot of support
from from buyers and we're very grateful for that.
We are a tech agnostic project developer and we started CO280
with the thesis that we needed permanent really high quality
Cdr for, you know, around $200 aton today that could scale,
(06:31):
right. So we didn't start out with the
idea of pulp and paper necessarily, but pretty quickly
after looking at all the different ways that you could
create Cdr that hit those parameters, we realized that
removing CO2 from existing industrial processes at pulp
mills was one of the most efficient ways to create high
(06:52):
quality permanent Cdr. And what's nice about efficiency
is that it is two things. So when you're efficient, it's
greener and it also is lower cost, right.
So that that pathway was what welanded on.
Yeah, I guess. I guess just just to add to that
Rasta when you're, when you're coming at it like our, our team
(07:18):
has all, has a lot of experiencecommercializing, you know,
complicated machines in, in renewable clean tech in climate
technologies. But when you, when you start as
a project, I mean, one of the things that we, we saw was that,
you know, in order for us to scale up carbon removal or any
(07:40):
of these climate technologies, there's, there's a need for
project developers and the ecosystem that are technology
agnostic. And really are really thinking
about how do you, how do you, how do you create the, the, the
deployment model and the scalable model and the, the, the
repeatable bankable solution? That, that, that, that can get
(08:05):
these technologies deployed in the market and scaled up.
And, and it, it, it, it kind of,it gives you, it gives you a
freedom to kind of focus on solving the problem the, the
most efficient way possible. And so, you know, just to build
on what Natalie said, we, we, welooked at all of the different
ways that you can create carbon removal and, you know, we, we,
(08:27):
and, and how we can create this,this network of, of repeatable,
scalable projects. And, and pulp and paper is an
obvious one. I mean, pulp and paper mills, as
you probably know, are the largest point source of biogenic
CO2 in the world, really significant scale of hundreds of
(08:49):
mills worldwide that that all produce that you know, when you
make, when you make pulp and paper, the mills themselves burn
all of the the the residual biomass waste and these gigantic
boilers to make, you know, steamand heat and power to run their
mills and in many cases exporting power to the grid.
(09:12):
In the United States, the majority of the mills are
located in the Gulf Coast, whichis right, you know, Co located
with, with some of the best saline aquifer geology in the
world for, for carbon storage. And the mills themselves, you
know, have been in in business. They've been, they've been in
operation for decades. So they've got well established
(09:33):
biomass supply chains. They've got so we're really,
we're really retrofitting these existing mill operations.
They have the ability to, to generate the kind of energy
steam power, provide utilities for carbon capture systems on
site very efficiently. So there's just a whole bunch of
(09:54):
advantages that that that, that make this application, you know,
one of the most efficient pathways.
Now, it's still super complicated to put these
projects together. And and that's where the skill
sets that we've put together in the company really come to bear
as we kind of we kind of look atcreating this new value chain.
(10:19):
Yeah. And I, I will also add that John
had experience selling power plants into the pulp and paper
industry. And so that's how the idea came
about, and that's how he kind ofsaw the opportunity that other
people had missed. I do love seeing further types
of role specialization happen, where for the longest time in
(10:39):
carbon removal, I think we had assumed that tech developers
would also be project developersand that the same people at the
same company would do both of those things, even though those
skill sets are very different ones.
I don't know that they should beCo located at the same company
or with the same personnel. That's not how we've done it.
Oh, you can jump in, John. Yeah.
Yeah, I was going to say I it, it, I, I've done that.
(11:02):
And it's, it's, it's challenging.
I mean they're, they're, they're, they're really
different mindsets. You know, 1 is focused on, on
commercializing, you know, product market fit and
technology and, and, and, and kind of connecting science with
technology and applications and creating a solution.
(11:22):
The other one is all about, you know, the, the, the skill sets
required to deploy and replicateand scale up.
And those are, you know, things like business model, business
model, innovation, partnerships,supply chain transactions, and
(11:46):
then, you know, access and deployment of, of a lot of
capital. And I think I think Natalie and
I both agree that one of the things that that that we believe
is that in order to, in order toaddress, you know, the Cdr scale
up requirements and drive down costs, we need to, we need to,
we need to get to the point where we're, we're leveraging a
(12:09):
lot of private capital. So, so Cdr projects need to get
to the point where they're fullycommercial and bankable and we
can, we can leverage the, the capital resources in, in the, in
the private project project finance market.
That's that's really essential for scale as far as we see Ross
(12:30):
and that's, that's part of what we're trying to do.
Yeah. I think early on in the Cdr
space, there was rightly a big focus on technologies that were
pretty low in the TRL scale and the potential catalytic impact
of those technologies. And that is where where people
should have been focused. But the truth is that there are
ways to deploy Cdr at scale now and that can be just as
(12:54):
catalytic because when you do something over and over again,
you bring down the cost of it. And so that's why John says
business model innovation. And that is like, I can't say
enough how critical that is to this market and to truly
achieving carbon removal on a time scale that's important or
(13:16):
relevant for the environment. Are you able to mostly take off
the shelf or nearly off the shelf technology for your
projects? At that point, then, are you not
engaged in technology development to the extent that
most others are? I would say that, you know, as
we look at so, so the technologies that, that we that,
that are really important to us,Ross are posting about post
(13:40):
combustion carbon capture technologies, right.
So that's the, that's the category of technologies that
that we deploy. And because we're capturing CO2
from, from stock emissions in, in these gigantic recovery
boilers. And so when you look at that
category of technologies, there's, there's a whole
ecosystem out there. There's there's liquid aiming
(14:02):
technology, there's non aqueous solvents, there's solid
sorbents, there's cryogenic technologies, there's hot
potassium carbonate, there's membranes.
And they're all, you know, they're all at different stages
of, of development and commercialization.
The, you know, from, from our, from from our vantage point to,
(14:23):
to, to, to initiate this market,we're really focusing on the,
the technologies within post combustion carbon capture that
are, that are the most developedand that is the liquid aiming
category technologies. I mean, capturing, you know,
(14:46):
look, liquid amines have been used for decades in, in, in
capturing pollutants in, in stock emissions and they have
more recently been been modifiedand adapted to capturing CO2.
So these are companies like, youknow, Mitsubishi Heavy
Industries, Shell can solve Fleur, BASF, Honeywell and and
(15:12):
SLB capture E and you know, these, these, these, these are,
you know, there's not been hundreds of these applications
by any stretch, but they are, they are at the point where they
are commercially proven and, andwe are adapting them into the
pulp and paper application. So and you know, we, I would
(15:34):
also say that there's some really exciting technologies
that are that are at an earlier stage of development in post
combustion carbon capture that, you know have the potential to
bring down costs, improve efficiency and provide more
versatility in terms of applications.
But we're starting in the aiming, the aiming solvent
category. Yeah.
(15:54):
When you think about like proving out a technology, you
asked like how much are we engaged in proving out
technology? And I'm going to simplify this a
little bit because I'm not a oneof our technical people, but
basically there are two different ways that you need to
de risk a technology for large scale deployment.
And one is the engineering scaleup.
