Hey, thanks for listening to Reversing Climate Change.

I'm your host, Ross Kenyon.

Before we get going, I'd love to tell you a little bit about our sponsors.

They make the show possible.

I would love it if you could listen for just a minute while I tell you about Phillip Lee LLP and our bionics.

If you work in carbon removal, you very well may have come across Phillip Lee LL PS work.

I originally saw Phillip Lee give a presentation about some of the common provisions within off Take agreements, and I was impressed by the quality of their scholarship and their work, and I'm happy that we're able to stay in touch and finally do this together.

I think the law is an underrepresented part of what happens within carbon removal.

We assume it's the background, we assume it's the mechanics.

It actually takes a very smart and creative person to be a good lawyer.

I think if you've ever had a bad lawyer, you know that there's quite a big difference between a good and a bad lawyer.

And what's good about Philip Lee, beyond the good experience that I've had personally, is that they're also just the largest legal team dedicated to the financing and development of carbon projects globally.

They actually were awarded Environmental Finances, VCM Law Firm of the Year for each of the last two previous years.

They have offices in the US, Europe and the UK.

If you have business law needs around nature based carbon projects or engineered ones if you're working with sustainable aviation fuels and the integration with Corcia, anything to do with the VCM generally, Article 6 of the Paris Agreement, the CRCF that's coming out of the EU now.

Get in touch with Phillip Lee.

If you're working in this space, you really do need a good eye to the law.

These projects need legal care.

There's a lot of structuring that takes place.

It's really not turnkey at this point still.

And there's a lot more innovation and creativity that's going to be needed to make sure that the legal infrastructure that supports carbon removal is there.

So link is in the show notes, go check out Phillip Lee, our other sponsors, our Bionics.

Our Bionics is great.

They've been on the podcast before.

I did a show with Lizette Week, which I'll link to in the show notes too if you want to go listen to that show I did with Lizette.

Our bionics is working on forestry in the Baltic states of Europe.

Europe used to be much more heavily forced it.

The great majority of forestry projects take place in the global S, which is generally a good thing.

But we also do need forestry to take place in the EU and in Europe as well.

Our bionics has put out some great research recently about the state of afore station projects, about the bottlenecks in the industry, why the high quality credits are selling out far ahead of issuance, what that means for people who want to be buying carbon removal credits for forestry but cannot.

It's a really important set of questions that are Bionics addresses with Grace.

I would recommend you checking out their work and also just checking out our box in general.

If you want to support forestry, give our bionics a look.

Link is in the show notes there.

Thanks for listening and now I will go into the show itself.

Thanks for your time.

Here it is.

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This show is about carbon removal.

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Many people do not know what makes a project live or die, but Ryan Covington of Philip Lee LLP knows.

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We speak of buyers and sellers, of risk and of courage, of whether the market will turn away or lean in.

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Ryan, thank you for being here.

Pleasure, pleasure.

Appreciate you having me.

Yeah, first of all, Jack Hughes have an accusation against you?

How dare you tell me how to use bankability?

I want to use it in however weird way I want to define it.

I want to use project finance in ways that are disconnected from historical experience.

Why do you deny me this?

That is a that is a great.

That is a great question.

I think it gets right to the heart of the issue, which is there seems to be within the carbon removal space, a couple tendencies.

One of the tendencies is a desire to reinvent the wheel when the wheel works perfectly fine.

And there's.

What about like a?

Smoother wheel that's more elliptical than a purely spheroid object.

Perhaps, but I think the wheels that sometimes come out are oblong shaped or have a lot of right angles and they don't exactly operate that well.

So if if there is a better wheel invented, I'd be more open to the tendency to reinvent.

But I I think the outcome often times is a rather opt to shape to carry on the metaphor here.

So we got 1 tendency in the space, which is let's reinvent the wheel for some reason.

And then the other tendency is we typically look to the wrong parties, the wrong market participants to define different standards.

And one of the biggest ones that we somehow found ourselves in looking to the wrong parties to define is bankability, right?

Bankability, we can get into what it is, but it's a standard that's applied to much more mature markets.

It's something that's in energy and infrastructure.

It's a project wide assessment that's undertaken by third party funders to decide whether they want to deploy debts there.

There's a tried and true way of assessing that across energy and infrastructure markets and large scale deployments.

But because of the absence of true third party financing within carbon removal specifically, we found ourselves looking to a few disparate voices to, to tell us what bankability is or to kind of fill the void for a lack of threshold.

And those participants are the ones that we're very well aware of.

It's, it's the large tech buyers often times that are establishing market norms or terms.

They're not necessarily telling us what is bankable.

They're not telling us what terms will unlock third party financing.

They're telling us what they require to transact for their, their optics.

