Key Carbon Ltd. and Marex Group Plc (MRX:NASDAQ) closed a US$15 million ($15M) carbon financing and investment transaction, as announced in a news release.
"This latest partnership is a powerful endorsement of our approach to investing in the voluntary carbon market and demonstrates our ongoing ability to attract meaningful funding in a challenging market through our robust approach to sourcing and governance," Key Carbon Cofounder and Chief Executive Officer Luke Leslie said in the release. "Partnerships like this will be critical to accelerating climate action and delivering tangible benefits to vulnerable communities."
A private company based in British Columbia, Key Carbon is a capital vehicle that finances and supports developers of superior-quality carbon projects, according to the release. The company is building a large, diversified portfolio of high-integrity carbon credit streams and royalties.
Marex, headquartered in London, England and with 35 offices around the world, is a financial services platform providing liquidity, market access and infrastructure services to clients in the energy, commodities and financial markets. In 2023 alone, Marex executed about 129 million (129M) trades and cleared 856M contracts.
Benefits of the Arrangement
The US$15M Key Carbon-Marex arrangement has two components. One, Marex invests US$5M in Key Carbon for a 2% interest; Key Carbon issues 1,224,349 of its shares to Marex at CA$5.50 apiece.
At this share price, the post-money valuation of Key Carbon is CA$337M, or US$250M. Notably this is more than 100% higher than it was at the company's previous equity financing, in April 2022 (CA$3 per share), Leslie pointed out.
Two, Marex invests the remaining US$10M in a Key Carbon subsidiary, a nondilutive financing to Key Carbon shareholders. The subsidiary, in a 50/50 joint venture with modern cookstove manufacturer Burn Manufacturing, will use these funds to finance the production and distribution of new, low-emission cookstoves in various African countries via cookstove project developer Global Cookstoves Ltd. Of the credits these projects generate, Key Carbon will be entitled to receive 10%.
"We're really excited because we see a fundamental underlying demand," Leslie told Streetwise Reports. "We see some massive buyers coming in, and they're trying to buy cookstoves directly or they're trying to do deals like this deal that we just did with Marex. They want the best stoves, the Burn stoves, and cookstoves is a big part of their strategy."
Before this deal, Key Carbon and Burn already were partners.
"We constitute most of Burn's business, Leslie said. "Money is coming through us because you have the governance, you've got the structures, you've got downside protection, you've got all sorts of rights, which allow us to rinse and repeat. We've got US$600M worth left to spend through Burn on the same terms."
For Marex, the partnership with Key Carbon allows it to further diversify its emissions offering and gives it access to additional prospective clients in the form of a new range of market participants, Marex Head of Environmental Bastien Declercq said in the release.
"Reliable access to trustworthy sources of carbon credits has held the market back in the last few years," Declercq added. "By moving up the value chain, we can play a more relevant role for our clients in helping them to transition to a greener future."
Catalysts for Key Carbon
Leslie told Streetwise about three significant upcoming developments. They are:
1) The launch of another special purpose vehicle, or SPV, already fully funded, to finance Burn-manufactured electric cookstoves.
"Every time we roll out one of the vehicles, there's a big royalty on it," Leslie said. "It is increasing shareholder value. It's increasing also the number of projects and the diversification of the portfolio."
2) The finalization of another partnership, this one with EKI Energy Services Ltd., a global carbon credit developer and supplier.
3) One or more acquisitions of other select companies in the space, such as distributors or carbon accounting firms.
"We're growing very fast, and it's not stopping in a very soft market," the CEO said. "We'll keep executing on the strategy. Then when inevitably the carbon markets turn, we're going to have a very exciting business to list."
Marex Ownership and Share Structure
Regarding ownership of Marex, eight strategic entities together hold 63.59%, or 48.55M shares, of it, according to Reuters. Of these investors, the Top 3 are Amphitryon Ltd. with 40.46% or 30.89M shares, Ocean Ring Jersey Co. Ltd. with 15.63% or 11.93M shares and Marex Group CEO Ian Lowitt with 3.61% or 2.75M shares.
As for institutional ownership, 73 companies own a total of 23.3% or 17.79M shares. The Top 3 are Intertrust Employee Benefit Trustee Ltd. with 2.64% or 4.1M shares, Capital International Investors with 1.96% or 1.5M shares and Capital Research Global Investors with 1.96% or 1.5M shares.
Retail investors have the remaining 13.11% of Marex.
Structurally, the company has 76.35M outstanding shares and 27.8M free float traded shares.
Its market cap is US$1.8 billion. Its 52-week range is US$18.13−26.03 per share.
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