(16:15):
So has it been built as big as you need to build it?
And the second one is a process pilot.
So that is does it work on my specific application?
And what you need to test there varies based on the technology.
So in the case of liquid amines,it's chemistry meeting
chemistry. So you have to kind of test do
(16:36):
liquid amines work on a specificflue gas that you're running a
your process on, right? And how well do they work?
What does that do you do your economic model?
And so at that level, we absolutely are engaged in, in
testing and and scaling up technology.
And I'm sorry, not scaling it, but testing at that process
(16:57):
level. And we actually have run a
mobile test unit very successfully for a 1000 ton per
year unit that just concluded recently.
And I think that's just been a huge accelerant to our business
and and a real proof point that our financial model makes sense
it's. Surprising to me you don't
(17:19):
describe yourself as being technical.
Don't you have a terminal masters in Oysters I.
Do I do have a masters in oystermicrobiology?
But I don't. I don't think it's actually that
relevant. You don't think so?
It's too bad. I, I think Natalie should you
should apply for a project, project engineering.
That that was pretty good. I, I, I like your explanation.
(17:42):
That was awesome. Yeah, I'm, I'm also very
attracted to business model innovation because I'm, I'm just
a commercially minded person. I don't think I can compete
personally on innovating on tech.
I don't think that's what I'm best at.
But I'm also looking for ways ofmaking the financial and
business layers make more sense or just a bit more snugly with a
place that's still that has sortof tenuous product market fit.
(18:05):
Overall, I like the focus on project development as
differentiated now where you're seeing that with groups like
Deep Sky, you know your neighbors near your provincial
neighbors here. And then also like residuals,
focus on biochar project development.
I suspect we're going to see a lot more people get into this
space who are experienced in delivering renewables and
(18:26):
deploying those in the field andtrying to bring those skills out
or anyone who's just actually put steel in the ground doing
basically anything, getting people like that into this
rather than scientist turned Co founder kind of people who are,
you know, going through tech transfer offices out of
universities and going that direction.
But we've seen a lot of that. But we need some of those like
one to two people and not just the zero to 1, I think.
(18:48):
So go ahead, Natalie. Yeah.
I mean when you look at the backspace in particular, about
probably half are a little bit more than half of the companies
that are deploying large scale BEX projects are project
developers. The other half are emitters.
So and in our case, we are project developers working with
existing emitters. So Yep, we agree.
(19:10):
Yeah. I, I, I, I would say, Ross,
that, you know, we, we certainlylike the, the, the tech
developers. We, we, we've got a lot of
people in our, our company who've, who've commercialized
technology. But we, we love steel in the
ground. We love, we love the, the, the,
the, the, the, the pouring concrete and fabricating steel
(19:33):
and, and putting machines to work in some of these, these
applications. That's kind of that's kind of
embedded in our DNA as a company.
Is there any ability that you have to forecast out and just
wildly speculate about what future business and financial
layer innovations might be possible within carbon removal?
Because there are further specification here that may
(19:55):
actually take place of people becoming more and more
specialized or breaking it out functionally in different kinds
of ways. I'm not sure if I'm going to
answer your exact question, but I, but I, you know, I think of
the, I think of, I think we're saying that.
I think our view is that business model, financial model
(20:18):
innovation is kind of open fieldrunning honestly.
You know, you think about it like what what we're doing in
pulp and paper is we're, we're creating a completely new value
chain by retrofitting these, these, you know, existing pulp
and paper mills that have been operated for decades making pulp
(20:38):
and paper. And we're, we're, we're creating
a, a, a new joint venture entitypartnering with the pulp and
paper companies to capture the CO2 using new technology from
that has been developed and deployed in other markets like
cement, cement industry and and coal-fired power power plants,
(21:02):
bringing it to pulp and paper and then capturing the CO2,
concentrating it. And then we're, we're, we're
sending it over the fence to a CO2 pipeline that's going to a
storage site. And, and there's a, there's a
long term off take contract witha midstream company to, to
finance own and operate that transport and that storage
(21:23):
contract. And then we're connecting that
joint venture to to revenue contract, long term revenue off
take contracts. And then we're trying to align
all the incentives amongst all the, all the parties involved in
this new value chain to make sure that everybody's,
(21:44):
everybody's financial and economic needs are, are met and
environmental needs are met. And it's, it's a really
interesting process. And one of the, one of the most
important things for us in, in this business model innovation
is, you know, these are, these are new assets that are partly
owned by CO280, our company and partly owned by our pulp and
(22:07):
paper companies. And you know, they have the
potential to really transform the economics of the underlying
pulp and paper company because they are profitable, they're
project financed, but they're also financed off the pulp and
papers company's balance sheet. So there's so there's a whole
financial aspect to how our our our pulp and paper partners
(22:30):
think about the business model from their perspective.
So I think that we think that they're that actually the
deployment of these big machinesin industry is going to create
some really interesting new, newvalue chains, new business
models, new financial models that ultimately, you know, a
hardcore project lender can lookat and go, that makes sense.
(22:54):
I understand where all the how you've allocated risk across the
value chain. I understand the economics, I
understand the technology risk, I understand the revenue risk.
And, and I'm, I'm, I'm ready to deploy hundreds of millions, if
not billions of, of dollars of capital in in to, to deploy this
(23:15):
and replicate it. And I, I, I, I think that
that's, that's one of the most exciting things that that I
think that we're, that we're, that we're doing and that, and
one of the learnings that we have from from our experience on
that. If you got anything to add to
that, But that's my, my thought about your question.
It's. It's hard to look ahead in a
(23:36):
crystal wall. I think honestly, I think that
it will depend on how the marketdevelops.
So if you have like you can makeparallels to the power industry
and how different energy technologies have developed.
But if you you know when, when solar and when PP as first came
(24:00):
out, they were not like something that folks required at
all for kind of their sustainability goals or for
anything. And they were purchased by some
early movers. But that market then developed
to a place where clean energy isseen as basically kind of like
table stakes for operating. And it's sort of something that
like everyone has to buy in order to achieve their goals.
And there's a variety of ways that that happened.
(24:22):
But carbon is not yet had that moment.
But we are still at the stage where we're selling to 1st
movers in different categories and we're seeing a lot of great
traction in the market, which isvery exciting.
You know, we're getting RFPs, there's new, new folks entering
the market and there's really strong leadership obviously by
(24:43):
Microsoft, Google, the Frontier members are our partners, JP
Morgan are absolutely fantastic.So big strong leaders and other
folks entering the market, I'm feeling very hopeful about the
Cdr market these days, actually.But generally, it hasn't reached
a point yet where it's become sort of a necessary good or
(25:05):
something that like everyone hasto buy.
And so I think that the ecosystem will develop
differently if it stays in this state or if that changes.
Yeah. They're good answers like some
follow up on pretty much all of it.
I think a good place to follow up is how JV structuring works,
(25:28):
where I think there are people listening who almost certainly
know about how deal mechanics work.
But I think we should maybe start at the beginning of why
might a joint venture structure be a good vehicle for a deal
like this. I think people listening may
just think you go to a company and you're an epiphyte on them.