So I think we've then this is the second tendency I've talked to is I think we equate negotiation leverage or or market cache or the the volume associated with a particular voice as a as a proxy for understanding these terms when we when those are the voices that we should be listening to necessarily for determining a very clear objective standard that's undertaken.

Do you think the big buyers that have enough market power to dictate terms like this, have they done something wrong?

Is this within the bounds of normal commercial activity?

Is this just what happens in a monopsonistic environment where buyers call the shots?

What has led to this?

And is this an OK city of affairs for our level of maturity, or do we make some terrible wrong turn here that's very unique.

Yeah, lots to unpack there.

I don't think buyers have done anything wrong.

And in fact, I think buyers are being asked to do too much frankly.

And I think that's we're relying on the wrong profile of participants to send market signals and to provide catalytic capital because of the absence of true third party funders entering the space, right.

And so I think the buyers have found themselves propping up the voluntary carbon market at least through pre purchases, through off takes along with kind of catalytic pre purchases and and they're being asked to kind of fill the void and dictate and continue to prop the space up.

I think so it's nothing that they've done wrong.

And I think because of that immense role that they're playing in the space to send really important demand signals and to send signals to the third party financiers that this is a durable sector, that this is a sector where there is demand.

I think we should one applaud their efforts and applaud the big buyers that are sticking their necks out to make long term commitments in the space.

I think there's a end of that conversation though, which is that we should be engaging more with and and we are at Phillip Lee certainly doing so engaging with large historic infrastructure funders, large commodities traders, large institutional lenders as well who have very clear cut standards that they have to get through their investment committees and other sectors to define what's bankable.

We're engaging with them to figure out what you actually need to see in the projects to unlock that third party financing that's sorely missing from the space.

And I think if we bring in that profile of player more into the conversation, we just say, we actually ask you the queries of the world, what do you require?

What do you want to see or the JPM, the JPM of the world, what do you require?

What do you require?

What do you want to see?

I think we're going to get a very clear answer to what that is, which which we can talk about a bit more.

I.

Think we're all looking for how to attract financiers like that into carbon removal.

And there's been some nibbling at it, like the Standard Chartered support for some of these deals with undo.

And there's a couple of these things that are happening within climate tech broadly.

But I have to think that if there is money to be made here, people are going to come and make that a reality because that's just how business people work.

Like there's something to happen here, but there's some question about is there technology risk, policy risk?

Are the ticket sizes too small?

Like a lot of institutional money, the deals just aren't big enough at the stage of maturity for carbon removal to even catch their attention.

Some of that is changing now, but is there even enough here to attract, you know, people who would finance bridges or major infrastructure projects?

100% valid.

There is.

If we're talking about engineered carbon removal specifically, we're looking at tech efficacy risk.

You know, does the tech actually do what it says it does at the level it says it can?

We're looking at project execution risk.

Can the tech developer that's wearing a project developer hang actually wind up a contract with an EPC that can de risk the project properly?

Can they get through pre feeded feed?

Can they line up their transportation and storage arrangements in a way that are actually commercially viable and bankable for the word of the day?

There's a question of is there proper government incentives?

Is there a compliance market driver that's going to be the unlock?

There's all kinds of questions within ECDR specifically that are keeping capital on the sidelines.

So, so I think the question is not whether there's sufficient level of need right now for the third party financing.

I think there is which we can talk about.

I think there's also a question of what can you do now to establish the pillars necessary for the space that would unlock third party financing for the commercial wave of deployments that need to occur before 20-30 and throughout the 20 thirties, right.

We can't just wait until 2029 and say, hey everybody, commercial scale deployments are starting to come online.

Let's rework all those off takes that you signed that actually can't attract third party financing or hey, those are really lovely carbon transportation storage agreements.

No funder would ever deploy cap, would ever deploy financing on this project because of the way that you structured your arrangement.

The the risks are unknown, the liability's too extreme.

The project risk is allocated to project developer too much.

There's all kinds of things that could come up, but you can't rewrite and then speed up through the process.

At the point in time when commercial scale deployments come on, those deployments take years to actually develop, to get through early stage development, to actually get through built to then get into operation, which you know, fit COD and be in operation.

These are long term infrastructure heavy projects.

What have we relied on today?

It's, it's really two, maybe 3 forms of financing.

One, it's venture capital funders, right?

Traditional VCs, maybe climate VCs, maybe a climate hardware VCs, but they're typically have played in the market where they're looking at off the shelf climate hardware tech.

They're not looking for capital intensive infrastructure intensive projects and how to finance them.

That's not their space.

So then that goes to the second one.

Well, there's the large corporates that are either playing and Beck's themselves doing large scale Beck's projects himself, you know, cement players.

Other industrials are similar.

