Star Royalties Ltd (TSX-V:STRR) said its subsidiary Green Star Royalties Ltd (TSX-V:STRR) has expanded its carbon credit agreement with Blue Source LLC by four fold.
The two companies will create verified carbon offset credits to reward the adoption of regenerative agriculture practices by North American farmers.
Under the amended agreement, Green Star has agreed to finance Blue Source’s regenerative agriculture carbon offset program up to $20.6 million in cash. The cash will be made available to growers in the program through Locus AG’s CarbonNOW program.
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Green Star expects initial funding of the investment to begin in the second quarter of 2022, with further quarterly tranches drawn by Blue Source, as required, until the entire $20.6 million is invested. Green Star currently expects $5 million will be invested in 2022 and the remainder in 2023, Star Royalties said.
This project investment has a term of 11.5 years and the future financial benefits from the monetization of the project's carbon offset credits will be split between the CarbonNOW growers, Blue Source, and Green Star Royalties, according to Star Royalties. The expanded program is expected to start generating credits for the 2023 growing season, with Locus AG beginning farmer enrollment within the coming months.
Green Star Royalties expects to generate cash flow equivalent to over 200,000 attributable carbon offset credits in 2024, increasing to over 400,000 attributable carbon offset credits per annum starting in 2025.
The expanded program is expected to generate more than two million premium carbon offset credits per year on average, which will be available for sale in the voluntary carbon marketplace.
Alex Pernin, CEO of Star Royalties, told investors that the company is “thrilled” to deepen its partnership with Bluesource and Locus AG.
“Just over four months have passed since we established this partnership and we are now more than quadrupling this investment in response to strong demand from US farmers to participate in the CarbonNOW carbon farming program,” Pernin said.
“Our teams are jointly passionate about financing a greener future. We are demonstrating the application of our royalty investment model as an innovative solution to financing the transition of US farmers to regenerative agriculture, and in turn, to originating premium carbon offset credits.”
Jamie MacKinnon, executive vice president of Bluesource, added: "The early success of this program is due in large part to well-designed incentives for growers and an alignment amongst the program partners on maximizing the value retained by the grower as a means of attracting more acres into the program and creating scale. It is also due to the considerable resource that Bluesource and Locus AG are deploying to onboard and support growers."
The CarbonNOW program will enable the Blue Source and Locus Agricultural Solutions partnership to incentivize regenerative agriculture practices on 1.32 million acres of farmland.
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