You know, you're remora to theirshark essentially, and they just
(25:50):
like be there because they're nice or they don't really care
or they're a customer of yours in some way.
Like this sort of joint sharing of responsibilities and revenue.
It's I think it's confusing to people who don't have a
corporate background or NBA background.
Maybe we should explain how thisworks?
Can I give you a soft answer andthen pass it over to John for
the, the, the real answer? So I think it really comes down
(26:14):
to partnership, right like and the, and the value that you can
provide to those partners. So a joint venture aligns us
very closely with our pulp and paper partners.
Like we have the same goal. We're 5050 in everybody is
pulling in the same direction and that's critical to getting
big projects to happen, especially in new value chains.
(26:34):
Like our projects are not first of a kind.
They're using existing things that have been done before, but
there are new components to the value chain that haven't been
put together necessarily before.So it takes everybody being
aligned and pulling in the same direction.
I think that was a real answer. That was a great answer.
(26:56):
I, I just, I just add to that, that I mean, part of it is, you
know, JVS are very common in theenergy world and particularly
the oil and gas gas world. These are, these are large
scale, these are large scale projects.
You know, you think about a typical project for us at a, a
pulp mill, Ross, it'd be, it would be 800,000 tons a year to
(27:20):
over 1,000,000 tons a year of CO2 that we capture.
So you know, when you, when you look at the complete, you know,
carbon capture technology systemplus balance of plant and CO2
compression and all the equipment to, to form a, a
complete system, we're looking at sort of seven, $800 million
(27:43):
of, of total project capital. And so, and then it's, you know
that, that, that, that capture plant has a whole bunch of other
transactions that are required in order to make it work.
There needs to be a deal with the mill to provide the flue gas
and utilities and the operations.
There's, I've talked about the offtake contracts for CO2
(28:05):
transportation, storage and revenue and tax credits and, and
all that kind of thing. So that the idea of a joint
venture is, you know, you've gotthe, the, the mill has the, the
facility, the pulp and paper company has the facility,
they've got the flue gas, they've got all the
infrastructure. And then we're bringing a lot
of, a lot of knowledge about howto, to, to select technology,
(28:29):
how to, how to, how to, how to put, piece together this new,
the, the whole project. There's a lot of work streams
required to kind of put the mechanics together and then how
to finance it. So a lot of it is around a, a, a
joint venture where you've got two parties who are both
bringing value into that joint venture.
(28:49):
And then you're sharing the risks and liabilities and, and
the capital exposure in a new entity.
That is, you know, to a certain extent it's, it's got a, it's
got a different risk profile from the underlying mill asset.
So you want to quarantine it from, from the, from the
mothership, so to speak. So those are, those are some of
the reasons why a joint venture makes sense.
(29:12):
And, and, you know, we found really that it, it's not a
common business model in, in pulp and paper.
It's, it's a very common business model in the oil and
gas industry and in midstream and, and in exploration deals.
So we're kind of bringing this new business model into this
industry in order to, to developa, a new value chain that's got
(29:36):
all that's got the potential to really transform the economics
of the industry. So that's the motivation and and
that's that's and that and that seems to be the right model for
this particular use case. If you could negotiate for 100%
of the project equity for CO280 rather than sharing it in AJV,
(29:58):
would you prefer that or do you actually prefer sharing it in a
joint venture? Oh, that's such a good question.
You know, I, I think there's a bunch of ways to answer that.
It's always simpler when you owneverything outright yourself.
The problem with that though is that you, you not only want to
(30:21):
share the upside, you want to share the, you want to align
incentives. So what's really important to a
joint venture that, that, that'sbased at A, at a mill of a
project that we have is that, that mill shares in the, in, in
the, in the financial performance of the entire
(30:44):
project. And, and that, that, and that,
that carbon removal project actually strengthens and
fortifies the, the, the economicperformance of that mill.
So it may not surprise you if I said that the projects that
we're working on with our mill partners are going to become the
(31:05):
most competitive pulp mills in all of North America and among
the most competitive in the world.
Because, you know, pulp and paper is a commodity industry.
And so, you know, fixed costs and variable revenue and a big
carbon removal project is these are these are fixed price long
(31:27):
term revenue contracts. So that will that will return
new profitability, new revenue, new profitability and they will
actually help enhance the competitiveness of those mills.
And that's happening at a time when North America's pulp and
paper industry is under a lot ofpressure.
There's there's a growing offshore competition from Brazil
(31:49):
and China. So the, the industry is, is, is
looking for ways to strengthen their competitiveness.
And this is the most significantopportunity for the industry to
do that. So, so, so the idea of having a
joint venture, we want the mill to be, we want the mill to be
(32:10):
highly competitive. We wanted to keep running for a
long period of time. That's good for the capture
project. And so we want to share the
economic rewards of the project as well as the as well as the
risks. Yep, yeah.
Every, every participant in the project.
It's not just CO280 doing these projects, right.
Like CO280 is sort of like the conductor of the orchestra, but
(32:35):
all the other folks are playing in the orchestra, right.
And so everybody has to profit. Everybody has to benefit from
our customers who get a really good price for a very high
quality product for other value basically from our customers all
the way to transportation and sequestration partners.
So everybody in the whole value chain and the local communities
(32:55):
has has to get some kind of benefit.
I like when I hear companies doing that portfolio approach.
I've heard Deep Sky talk a lot about that too.
I think the portfolio product development approach is going to
be something we'll see more people imitate in the future.
CU280 has such a clean go to market relative to many other
carbon removal project in tech developers.
(33:17):
What advice might you have for those who are already in flight,
or even those who'd like to start new carbon removal
companies? You've had such a good go of
things, I'm sure there's some lessons.
You're far enough ahead. Surely you can share some
tidbits of wisdom with your future competitors.
What should they do differently?Where I think a lot of people
get caught in the doldrums. What should they do?
(33:39):
When you say doldrums are you talking about like the the
valley of death and a tech scaleup or is that what you mean?
A bit. I think there's also just.
The environment is heavily monotonistic and the deals are
power log. You either get the big off takes
or you don't. If you are starting a company
now, you should almost certainlybe engineering your company to
be highly off take able. And if you're not, you're
(34:00):
setting yourself up for a very difficult go to market.
And I think that's probably something that you sit out with
Where what do we need to do in order to win the big Microsoft
and Frontier off takes? I imagine that was probably just
core to your DNA from the very origins, am I right?
Yeah, Yeah, yeah, go ahead. I mean, well, I was going to
say, what are the fundamental principles of our company is
(34:23):
that we're obsessed with customer needs.
No, I mean that's, that's that that should apply to really any
category of technology commercialization or, or project
developers. Like at the end of the day, if,
if customers don't care about what you're doing, you should
probably do something else. So this, this sort of, and, and
(34:46):
we're, we're constantly trying to, to understand and align what
we're doing with our customer values.
So you know, you think about Cdrand you, you really have to
think about Cdr in terms of eachdifferent vertical market,
right? Cdr is different for the airline
(35:07):
industry in the shipping industry than the banking
industry, than the tech industry, right?