You got the energy majors that are doing a model like OXY that you know owns 1.5 in carbon engineering and bought Holocene, Holocene as well.

And they're, they're doing on balance sheet financings essentially to actually get their projects deployed to to a large extent or they're providing the equity financings at the the same VCs are Co participating in rounds or project level debt.

So we've got these two, we've got VCs that are actually providing some money, but it's fickle like all VCs, it's market trends and it comes and goes and it's not committed for large scale infrastructure.

It's just not as much as we've seen large rounds happen in the space.

It's not going to be there when we need the dollar figures that we need to actually get commercial scale deployments done.

It's dollar figures.

We need to get pilot scale deployments done, not commercial scale, true commercial scale deployments done.

You've got corporates that can do it either on balance sheet or three Subs.

And then the last group is just this mismatch that we're relying on government's incentives and grants, catalytic funding and grants through players like Breakthrough that are helping.

But again, there's significant funding that's being supplied, but it's it's to help these project developers through this period where they're dual tracking tech de risking at the same time as project de risking, right?

And it's to get a pilot done, to get an off take done.

And when we say pilot, because again, we're talking about the space using these terms that either can sound really small or really big or really important or really not, right.

But pilots, when we're talking about a pilot, this is a for DAC, for instance, this is 500 to 5000 or 10,000 tons per annum that you're actually trying to remove, right?

Small commercial scale is 20,000 to 50,000.

Those are the projects to date that are being financed in the way that I'm talking about.

We need to now move very quickly to a stage where we're at commercial scale which is 100K to 500K tons removal capacity for projects coming online IN202820292030 and throughout the 20 thirties.

So that the orders of magnitude of of removal capacity is directly correlated to the orders of magnitude of dollars capacity that we need to unlock, capital capacity that we need to unlock.

And who theoretically, if we can solve for that huge set of issues that you previewed up top, who can unlock that capital?

I would like to think it's the project financiers who have a way of deploying capital against projects that are banks on future cash flows, right?

That's what project financing is, limited recourse.

Third party financing banked on future cash flows generated by a specific project and secured by the assets of that project.

It's not VC financing, it's not pre purchases.

It's not corporate balance sheet financing.

It is third party debt financing.

That's limited recourse.

The nature that's banked on cash flows generated of a specific project.

That's how simple the concept is.

But instead we equate project financing with everything else I'm talking about.

So people then say, Ross, they say, well, wait a second, there's capital that's going into the space.

The optics really aren't the issue.

That's stopping more capital from coming because the CS are contributing and corporates are interested in.

There's some corporate strategics that are deploying more capital, but that's not who we're targeting.

That's not the form of capital, the form of financing we're targeting for commercial scale.

We're targeting something very specific, which is project finance or project finance if you want to, if you want to be a banker.

I I flopped between the two pronunciations, but finance definitely sounds a little bit, I don't know, snootier.

My nose is up a little bit when I say it that way.

I.

Was going to say it depends on how full of myself I feel that day as to whether I say finance or finance.

Yeah, fair enough.

I think in that second category, defined broadly enough, are the big joint ventures of someone like CO280.

They did a show with them not long ago, spent a lot of time on how to actually structure deals and mechanics of them, and they've been very successful making joint ventures work.

Is that an example of the second category?

Is it something else?

Are they as as good as it looks in that episode?

Is it not the right fit for lots of people?

Sorry, I I'm not really asking you one question at a time, am I?

But you can take it any way you want.

But they're, they're a really interesting model and I think it's a model that's going to be actually a, a pretty key unlock for the space.

My understanding of CO280 is there what's called like a tech agnostic project developer, meaning that it's not relying on kind of that dual tracking or don't have to do the dual tracking of tech de risking at the same time as project execution.

And they're focusing heavily on wearing that project developer hat.

And by doing so, this is very similar to Deep Sky out of Canada on the DAC side.

In doing so, what they're, what they're doing is they're saying I'm going to rely on third parties who have longer histories of developing carbon capture technology or carbon removal technology.

I'm going to go through all the effort and pain of structuring my entity in a way that's actually financeable from third party debts or venture capital or similar.

I'm going to worry about all the kind of key participants that we need for EPC and O&M and and similar.

I'm going to actually vet those third party tech enablers for the projects.

I'm going to line up the key 4 point.

Strategic relationships with industrial players or energy majors or large land owners are similar.

The feedstock supplies, optics, theoretically what they can do is say, I'm going to be the one that sits at the center of all these projects and can map out how all the relationships work, which goes exactly to the conversation we're having today, which is what is bankability, right?

Because what CO280 theoretically can say is, well, hang on a second, I need to make sure my projects are bankable because I'm the project developer and I need to attract third party financing or capital for these projects, right?

So ACO 280 would have to then say, OK, well, bankability is a project wide, wide assessment that a lender's going to go through and they're going to say, have I identified all the project risks?

