Alterra carbon investment provides solid income stream
ASX-listed ag player Alterra, says that its investment in and association with carbon credit forestry business, Carbon Conscious, has been generating solid income streams that are set to continue into the future on the back of long term tree planting and management contracts with energy titans, BP and Origin. Alterra took over $1.1m off the table at Carbon Conscious last year by way of dividends, management fees, interest and a $400k early loan repayment.
Alterra de-merged the Carbon Conscious business from its listed entity at the end of 2018 but continued to act as forestry manager for the now unlisted company that plants trees in order to create carbon credits used by the energy industry.
It also kept 15% of the demerged company as an investment.
Alterra also loaned the business $1m in working capital that was not due to be repaid until the end of this year, however Carbon Conscious managed to repay $400k of that loan last year ahead of time.
The Perth based ag player said that since the de-merger it has received $502,200 in asset management and associated fees and $156,000 from shareholder distributions in the form of a return of capital and fully franked dividends from Carbon Conscious.
It has also received $56,607 in interest payments from the working capital loan on top of $400,000 early repayment.
Carbon Conscious has paid out just over $1m plus franking credits to its shareholder base since the de-merger and has signalled that it is gearing up to pay out another $521k in fully franked dividends by May this year if business conditions remain strong.
Alterra says that its 2019 distribution from Carbon Conscious represents a 15% return on its equity.
The company said this week that it expects Carbon Conscious’ contracted income streams from customers BP and Origin Energy to remain stable through to 2027, with shareholder distributions also forecast to remain stable.
The new arm’s length relationship between the two companies means that Alterra can focus on its core agricultural business whilst maintaining a solid annuity style income stream to help with overheads.
The Perth based company has been developing a pipeline of potential WA agricultural project opportunities with existing land and water owners and has been introducing its new business model to investors.
The company’s target sectors include high-value tree crops, intensive dairy and other irrigated cropping opportunities including avocados and WA.
It is looking to originate and manage large scale agricultural projects with institutional money.
Alterra Managing Director, Oliver Barnes said “Revenue from Carbon Conscious importantly provides Alterra with material cash resources to allow us to implement our strategy and build our agricultural management business, with the ultimate objective of driving returns for our investors”