Why are they buying it? What, what are they, what, what,
what, what are they buying and how are they buying it?
How are they developing their portfolios?
What do they care about what's really what's, what's, what,
what is their value? What are their value drivers?
And that's been part of our coreDNA, Ross, from day one.
(35:28):
And, and, and we sort of said, look, if the big, the big buyers
aren't interested in buying our Cdr, let's go do something else.
So that that that that's that's just not that's something I
think that that I think that would be my number one advice
would be customer obsessed. Yeah, I think I totally agree,
(35:51):
John. I think the other thing is just
identifying who your market actually is, right.
So if you're a technology company, then your customer is
probably project developers likeus.
And so figuring out exactly whatyou can do to attract project
developers like us is is the best thing to do.
So. So identify your customer and
then be relentlessly focused on value.
(36:14):
How important is it for you to have a sufficient ticket size to
be attractive to people who wantto make very big off takes?
Because the volumes you're able to offer are great.
And I imagine that companies prefer to do business with one
giant ticket for a purchase likethis rather than having, you
know, 15 little ones that they have to manage.
Is that a true statement? You know, I think it depends.
(36:38):
So each company has a different size of their footprint, right?
And that that dictates how much Cdr they're going to buy.
So you look at a customer like JP Morgan and they did a massive
off take with us. It's kind of it's the biggest
one ever done not by Microsoft, but it is smaller than what
Microsoft has done because they don't have as big of a footprint
to cover for the goals that theyset.
(37:01):
So when you think about portfolio building, I think it's
really important to think about different scales of those
portfolios. And they're all going to go
about them differently dependingon the size of their need.
But even something that's, you know, smaller than a Microsoft
(37:23):
deal is still a pretty big, a pretty big deal.
And and you know, each one is super important and and actually
goes pretty differently every time.
Yeah, just to just to add that, I mean the market is so is so
early stage, Ross. I think our team, our Natalie's
team, the Cdr team, commercial team spends a lot of time with
(37:47):
prospective buyers, educating them on how to buy, who to who
to who, who are good advisors for them, how to build a
portfolio. There.
There is, there is a, there's, there's a need and there's going
to be, you know, we see the, thebeginnings of where there's
going to be aggregators. And, and, and I don't mean start
(38:08):
up aggregators, I mean like mainstream aggregators,
mainstream portfolio builders, who, who, who, who are, who are,
who is the main bulk of the market going to go to, to, to,
to, to, to design and deploy andprovide a complete portfolio of,
(38:29):
of high quality verified Cdr. That part of the market really
has just, is really just starting to develop.
And you know, it's, it's, it's done in all sorts of other areas
of trading. It's, it's, it's going to happen
in Cdr, but it's just not, it's not there today.
(38:50):
And, and so, so when you're a company like us, we, you know,
it's really important for us to deal with the big, the big
buyers. They have the resources, they're
putting a lot of time, effort, engineering resources into doing
due diligence to make sure they're buying really high
quality Cdr that meets their goals.
But then we also dealing with a lot of the smaller buyers who
(39:12):
want to get started, but they don't necessarily have all the
resources that, you know, Microsoft has or, or Google has
to, to, to understand all, all of the, all the nuances of these
projects. So it's early and and so we're
supporting that process with, with, with, with buyers kind of
(39:33):
across the across the ticket size spectrum say it that way.
Natalie, one thing you said caught my ear, which is that
you're actually feeling fairly optimistic about Cdr.
I've been going through my sine wave is near the through in some
some cases here I'm not. I'm not feeling great about it
overall. Why should I feel optimistic?
(39:53):
I'm opened up, changing my mind.I'm just feeling a little bit
down lately. Maybe you change his mind,
Natalie. Yeah, here's your chance.
Yeah. I mean, so I'm not saying it's
easy by any means just to sell CDRI think that what we found is
that. Price is a component that
(40:15):
unlocks the market significantly.
So when you're operating around $200 a ton, there is more
interest and the ticket sizes are larger than at a higher
price. That said, yeah, I mean, I
can't, I cannot say anything about the specific customers
that we have signed agreements with, but we do have new
(40:35):
customers entering the space. I think that some of the
developments in the Japanese market are really hopeful.
I don't think that's just smoke.I think that there are going to
be real buyers out of that market.
I think they're very sincere about achieving climate outcomes
in Japan. I think they really care and Cdr
(40:56):
is a way that they can do that. So I think there's quite a few
reasons to be hopeful about it. And I understand that the sine
curve, I've, I've been on that sign curve myself many times,
but right now I just happen to be feeling pretty good about it.
We also are seeing a big uptake in RFPs.
I I'm not the only one that's seeing that.
My, my fellow, yeah, my fellow leaders in the space have seen
(41:19):
it as well. And that means that more people
are learning how to procure and buy.
And I think there's new entranceinto the market and just the
size of the market has grown if you just look at the numbers,
so. Thank you John and Natalie for
being here. Really love what you're doing
and just glad we were able to have this conversation.
Thanks. Ross, really appreciate it.
This is the Reversing Climate Change podcast.
I'm Ross Kenny, and I'm the hostof the show.
Today's sponsor is Our Bonics. We need a lot more forestry
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(01:31):
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I'll put the link in the show notes for that to listen to the
episode I did with Lizette. And thanks so much for
listening. Here is your show.
(01:54):
Hello. Thank you for all the listeners.
My name is Ross Kenyon. I am a carbon removal
entrepreneur and the host of Reversing Climate Change.
Thanks for listening to the podcast.
If you love this show, please give it a great rating and
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(02:17):
Go ahead and join support the show.
It is very much appreciated and thanks for helping me keep this
thing going. I love doing it.
Presumably love listening. Thank you for doing so.
And OK, I'm going to introduce the show now.
Today's show is with CO280. If you follow carbon removal,
you almost without a doubt know CO280.
They are high on the leaderboardon CDRFYI for tons sold.
(02:40):
They keep announcing big off takes and they are helping the
pulp and paper industry practicecarbon removal.
Emissions from pulp and paper inthe processing of biogenic
materials. It represents a very large
amount of carbon. We talked about this in the
show. The founders of CO280 noticed
this and said how do we help this industry decarbonize and
(03:05):
practice carbon removal? It's funny because I think a lot
of entrepreneurs go the other direction where they become
enamoured of a certain technology and then they're
trying to figure out how to go to market.
I suspect if anyone is listeningas a carbon removal entrepreneur
or even a climate tech entrepreneur, you probably got
super into biochar or you are a material scientist who developed
some sort of new sorbent or something like that.
(03:28):
And then the trick is to figure out, how do you commercialize
this tech? I'm really excited by people
coming into carbon removal from the opposite direction where
they are just saying, all right,how do I engineer a solution for
this exact industry that has a problem that they actually would
like to be solved? We're seeing a lot more of that
now. And I think that's one of the
most powerfully positive things that's happening in carbon
(03:48):
removal right now. If you want to start a company,
but you haven't yet, I would advise you to potentially look
at doing that yourself. I don't know what it is about
hard tech, deep tech, frontier tech, whatever we want to call
this that makes people come at it from this way.