Step one, have I identified all the project risks?

So they're wearing a hat 368° view and they have the responsibility to actually identify all of them.

The second thing that COA CO280, not a client.

So can't tell you if they're too cute or not, but what ACO 280 could do is actually mitigate the risk.

So they can say I've identified the risk.

Here's the ones that I've dealt with by relying on third parties or insurance or other mechanisms to actually de risk that issue.

I've engaged with local governments, local communities, whatever it is, environmental consultants.

The third step is I now have to go, OK, I've identified everything.

I've mitigated what I could.

There's some that's leftover and not going to allocate that project risk in a way that a funder can actually say, OK, I'm comfortable with the level of project risk that says with project developer.

I'm comfortable that your carpet transportation storage provider is wrapping you sufficiently, for example.

And because I'm so comfortable, I've gone through this project wide assessment.

I can now decide to give you debt and be confident that you're going to repay it.

And not only am I confident that you're going to repay it, but an ultimate downside scenario.

I actually can say I'm comfortable in my level of protection by way of the recourse I have via the security package that's given.

I'm not saying that's what CO280 is doing currently.

I can't again speak for them, but that's what a project developer is faced with doing.

They're faced with mapping this whole world.

The joint venture concept that you're talking about is a critical step in this process because you are leveraging industrial players with key knowledge that can that have built projects that understand infrastructure, that understand risk, that understand this bankability assessment that's going on.

You're speaking similar language.

So you are de risking for your funders, either VC or hopefully soon project financiers, you're de risking the process.

So it, it's an example of that second bucket that you're talking about, but it's one that it's one that can evolve into a more a, a broader, more impactful unlock for the space.

If you can leverage those J VS into ultimately project codes, SPV structures that are set up to do one single project, then you can unlock that debt assuming that we've controlled for all those other variables.

So it is an example of where the space is going.

It's not an example, as far as I understand it, of this kind of true project finance model where debts being deployed against a specific project.

But it's a really important step in this process that we're going along as a space collectively.

I've been cheering on the differentiation between project development and tech development.

I might infer from your comments you were also cheering this on.

Usually.

Usually.

Yeah.

Why do you think it took us so long?

Those things were Co located for years and years.

And once it happened, I started seeing people focus on this and like, well, the same thing happened.

Obviously people who work in forestry are project developers and they're not all foresters.

And why did it take us this long to just become project development people?

Yeah, I think one of the biggest impediments to the space in terms of its growth and what's held it back is actually the reluctance to embrace more delineated and sophisticated roles on projects in a manner that more traditional industry has done.

I think that's hat in terms of why we haven't embraced it just yet.

And obviously Oxy via 1.5 has they've they've set up a project developer and they bought tech from third parties and that's their model.

So there are some that have done.

So I, I think that I think one of the issues is that the tech enablers are so close to the their actual underlying tech.

No surprise that they're seen as the ones that can best de risk it and they're de risking it via deployments, pilot deployments, which is largely what we have.

And so we've and they were being venture capital finance.

So I think there's this assumption that let the tech developers develop the tech, see how it plays out in reality and we don't have to worry about all these other kind of larger participants who have built these projects as much.

Maybe we get AEPC involved in the pre feed stage for some kind of engineering support.

But for large part we just need to get this out into the wild and see how it performs and we go from there.

That is a model that is more acceptable or more understandable at pilot.

It's way less understandable when you actually jump to small commercial scale or true commercial scale.

You can't, you can't in earnest develop.

You can't in earnest I think dual track that unless you have a very sophisticated infrastructure that's built internally to do project development.

And it's very clear that that's one whole business vertical is project development and another one it's tech enabling.

And that's a completely different vertical when you try to get people to speak the same language.

I think that's where we've had issues.

And I think quite honestly, this, this gets to kind of the interface with like off takes.

Even as we've used the off take in this model of tech enabler and project developer, even we've used the off take as a market signal.

But who are we signalling to?

We're signalling to VCs and corporate strategics that might be interested.

We're saying, look, my tech is validated, not my project execution capacity.

Now my sophistication as a project developer, my tech is de risk sufficiently that I got a large buyer to commit to an off take and therefore venture capital firms that are getting hundreds of decks of project developers or tech enablers.

I want you to lead my, my, my seed or Series A or A Series B or similar because look, I've, I've got market demand signal for my project.

That's a tech validation largely because you're proving and you're speaking a language to both VCs and corporate strategics who might want to acquire that tech or have access to that tech for their own use.

You're speaking a language that says this tech is ready to be used.

You're not speaking a language necessarily to say I'm ready to go across multiple jurisdictions, to interface across multiple governments and regulatory regimes and talk with multiple funders and different stakeholders and create a project at a scale that's akin to developing a solar farm or a entourage for wind farm or something similar.

These are really complex projects.

So I think something that's happening is that for these dual hat tech developers, project developers, at minimum, we're seeing a greater emphasis on the two verticals.

Tell me how your tech works.

Awesome.

Let's let's let's figure out, let's DD, let's see if it actually does what it says.

Equally important, who do you have on your team that's come from traditional energy and infra?

What corporate strategic do you have in your back back pockets actually help you with this?

What industrial player is is supporting you or giving you access or otherwise interested?

It's a question of who is going to help unlock large scale deployments, not does your tech work.

So that off take in that context to round that out and appreciate I'm like very long winded on this, that off take in that context, it's less important how it fits into commercial skill deployments.

If what we're looking for is how does this unlock and keep tech developers scaling to enable them to ultimately reach commercial scale?

That's a different conversation than can the offtake underpin a financing that unlocks the commercial scale.

So what can help us get there versus what is necessary to actually get the project deployed?

I.

Think that's very astute.

My speculation for why this might be?

I'd be curious of your own as well as I think software culturally calls the shots and everyone likes the idea of the 20 something or 30 something founder having a dream and then building the next, you know, world beating brand and for that happening for carbon removal.

But as I've grown more experience as a business person and within carbon removal, the teams that I gravitate towards tend to have more age and more experience and they do have some of that conventional infra and energy.

Like have you put steel on the ground?

Have you made some stuff happen?

You're not just someone who worked in a lab and is commercializing tech coming out of university.

No shade against that.

We need that too.

But if there's some way to differentiate these business models and say we're a tech developer, we don't want to do project development, Our goal is to license this to the corporate strategics in this area and that's our go to market.

Actually, I think if I was diligence in a deal for a VC, I would treat that much more seriously because they have acknowledged their limits.

Whereas this idea that we're going to do all this stuff, science, engineering, commercial, we're good at it all.

And I feel like is there a full stack carbon removal company like that that can do it?

There are a couple who are doing fairly well perhaps.

But overall, I think that expectation is just like the Iron Man configuration of business expertise.

100% agree with that assessment.

I think, I think that we're seeing out of hopefully we're working ton with engineered carpet removal project developers.

We also work on the the fighter side as well.

And I, I think we're seeing, and we're coaching our clients through that process of being comfortable with the tech licensing play or manufacturing play.

We're coaching them through pursuing deployment opportunities where their tech enabler or maybe project developer at a smaller scale and seeing which one fits in their business model more, which one's actually workable, what, what speaks to their skill set.

We're looking at opportunities unlocked in different jurisdictions and climates and, and situations.

And I think a big one, honestly, that's, that's a key unlock.

And what you're talking about is even if you're a tech developer that wants to be involved in the project deployment process, having informing relationships with corporate strategics and other industrial players to be the unlock is incredibly key.

So to answer or to react to what you're saying, I, I don't think it's necessarily somebody's 100% figured it out how to kind of wear all hats and do all things.

I think that there's a realization increasingly that you can't.

And I think it's a question of how do you specifically build a stack and offering that enables your tech to get out in the wild and used.

And it might be that you're, you realize that it's through licensing.

It might be that you're a project developer with a corporate strategic AJV was somebody that actually helps unlock those projects.

But typically the one stop shop, I can do it all mentality hasn't exactly worked in the space.

And so I think there's a assumption of greater sophistication and delineation of roles that's coming.

Dang, I would love to just see the numbers for if you're a company out there and you're listening and you are pursuing a licensing only tech development carbon removal pathway, I'd love to hear from you because I'm wondering how those numbers actually do pencil.

Can they justify A venture capitalist portfolio figures like can that fit inside there anymore?

Because they're going to be sharing a lot of the upside with the actual deployment people and that might actually make it harder to receive that type of funding.

In which case what happens to those licensing only companies?

Do they have a go to market that could be successful?

Yeah, the space has already seen this work, right.

I mean, I mean, there are there are examples of players in the space like Capsule for instance, that's been a essentially an OEM, the developer of technology that's carbon capture technology that can be used and de risked for various projects.

So I don't think that this is a new concepts necessarily Zvanta historically as well in terms of like developing actual carbon capture technology.

So I think there's a model that's proven out and and has successfully scaled in the space in terms of having that clear role.

I don't think there's AI, don't think there's a one-size-fits-all to that approach either.

I think there's these approaches take different forms, right.

Essentially carbon engineering as far as I understand it is serving as the de facto or the actual R&D arm for Oxy's low carbon Solutions team.

And they're engaging with 1.5, right.

They they've definitely are a you know Oxy sub and directly linked to it.

But their go to market strategy was were the tech developers were the R&D developers and we now have the corporate backing of a large, a large energy player that can help support our scaling.