I suspect because so much comes out of universities and tech
transfer offices and just like, you know, serious STEM people
(04:11):
who want to commercialize the stuff that they've discovered or
advanced in the lab. But it doesn't actually have to
be that way. There's another way to go.
In any case, today's shows with John Roan, the Co founder and
CEO of CEO 280 and Natalie Kotickian who is the Co founder
and chief commercial officer of CO280.
I'm really glad to have had themon.
(04:31):
I've admired their work for a very long time.
I think the go to market is verysmart and worth a very serious
think. Well done to CO280 for so many
of these big off takes and getting an industry that I think
a lot of people were not thinking about or looking at
that closely, very, very deep into carbon removal.
Maybe that's one of the thing I can put you on to too, that if
(04:53):
you're listening, if you can help turn an industry on to
carbon removal to see opportunity there, that's
probably some of the most important work that you could
do. OK, enough Prologue.
Here is your show. Thanks for listening.
Rate and review on Apple Podcast, Spotify, become a paid
subscriber or otherwise just listen to the show.
That's good. We can just get right to that.
Thanks for listening. And here it is.
(05:19):
Natalie and John, thanks for being here.
Yeah. Thanks for having us, Ross.
Yeah. Thank you, Ross.
I'm very happy to have you. CO280 has certainly made a huge
splash. I like the fact that you're
working with an industry that I think it's one of those fields
that people take for granted. Not a lot of people think about
pulp and paper unless you're in it, but then just sort of
outflanked everyone in carbon removal and making these
(05:42):
enormous deals that have very wide backing.
I can give a little bit of background into how we, how we
kind of started CO280, but I think before that, you know, we
are we amongst a group of, of big Cdr companies.
I wouldn't say we're necessarilythe biggest or the best, but we
are, you know, doing doing the best we can to remove a bunch of
(06:05):
carbon so. Some lot of Natalie, some
enormous deals. Yeah, they're, they are enormous
deals for sure. And we have a lot of support
from from buyers and we're very grateful for that.
We are a tech agnostic project developer and we started CO280
with the thesis that we needed permanent really high quality
Cdr for, you know, around $200 aton today that could scale,
(06:31):
right. So we didn't start out with the
idea of pulp and paper necessarily, but pretty quickly
after looking at all the different ways that you could
create Cdr that hit those parameters, we realized that
removing CO2 from existing industrial processes at pulp
mills was one of the most efficient ways to create high
(06:52):
quality permanent Cdr. And what's nice about efficiency
is that it is two things. So when you're efficient, it's
greener and it also is lower cost, right.
So that that pathway was what welanded on.
Yeah, I guess. I guess just just to add to that
Rasta when you're, when you're coming at it like our, our team
(07:18):
has all, has a lot of experiencecommercializing, you know,
complicated machines in, in renewable clean tech in climate
technologies. But when you, when you start as
a project, I mean, one of the things that we, we saw was that,
you know, in order for us to scale up carbon removal or any
(07:40):
of these climate technologies, there's, there's a need for
project developers and the ecosystem that are technology
agnostic. And really are really thinking
about how do you, how do you, how do you create the, the, the
deployment model and the scalable model and the, the, the
repeatable bankable solution? That, that, that, that can get
(08:05):
these technologies deployed in the market and scaled up.
And, and it, it, it, it kind of,it gives you, it gives you a
freedom to kind of focus on solving the problem the, the
most efficient way possible. And so, you know, just to build
on what Natalie said, we, we, welooked at all of the different
ways that you can create carbon removal and, you know, we, we,
(08:27):
and, and how we can create this,this network of, of repeatable,
scalable projects. And, and pulp and paper is an
obvious one. I mean, pulp and paper mills, as
you probably know, are the largest point source of biogenic
CO2 in the world, really significant scale of hundreds of
(08:49):
mills worldwide that that all produce that you know, when you
make, when you make pulp and paper, the mills themselves burn
all of the the the residual biomass waste and these gigantic
boilers to make, you know, steamand heat and power to run their
mills and in many cases exporting power to the grid.
(09:12):
In the United States, the majority of the mills are
located in the Gulf Coast, whichis right, you know, Co located
with, with some of the best saline aquifer geology in the
world for, for carbon storage. And the mills themselves, you
know, have been in in business. They've been, they've been in
operation for decades. So they've got well established
(09:33):
biomass supply chains. They've got so we're really,
we're really retrofitting these existing mill operations.
They have the ability to, to generate the kind of energy
steam power, provide utilities for carbon capture systems on
site very efficiently. So there's just a whole bunch of
(09:54):
advantages that that that, that make this application, you know,
one of the most efficient pathways.
Now, it's still super complicated to put these
projects together. And and that's where the skill
sets that we've put together in the company really come to bear
as we kind of we kind of look atcreating this new value chain.
(10:19):
Yeah. And I, I will also add that John
had experience selling power plants into the pulp and paper
industry. And so that's how the idea came
about, and that's how he kind ofsaw the opportunity that other
people had missed. I do love seeing further types
of role specialization happen, where for the longest time in
(10:39):
carbon removal, I think we had assumed that tech developers
would also be project developersand that the same people at the
same company would do both of those things, even though those
skill sets are very different ones.
I don't know that they should beCo located at the same company
or with the same personnel. That's not how we've done it.
Oh, you can jump in, John. Yeah.
Yeah, I was going to say I it, it, I, I've done that.
(11:02):
And it's, it's, it's challenging.
I mean they're, they're, they're, they're really
different mindsets. You know, 1 is focused on, on
commercializing, you know, product market fit and
technology and, and, and, and kind of connecting science with
technology and applications and creating a solution.
(11:22):
The other one is all about, you know, the, the, the skill sets
required to deploy and replicateand scale up.
And those are, you know, things like business model, business
model, innovation, partnerships,supply chain transactions, and
(11:46):
then, you know, access and deployment of, of a lot of
capital. And I think I think Natalie and
I both agree that one of the things that that that we believe
is that in order to, in order toaddress, you know, the Cdr scale
up requirements and drive down costs, we need to, we need to,
we need to get to the point where we're, we're leveraging a
(12:09):
lot of private capital. So, so Cdr projects need to get
to the point where they're fullycommercial and bankable and we
can, we can leverage the, the capital resources in, in the, in
the private project project finance market.
That's that's really essential for scale as far as we see Ross
(12:30):
and that's, that's part of what we're trying to do.
Yeah. I think early on in the Cdr
space, there was rightly a big focus on technologies that were
pretty low in the TRL scale and the potential catalytic impact
of those technologies. And that is where where people
should have been focused. But the truth is that there are
ways to deploy Cdr at scale now and that can be just as
(12:54):
catalytic because when you do something over and over again,
you bring down the cost of it. And so that's why John says
business model innovation. And that is like, I can't say
enough how critical that is to this market and to truly
achieving carbon removal on a time scale that's important or
(13:16):
relevant for the environment. Are you able to mostly take off
the shelf or nearly off the shelf technology for your
projects? At that point, then, are you not
engaged in technology development to the extent that
most others are? I would say that, you know, as
we look at so, so the technologies that, that we that,
that are really important to us,Ross are posting about post
(13:40):
combustion carbon capture technologies, right.
So that's the, that's the category of technologies that
that we deploy. And because we're capturing CO2
from, from stock emissions in, in these gigantic recovery
boilers. And so when you look at that
category of technologies, there's, there's a whole
ecosystem out there. There's there's liquid aiming
(14:02):
technology, there's non aqueous solvents, there's solid
sorbents, there's cryogenic technologies, there's hot
potassium carbonate, there's membranes.
And they're all, you know, they're all at different stages
of, of development and commercialization.
The, you know, from, from our, from from our vantage point to,
(14:23):
to, to, to initiate this market,we're really focusing on the,
the technologies within post combustion carbon capture that
are, that are the most developedand that is the liquid aiming
category technologies. I mean, capturing, you know,
(14:46):
look, liquid amines have been used for decades in, in, in
capturing pollutants in, in stock emissions and they have
more recently been been modifiedand adapted to capturing CO2.
So these are companies like, youknow, Mitsubishi Heavy
Industries, Shell can solve Fleur, BASF, Honeywell and and
(15:12):
SLB capture E and you know, these, these, these, these are,
you know, there's not been hundreds of these applications
by any stretch, but they are, they are at the point where they
are commercially proven and, andwe are adapting them into the
pulp and paper application. So and you know, we, I would
(15:34):
also say that there's some really exciting technologies
that are that are at an earlier stage of development in post
combustion carbon capture that, you know have the potential to
bring down costs, improve efficiency and provide more
versatility in terms of applications.
But we're starting in the aiming, the aiming solvent
category. Yeah.
(15:54):
When you think about like proving out a technology, you
asked like how much are we engaged in proving out
technology? And I'm going to simplify this a
little bit because I'm not a oneof our technical people, but
basically there are two different ways that you need to
de risk a technology for large scale deployment.
And one is the engineering scaleup.
(16:15):
So has it been built as big as you need to build it?
And the second one is a process pilot.
So that is does it work on my specific application?
And what you need to test there varies based on the technology.
So in the case of liquid amines,it's chemistry meeting
chemistry. So you have to kind of test do
(16:36):
liquid amines work on a specificflue gas that you're running a
your process on, right? And how well do they work?
What does that do you do your economic model?
And so at that level, we absolutely are engaged in, in
testing and and scaling up technology.
And I'm sorry, not scaling it, but testing at that process
(16:57):
level. And we actually have run a
mobile test unit very successfully for a 1000 ton per
year unit that just concluded recently.
And I think that's just been a huge accelerant to our business
and and a real proof point that our financial model makes sense
it's. Surprising to me you don't
(17:19):
describe yourself as being technical.
Don't you have a terminal masters in Oysters I.
Do I do have a masters in oystermicrobiology?
But I don't. I don't think it's actually that
relevant. You don't think so?
It's too bad. I, I think Natalie should you
should apply for a project, project engineering.
That that was pretty good. I, I, I like your explanation.
(17:42):
That was awesome. Yeah, I'm, I'm also very
attracted to business model innovation because I'm, I'm just
a commercially minded person. I don't think I can compete
personally on innovating on tech.
I don't think that's what I'm best at.
But I'm also looking for ways ofmaking the financial and
business layers make more sense or just a bit more snugly with a
place that's still that has sortof tenuous product market fit.
(18:05):
Overall, I like the focus on project development as
differentiated now where you're seeing that with groups like
Deep Sky, you know your neighbors near your provincial
neighbors here. And then also like residuals,
focus on biochar project development.
I suspect we're going to see a lot more people get into this
space who are experienced in delivering renewables and
(18:26):
deploying those in the field andtrying to bring those skills out
or anyone who's just actually put steel in the ground doing
basically anything, getting people like that into this
rather than scientist turned Co founder kind of people who are,
you know, going through tech transfer offices out of
universities and going that direction.
But we've seen a lot of that. But we need some of those like
one to two people and not just the zero to 1, I think.
(18:48):
So go ahead, Natalie. Yeah.
I mean when you look at the backspace in particular, about
probably half are a little bit more than half of the companies
that are deploying large scale BEX projects are project
developers. The other half are emitters.
So and in our case, we are project developers working with
existing emitters. So Yep, we agree.
(19:10):
Yeah. I, I, I, I would say, Ross,
that, you know, we, we certainlylike the, the, the tech
developers. We, we, we've got a lot of
people in our, our company who've, who've commercialized
technology. But we, we love steel in the
ground. We love, we love the, the, the,
the, the, the, the pouring concrete and fabricating steel
(19:33):
and, and putting machines to work in some of these, these
applications. That's kind of that's kind of
embedded in our DNA as a company.
Is there any ability that you have to forecast out and just
wildly speculate about what future business and financial
layer innovations might be possible within carbon removal?
Because there are further specification here that may
(19:55):
actually take place of people becoming more and more
specialized or breaking it out functionally in different kinds
of ways. I'm not sure if I'm going to
answer your exact question, but I, but I, you know, I think of
the, I think of, I think we're saying that.
I think our view is that business model, financial model
(20:18):
innovation is kind of open fieldrunning honestly.
You know, you think about it like what what we're doing in
pulp and paper is we're, we're creating a completely new value
chain by retrofitting these, these, you know, existing pulp
and paper mills that have been operated for decades making pulp
(20:38):
and paper. And we're, we're, we're creating
a, a, a new joint venture entitypartnering with the pulp and
paper companies to capture the CO2 using new technology from
that has been developed and deployed in other markets like
cement, cement industry and and coal-fired power power plants,
(21:02):
bringing it to pulp and paper and then capturing the CO2,
concentrating it. And then we're, we're, we're
sending it over the fence to a CO2 pipeline that's going to a
storage site. And, and there's a, there's a
long term off take contract witha midstream company to, to
finance own and operate that transport and that storage
(21:23):
contract. And then we're connecting that
joint venture to to revenue contract, long term revenue off
take contracts. And then we're trying to align
all the incentives amongst all the, all the parties involved in
this new value chain to make sure that everybody's,
(21:44):
everybody's financial and economic needs are, are met and
environmental needs are met. And it's, it's a really
interesting process. And one of the, one of the most
important things for us in, in this business model innovation
is, you know, these are, these are new assets that are partly
owned by CO280, our company and partly owned by our pulp and
(22:07):
paper companies. And you know, they have the
potential to really transform the economics of the underlying
pulp and paper company because they are profitable, they're
project financed, but they're also financed off the pulp and
papers company's balance sheet. So there's so there's a whole
financial aspect to how our our our pulp and paper partners
(22:30):
think about the business model from their perspective.
So I think that we think that they're that actually the
deployment of these big machinesin industry is going to create
some really interesting new, newvalue chains, new business
models, new financial models that ultimately, you know, a
hardcore project lender can lookat and go, that makes sense.