And I think there's different softer variations of that where we're seeing clients that are engaging with different industries for different licensing, partnership, project deployment arrangements that fit within that industrial players viewpoint.

It could be Co location on site.

It could be with a view towards using their third party transportation or they're using their transportation and storage infrastructure that's being developed out.

It could be for access to carpet credits that are generated by the projects.

There's a, a number of different ways that we're seeing that tech player get their tech out into the wild that that can be AVC play.

It can't be a corporate strategic play or can't be just a well, I'm going to scale this up and I'm going to be the third party de risker for it.

I I think, and I think there is a question now is like I tell a lot of people when they're looking at the engineer car removal space that right now we're in the Pruitt phase, right?

All these technologies are at a Pruitt phase where we've we've gone past the hype phase.

That's that's come and gone very clearly in the space.

And we're now in the Pruitt phase and we're going to see I suspect immense consolidation in the space over the next two years up to 2027 during this prudent phase.

And I think there's naturally going to be via that consolidation clearer roles and there's going to be the winners that come out in the 202820292030 deployment stage level.

So I think there's going to be a natural pressure that's coming from the top down that's going to that's going to make your role clear if you don't already have a clear role because of how much pressure there is right now to stand out and actually prove that your tech works or that your project deployment strategy works.

Ignore that big comment you just dropped on us.

How dare you say there's going to be consolidation.

We should never face that.

Consolidation's a flight where the right it doesn't sound as bad when you put it that way.

That's.

True.

I took a meeting a while ago with a venture studio and they had a model that I really liked where this is not unique to them.

This is fairly common, but they pointed it out to me very clearly that one strategy is to look at what large Agri business or some other large well capitalized industry has set out for their goals for the next couple years.

And then just reverse engineers companies for acquisition by the people that have money.

And I would love to see it.

I, I read a lot of decks.

A lot of decks come my way for various reasons and I almost never see anything that's licensing oriented as their main go to market.

But I also would just love to see, yeah, we just want to be acquired by like Oxy is the only one who's really bought a lot of carbon removal stuff today.

It's only a couple companies.

So we're just going to design sorbent technology that is compatible but different.

We have IP that we can sell to them or license them.

That's just what we're going to do.

I would be like, all right, this may be a single or a double if you're AVC, like that's not going to be some huge portfolio justifying return, but they're probably going to make money on it.

If you think that that deal gets diligent successfully and they're on the right track with this, that's a pretty good thing.

I'm wondering, is there anyone out there with the strategy for that?

Because someone is probably going to figure it out and make some money doing it.

Maybe there's probably just too much political risk and, and market risk right now facing carbon removal to feel secure.

It's not like doing that for hardware or consumer goods, but I love that idea.

I'd love to see someone do it.

If you're listening and you have money, feel free to take that idea and run with it.

It's not mine.

It's it belongs to the universe basically.

Yeah, I think, I think there's something that's really interesting that's going on in.

I thought this could be the understatement of the century.

There's something really interesting going on in Trump's America.

You're you.

Are so smart wow I.

Love that.

It's something really interesting.

Yeah.

There's something that doesn't get talked about enough within the carbon removal space.

And I think it's difficult to talk about because of the confidentiality and sensitivity in the current climate that we're operating is, is that the type of deal structures that you're talking about are advancing in the background very quietly for deployments in North America, Europe, Middle East and elsewhere.

And I think there are, I think there's a tendency, again, if we're going to kind of bring this conversation back, we look for very clear market signals.

Have you signed an offtake with the biggest buyer in the space or with Frontier or similar?

Have you gone in through your Series A and who's on your investor deck?

Well, we're not hearing the space because we can't talk about it.

Is the number of footprint strategic partnerships that are being entered into in the background and have been entered into even pre Trump that are going on not necessarily as planned, but with a lot of interest and sophistication that are going to shape who the players are that come out successfully.

And I know I'm being very vague here, but I think that if people are assuming that venture capital is venture capital, non corporate strategic venture capital is the unlock for the space and that's the way that we decide whether the space is doing well or not.

What I would say is.

And what we advise a lot of our clients to do is, yes, of course, you have to get through that if that's part of your skill up effort.

And yes, you need to have VCs on your table that understand it.

But you really need to be engaging with various industry players who have the capital and the decades of experience in getting energy infrastructure or other industrial projects built.

And if you're not, you're going to find yourself in the back of the queue for project deployment opportunities, project finance availability, and even VC funding because you're going to have lost out on a ton of momentum that's being built very quietly behind the scenes right now.

Again, intentionally very vague and amorphous in terms of what I'm saying.

But what I would say is that viewpoint that you're talking about is ones that very successful project developers are painstake painstakingly following in the background very, very quietly rather than kind of putting their hand up to say what they're doing.

And and I suspect that if you're being strategic and diversify your partners during this period of uncertainty, especially in Trump's America, I think that's a huge, huge positive for your chances of kind of coming out the other side of this pretty good phase in being there for having your tech deployed or are you building your projects if you're the project developer hat come commercial scale phase that we're that we're all looking for.

It was a bit amorphous, but all it really proves is that you have your JD, I think.

She's.

I believe it.

Now I don't even need to look you up.

Yeah, it's the.

Most no.

The comment proves it.

How do you say the most?

Was saying the least right?

Or say the least by saying the most however way which way it goes.

It wasn't that.

It's very sensible advice if people are able to plug into existing industries that how of farsighted companies that know that 45 Q and things adjacent to it are going to be OK through the Trump years and whatever comes after it is likely going to re enhance carbon removal status and political options.

That's a good thing to do.

Or companies that just know that they need to do it for their own reasons.

Like if Agri business knows that fertility is not improving and topsoil loss is real, that biotchar can maybe help with it and drought resilience, then OK, those are good things to be plugging into right now that do not have the political risk that just BCM or policy dependence rates for it.

That's almost very commonplace at this point where people are saying like, are there alternative go to markets here that we can cotton on to that are not just please can we have some money, Microsoft, we're really, we're really interesting.

Come take a look.

Yeah.

And, and I think honestly, there's a whole different segment of people that you should be talking to either directly or through those partnerships, which is the project financiers, right?

So this isn't a theoretical, we're starting to see it actually play out in terms of off take conversations, transportation and storage arrangements and negotiations and how they're structured.

If you're not, if you don't have visibility into what a lender requires in terms of assessing the bankability of your project and whether you're off take is bankable, for example, you're one, you're leaving a ton of leverage on the table in your negotiation with those limited significant buyers in the space.

And what I'm saying is if third party funding is a key unlock for your projects, that means that you should be talking with or have an advisor that's familiar with or a corporate strategic that has a relationship with the funder that would actually sit down and look at your off take and and say, OK, let me look at this off take.

OK.

My first question, how committed or how firm is this offtake?

Are the delivery obligations clear?

Is there certain delivery volumes?

Is there certain, Is there certainty around obligations to actually take and pay?

I'm going to look at whether you're under delivery regime, shortfall regime is pre baked and does it actually say what happens in a scenario where you have interim shortfalls and how do we deal with it or does it have this really Gray amorphous?

Let's agree to agree what happens in the case of this and what does a replacement credit mean, even if that's a remedy, right if you're go ahead live.

Oh no, I'm just reacting.

Yeah.

Like I, I that is not good enough.

I would be very scared if a contract was past me that's look like that.

Exactly.

So you're looking at if, if you don't, if you don't know that a lender or a corporate strategic, but especially a lender is ultimately going to say, I need to be able to pick this up and see that this is a firm off take.

That you don't have overly broad force majeure regimes or change in law regimes that are too clunky or you don't talk about what happens in terms of changing methodology.

How do you plan for it?

You need to have certainty committed and not be able to underpin it.

You want to look at it and say I'm going to pick up this off take.

I'm going to deploy debt against this.

What's your maximum exposure under this?

How do you quantify it?

Can it be quantifiable and how's it allocated?

What is your interim damages regime look like, the remedies?

What's your termination damages regime look like and is it appropriate?

How is it undermined or influenced by things like indemnification obligations, Right.

These are all questions that lenders will ask and do ask already within carbon removal and ask on every single energy and infrastructure project.

They're going to say what's the creditworthiness and what's the credit support required for this to backstop the obligations of both the the project developer and buyer side.

And then the last one they're going to say is what does this off take do?

How does it interface with does it integrate the terms of the rest of the project?

Or is this just an off the shelf template that didn't move and it's not fit for purpose for this project and it doesn't account for or pass through all the liabilities?

That framework that I just said the four kind of key questions, every lender, we'll ask those four questions and have numerous DD follow-ups to get to the point of it.

And that's for the off take only.

So if you don't have right now project developers, tech developers, somebody on your team or an advisor or a corporate strategic or you're not talking with those funders already to say, please tell me what your requirements are.

And you're not saying back to the buyers that this is what's needed, then you are going to be behind.

You are behind in the process because bringing in those concepts and bringing those viewpoints is what's getting projects project finance down.

Look, look at what Chestnut Carbon did in the nature space.

They got an actual deal done with Microsoft as the cornerstone with an off take that was sufficiently bankable on top of the security package that was given for it to get JPM to provide debt to it.

That happened in nature and I know that there's project financing conversations that are going on to bring those players into the space for engineered car removal specifically.

And how are they doing it?