(22:54):
I understand where all the how you've allocated risk across the
value chain. I understand the economics, I
understand the technology risk, I understand the revenue risk.
And, and I'm, I'm, I'm ready to deploy hundreds of millions, if
not billions of, of dollars of capital in in to, to deploy this
(23:15):
and replicate it. And I, I, I, I think that
that's, that's one of the most exciting things that that I
think that we're, that we're, that we're doing and that, and
one of the learnings that we have from from our experience on
that. If you got anything to add to
that, But that's my, my thought about your question.
It's. It's hard to look ahead in a
(23:36):
crystal wall. I think honestly, I think that
it will depend on how the marketdevelops.
So if you have like you can makeparallels to the power industry
and how different energy technologies have developed.
But if you you know when, when solar and when PP as first came
(24:00):
out, they were not like something that folks required at
all for kind of their sustainability goals or for
anything. And they were purchased by some
early movers. But that market then developed
to a place where clean energy isseen as basically kind of like
table stakes for operating. And it's sort of something that
like everyone has to buy in order to achieve their goals.
And there's a variety of ways that that happened.
(24:22):
But carbon is not yet had that moment.
But we are still at the stage where we're selling to 1st
movers in different categories and we're seeing a lot of great
traction in the market, which isvery exciting.
You know, we're getting RFPs, there's new, new folks entering
the market and there's really strong leadership obviously by
(24:43):
Microsoft, Google, the Frontier members are our partners, JP
Morgan are absolutely fantastic.So big strong leaders and other
folks entering the market, I'm feeling very hopeful about the
Cdr market these days, actually.But generally, it hasn't reached
a point yet where it's become sort of a necessary good or
(25:05):
something that like everyone hasto buy.
And so I think that the ecosystem will develop
differently if it stays in this state or if that changes.
Yeah. They're good answers like some
follow up on pretty much all of it.
I think a good place to follow up is how JV structuring works,
(25:28):
where I think there are people listening who almost certainly
know about how deal mechanics work.
But I think we should maybe start at the beginning of why
might a joint venture structure be a good vehicle for a deal
like this. I think people listening may
just think you go to a company and you're an epiphyte on them.
You know, you're remora to theirshark essentially, and they just
(25:50):
like be there because they're nice or they don't really care
or they're a customer of yours in some way.
Like this sort of joint sharing of responsibilities and revenue.
It's I think it's confusing to people who don't have a
corporate background or NBA background.
Maybe we should explain how thisworks?
Can I give you a soft answer andthen pass it over to John for
the, the, the real answer? So I think it really comes down
(26:14):
to partnership, right like and the, and the value that you can
provide to those partners. So a joint venture aligns us
very closely with our pulp and paper partners.
Like we have the same goal. We're 5050 in everybody is
pulling in the same direction and that's critical to getting
big projects to happen, especially in new value chains.
(26:34):
Like our projects are not first of a kind.
They're using existing things that have been done before, but
there are new components to the value chain that haven't been
put together necessarily before.So it takes everybody being
aligned and pulling in the same direction.
I think that was a real answer. That was a great answer.
(26:56):
I, I just, I just add to that, that I mean, part of it is, you
know, JVS are very common in theenergy world and particularly
the oil and gas gas world. These are, these are large
scale, these are large scale projects.
You know, you think about a typical project for us at a, a
pulp mill, Ross, it'd be, it would be 800,000 tons a year to
(27:20):
over 1,000,000 tons a year of CO2 that we capture.
So you know, when you, when you look at the complete, you know,
carbon capture technology systemplus balance of plant and CO2
compression and all the equipment to, to form a, a
complete system, we're looking at sort of seven, $800 million
(27:43):
of, of total project capital. And so, and then it's, you know
that, that, that, that capture plant has a whole bunch of other
transactions that are required in order to make it work.
There needs to be a deal with the mill to provide the flue gas
and utilities and the operations.
There's, I've talked about the offtake contracts for CO2
(28:05):
transportation, storage and revenue and tax credits and, and
all that kind of thing. So that the idea of a joint
venture is, you know, you've gotthe, the, the mill has the, the
facility, the pulp and paper company has the facility,
they've got the flue gas, they've got all the
infrastructure. And then we're bringing a lot
of, a lot of knowledge about howto, to, to select technology,
(28:29):
how to, how to, how to, how to put, piece together this new,
the, the whole project. There's a lot of work streams
required to kind of put the mechanics together and then how
to finance it. So a lot of it is around a, a, a
joint venture where you've got two parties who are both
bringing value into that joint venture.
(28:49):
And then you're sharing the risks and liabilities and, and
the capital exposure in a new entity.
That is, you know, to a certain extent it's, it's got a, it's
got a different risk profile from the underlying mill asset.
So you want to quarantine it from, from the, from the
mothership, so to speak. So those are, those are some of
the reasons why a joint venture makes sense.
(29:12):
And, and, you know, we found really that it, it's not a
common business model in, in pulp and paper.
It's, it's a very common business model in the oil and
gas industry and in midstream and, and in exploration deals.
So we're kind of bringing this new business model into this
industry in order to, to developa, a new value chain that's got
(29:36):
all that's got the potential to really transform the economics
of the industry. So that's the motivation and and
that's that's and that and that seems to be the right model for
this particular use case. If you could negotiate for 100%
of the project equity for CO280 rather than sharing it in AJV,
(29:58):
would you prefer that or do you actually prefer sharing it in a
joint venture? Oh, that's such a good question.
You know, I, I think there's a bunch of ways to answer that.
It's always simpler when you owneverything outright yourself.
The problem with that though is that you, you not only want to
(30:21):
share the upside, you want to share the, you want to align
incentives. So what's really important to a
joint venture that, that, that'sbased at A, at a mill of a
project that we have is that, that mill shares in the, in, in
the, in the financial performance of the entire
(30:44):
project. And, and that, that, and that,
that carbon removal project actually strengthens and
fortifies the, the, the economicperformance of that mill.
So it may not surprise you if I said that the projects that
we're working on with our mill partners are going to become the
(31:05):
most competitive pulp mills in all of North America and among
the most competitive in the world.
Because, you know, pulp and paper is a commodity industry.
And so, you know, fixed costs and variable revenue and a big
carbon removal project is these are these are fixed price long
(31:27):
term revenue contracts. So that will that will return
new profitability, new revenue, new profitability and they will
actually help enhance the competitiveness of those mills.
And that's happening at a time when North America's pulp and
paper industry is under a lot ofpressure.
There's there's a growing offshore competition from Brazil
(31:49):
and China. So the, the industry is, is, is
looking for ways to strengthen their competitiveness.
And this is the most significantopportunity for the industry to
do that. So, so, so the idea of having a
joint venture, we want the mill to be, we want the mill to be
(32:10):
highly competitive. We wanted to keep running for a
long period of time. That's good for the capture
project. And so we want to share the
economic rewards of the project as well as the as well as the
risks. Yep, yeah.
Every, every participant in the project.
It's not just CO280 doing these projects, right.
Like CO280 is sort of like the conductor of the orchestra, but
(32:35):
all the other folks are playing in the orchestra, right.
And so everybody has to profit. Everybody has to benefit from
our customers who get a really good price for a very high
quality product for other value basically from our customers all
the way to transportation and sequestration partners.
So everybody in the whole value chain and the local communities
(32:55):
has has to get some kind of benefit.
I like when I hear companies doing that portfolio approach.
I've heard Deep Sky talk a lot about that too.
I think the portfolio product development approach is going to
be something we'll see more people imitate in the future.
CU280 has such a clean go to market relative to many other
carbon removal project in tech developers.
(33:17):
What advice might you have for those who are already in flight,
or even those who'd like to start new carbon removal
companies? You've had such a good go of
things, I'm sure there's some lessons.
You're far enough ahead. Surely you can share some
tidbits of wisdom with your future competitors.
What should they do differently?Where I think a lot of people
get caught in the doldrums. What should they do?
(33:39):
When you say doldrums are you talking about like the the
valley of death and a tech scaleup or is that what you mean?
A bit. I think there's also just.
The environment is heavily monotonistic and the deals are
power log. You either get the big off takes
or you don't. If you are starting a company
now, you should almost certainlybe engineering your company to
be highly off take able. And if you're not, you're
(34:00):
setting yourself up for a very difficult go to market.
And I think that's probably something that you sit out with
Where what do we need to do in order to win the big Microsoft
and Frontier off takes? I imagine that was probably just
core to your DNA from the very origins, am I right?
Yeah, Yeah, yeah, go ahead. I mean, well, I was going to
say, what are the fundamental principles of our company is
(34:23):
that we're obsessed with customer needs.
No, I mean that's, that's that that should apply to really any
category of technology commercialization or, or project
developers. Like at the end of the day, if,
if customers don't care about what you're doing, you should
probably do something else. So this, this sort of, and, and
(34:46):
we're, we're constantly trying to, to understand and align what
we're doing with our customer values.
So you know, you think about Cdrand you, you really have to
think about Cdr in terms of eachdifferent vertical market,
right? Cdr is different for the airline
(35:07):
industry in the shipping industry than the banking
industry, than the tech industry, right?
Why are they buying it? What, what are they, what, what,
what, what are they buying and how are they buying it?
How are they developing their portfolios?
What do they care about what's really what's, what's, what,
what is their value? What are their value drivers?
And that's been part of our coreDNA, Ross, from day one.
(35:28):
And, and, and we sort of said, look, if the big, the big buyers
aren't interested in buying our Cdr, let's go do something else.
So that that that that's that's just not that's something I
think that that I think that would be my number one advice
would be customer obsessed. Yeah, I think I totally agree,
(35:51):
John. I think the other thing is just
identifying who your market actually is, right.
So if you're a technology company, then your customer is
probably project developers likeus.
And so figuring out exactly whatyou can do to attract project
developers like us is is the best thing to do.
So. So identify your customer and
then be relentlessly focused on value.
(36:14):
How important is it for you to have a sufficient ticket size to
be attractive to people who wantto make very big off takes?
Because the volumes you're able to offer are great.
And I imagine that companies prefer to do business with one
giant ticket for a purchase likethis rather than having, you
know, 15 little ones that they have to manage.
Is that a true statement? You know, I think it depends.
(36:38):
So each company has a different size of their footprint, right?
And that that dictates how much Cdr they're going to buy.
So you look at a customer like JP Morgan and they did a massive
off take with us. It's kind of it's the biggest
one ever done not by Microsoft, but it is smaller than what
Microsoft has done because they don't have as big of a footprint
to cover for the goals that theyset.
(37:01):
So when you think about portfolio building, I think it's
really important to think about different scales of those
portfolios. And they're all going to go
about them differently dependingon the size of their need.
But even something that's, you know, smaller than a Microsoft
(37:23):
deal is still a pretty big, a pretty big deal.
And and you know, each one is super important and and actually
goes pretty differently every time.
Yeah, just to just to add that, I mean the market is so is so
early stage, Ross. I think our team, our Natalie's
team, the Cdr team, commercial team spends a lot of time with
(37:47):
prospective buyers, educating them on how to buy, who to who
to who, who are good advisors for them, how to build a
portfolio. There.
There is, there is a, there's, there's a need and there's going
to be, you know, we see the, thebeginnings of where there's
going to be aggregators. And, and, and I don't mean start
(38:08):
up aggregators, I mean like mainstream aggregators,
mainstream portfolio builders, who, who, who, who are, who are,
who is the main bulk of the market going to go to, to, to,
to, to, to design and deploy andprovide a complete portfolio of,
(38:29):
of high quality verified Cdr. That part of the market really
has just, is really just starting to develop.
And you know, it's, it's, it's done in all sorts of other areas
of trading. It's, it's, it's going to happen
in Cdr, but it's just not, it's not there today.
(38:50):
And, and so, so when you're a company like us, we, you know,
it's really important for us to deal with the big, the big
buyers. They have the resources, they're
putting a lot of time, effort, engineering resources into doing
due diligence to make sure they're buying really high
quality Cdr that meets their goals.
But then we also dealing with a lot of the smaller buyers who
(39:12):
want to get started, but they don't necessarily have all the
resources that, you know, Microsoft has or, or Google has
to, to, to understand all, all of the, all the nuances of these
projects. So it's early and and so we're
supporting that process with, with, with, with buyers kind of
(39:33):
across the across the ticket size spectrum say it that way.
Natalie, one thing you said caught my ear, which is that
you're actually feeling fairly optimistic about Cdr.
I've been going through my sine wave is near the through in some
some cases here I'm not. I'm not feeling great about it
overall. Why should I feel optimistic?
(39:53):
I'm opened up, changing my mind.I'm just feeling a little bit
down lately. Maybe you change his mind,
Natalie. Yeah, here's your chance.
Yeah. I mean, so I'm not saying it's
easy by any means just to sell CDRI think that what we found is
that. Price is a component that
(40:15):
unlocks the market significantly.
So when you're operating around $200 a ton, there is more
interest and the ticket sizes are larger than at a higher
price. That said, yeah, I mean, I
can't, I cannot say anything about the specific customers
that we have signed agreements with, but we do have new
(40:35):
customers entering the space. I think that some of the
developments in the Japanese market are really hopeful.
I don't think that's just smoke.I think that there are going to
be real buyers out of that market.
I think they're very sincere about achieving climate outcomes
in Japan. I think they really care and Cdr
(40:56):
is a way that they can do that. So I think there's quite a few
reasons to be hopeful about it. And I understand that the sine
curve, I've, I've been on that sign curve myself many times,
but right now I just happen to be feeling pretty good about it.
We also are seeing a big uptake in RFPs.
I I'm not the only one that's seeing that.
My, my fellow, yeah, my fellow leaders in the space have seen
(41:19):
it as well. And that means that more people
are learning how to procure and buy.
And I think there's new entranceinto the market and just the
size of the market has grown if you just look at the numbers,
so. Thank you John and Natalie for
being here. Really love what you're doing
and just glad we were able to have this conversation.
Thanks. Ross, really appreciate it.
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