They're leveraging those viewpoints and those requirements in a way that you can actually have not leverage or balance in the negotiations.

That's not a realistic expectation, but you can have the core levers and red flags that you know are going to be deal killers for you if that's the way that you're going to finance your projects.

So again, to kind of round out that conversation about who are you talking to?

How do you get ahead?

Who's going to come out the other side?

If nobody is actually directly coming from the funders viewpoint in mouth, then all we're doing is regurgitating assumptions and guesses as to what's going to be required rather than saying we know with certainty what is required on top of all the questions that used to have thought.

So I think that we're seeing those players engaged more and it just needs to happen at a higher and higher rate.

Couldn't we finance carbon removal just because it's the right thing to do?

I would love that.

I think for the Hemingway quote, man.

But isn't it for you to think so?

Of course.

But isn't it for you to think so?

That's right.

That's right, I asked my beautiful, if naive question, hoping to trigger that.

I didn't take the bait.

Yeah, no, yeah, you need to, you need to run the video back and I can come in eloquently and just just drop that one, right?

But that's painting, right?

That's the that's that's the Hemingway nature of the podcast, right?

Is that even for the most perfect opportunity, theoretically something inevitably some ball gets dropped.

No, no pun intended.

Yeah, I love that we were we were talking about the the origins for the show and the rather literary nature of the show.

It's like the show will sometimes have like a hardcore business mechanics like we talked about today.

And then they'll be a show that's just like, OK, we're starting with Dostoyevsky now.

This is where this is where we're going.

But you're a Hemingway fan.

We were talking about The Sun Also Rises in the conclusion of that.

Re read it.

I don't think I've read it since high school.

Really enjoyed it, but I don't think I understood it when I first read it.

It's a much sadder book that I recall.

I had the I had the same exact response.

I read that book in high school.

I was 17, living in Belgium, and I had a teacher called Mr.

Novak, and our entire 12th grade English class was called Finding Hemingway.

And so we read the kind of complete works of Hemingway and then we actually took a trip as a as a class, a small VP lit class to Paris.

And we did a week going to like the cafes that he rode at and sat there and rode and drank where he drank.

And, and my reaction was one, why did I think that I had any understanding of what Hemingway was saying at 17?

I remember vividly being like, I get it.

I really get what he's going for here.

And I just reread it on the lead up to this podcast also.

And I was like, I had no idea what he was saying in the book about loss and and let down and what could have been and should have been and how you deal with that let down and whether it's worth embracing or holding on to hope or letting it go or just kind of having this Zen like understanding come out of it, which is just that there's there.

There's a theoretical world that's pretty to think about and you can understand and appreciate, But but you just got to give it up or give up the hope along the way.

At some point, which the time to ECDR.

We shouldn't we shouldn't give up the we shouldn't give up the hope.

And we should also not have a Hemingway like approach where we put concepts of of love or understanding and these far lofty Platonic ideals that can never be approachable and are just to give you heartbreak along the way.

So we've got to pivot away from positives being hurtful, passed to inevitable let down.

And instead we can kind of bridge what is a space that's full of its fair share of losses, but also some good wins and say, look, there's a very clear path towards happiness and love and and Lady Brett and Jake and the ECBR space can finally run off together and have a few absence drinks and look back instantly.

It's not only pretty to think about, but we've we've actually done it.

We've actually done it.

Go back to Pimple and actually run this time rather than looking at the bulls from above a balcony.

I love it.

Somehow you pulled it off.

I was like, this might be a little shoe horny, but it it actually all fit together so nicely.

And I also, I oscillate between having a sort of capital R romantic hope and really resenting in some ways how mechanical and financial a lot of carbon removal and climate action is.

And just like respecting and appreciating the activists who are just like, none of that stuff really matters.

We've sort of lost the plot if that's where our heads AT.

And the dialectic between those 2 is where I tend to hang out.

It doesn't necessarily make me the most contented of person working in carbon removal, but it does make me think, and I think maybe that's the most one can hope.

We're also kind of a Hemingway attitude as well.

He didn't strike me as the most contented of men either.

It no, no it doesn't.

Ryan, thanks for being here.

I learned a lot.

Thanks for letting me ask all my questions about project finance and bankability and also some Hemingway.

Pleasure.

No.

Appreciate.

Appreciate you having me on.

Appreciate all the conversations that you're having in the space through your podcasts and, and look, these are barely touched on the surface of a lot of these issues and a lot of people in the space working on the same thing.

So happy to have conversations with anybody else that's trying to tackle this as well.

And, and appreciate you kind of putting this conversation more into the mainstream and kind of front and center as people start to look at a bit more nuance in the space and issues that are actually stopping projects from getting deployed and capital actually entering.

So appreciate everything you do.

Thank you, Ryan.