Published On: June 2nd, 2023
Carbonxt Group Limited (CGI or the Company) is pleased to announce the establishment of a joint venture, NewCarbon Processing, LLC (“NewCarbon”), through a legally binding Joint Venture Agreement with Kentucky Carbon Processing, LLC (KCP), its US partner. The joint venture aims to build a state-of-the-art Activated Carbon Plant (ACP) in eastern Kentucky, USA. This JV was announced in July 2022 to build a new facility instead of the final deal to transition Inez’s existing operational facilities into an Activated Carbon Plant.
Carbonxt’s expansion strategy achieves a crucial milestone as the joint venture propels its total production capacity to 21,000 tons, establishing a solid foundation for future growth. Manufacturing operations are set to commence in the first half of 2024.
Figure 1: Joint Venture Ownership and Roles
Commercial Terms and Key Benefits Of Kentucky JV
Carbonxt and KCP agreed to retrofit an existing power plant for Activated Carbon production per the revised plan. Carbonxt Group will invest USD 10 million in NewCarbon over the next two years (subject to completion milestones). The Company will fund USD 5 million immediately, including a USD 0.5 million already made to secure long lead time items, and a further USD 0.5 million is due to plant successful commissioning. Once the facility is operational, the remaining amount will be paid in four quarterly instalments (an average of USD 1.125 million per quarter). On the other hand, KCP will participate in JV with related Inez Power assets (kiln, turbine, buildings etc.) to produce the first 10,000+ tons of Activated Carbon while also being responsible for delivering an operational production facility. Carbonxt has arranged AUD 18 million through debt and equity to fund the expansion.
Figure 2: Improved Commercial Terms For Kentucky JV
Conversion of the existing Inez Power facility compared to building from scratch will be cost-effective and risk-free.
Figure 3: NewCarbon Project Timeline
Carbonxt Group Limited: Pioneering Solutions for Cleaner Environments
Carbonxt Group Limited is developing and selling specialised Activated Carbon (AC) products. The Company’s comprehensive range includes Powdered Activated Carbon (PAC) and AC Pellets designed to eliminate pollutants and toxins from water and air. These cutting-edge solutions find extensive utilisation in industrial air purification, wastewater treatment, and various liquid and gas phase markets.
Expanding Production Capacity and Geographic Presence
NewCarbon Joint Venture Agreement will increase the Carbonxt Group’s total production capacity to 21,000 tons. It will help the Company to expand its addressable market size. This diversified manufacturing portfolio in North America includes Kentucky, Minnesota, and Georgia plants.
Kentucky facility allows Carbonxt to expand its customer base to new industries, with a particular emphasis on water and wastewater, in line with the regulatory changes implemented by the EPA to limit PFAS pollution—the joint venture positions Carbonxt to capitalise on the growing demand in these sectors.
What are PFAS and Regulation To Prevent
Per- and Polyfluoroalkyl Substances (“PFAS”) are widely used, long-lasting chemicals, components of which break down very slowly and are found in soil, water, air, fish, and humans across the globe.
To address PFAS pollution in the environment, the Biden administration intends to utilise the Clean Water Act permitting and regulatory programs established by the Environmental Protection Agency (EPA). As part of this initiative, the US Government has allocated significant funding of USD 10 billion under the Bipartisan Infrastructure Law to assist operators in meeting the enhanced standards and covering their compliance expenses.
Rapidly Increasing Activated Carbon Prices
In Activated Carbon space Powered and Pellet products, robust demand was enough to raise the prices in the last 12 months. There is considerable intellectual property in making Activated Carbon to address individual use cases and pricing ranging from USD 2000 to USD 6000 per ton. AC Granular demand is expected to rise due to the new EPA regulation. Carbonxt Group Limited is securing an average price above USD 4,000 per ton for Activated Carbon Pellets. Public announcements from other activated carbon groups are:
- Calgon announced price increases of 15% -40% in Dec 2022 (See formal press release: https://www.calgoncarbon.com/12122piqdfgf/%20)
Figure 4: Florida Utility – PAC Winning Bid Over Time
Warren Murphy, Managing Director of Carbonxt Group Limited further emphasized, “The NewCarbon agreement positions the Company to play a central role in the manufacture and supply of Activated Carbon products, to meet a pending step-change in demand for water treatment solutions in the US market. The project uniquely benefits from attractive development economics and a lucrative outlook for a long-term cash flow generation.”
Warren also expressed gratitude, stating, “We’d like to thank Carbonxt shareholders for their ongoing support and look forward to providing ongoing updates on construction and development of the plant.”
Carbonxt Group Managing Director Mr Warren Murphy
Figure 5: Mr Warren Murphy Carbonxt Group MD
Managing Director Mr Warren Murphy is an esteemed executive with an impressive background in finance and brings a rich experience from several industries. He has influenced top-tier energy firms such as Australian Infrastructure & Project Finance Group, Alinta Limited and Sydney Gas Limited. Among his notable achievements, he has successfully overseen the development of more than 2,000 MW of Greenfield power stations and facilitated the acquisition of over 3,000 MW of generation capacity. These accomplishments demonstrate his exceptional leadership and expertise in the energy industry.
Mr Warren Murphy’s exemplary guidance has been a driving force behind Carbonxt’s ongoing success. His contributions to global projects have left an indelible mark on the Company and the industry. Under his stewardship, Carbonxt Group is poised for sustained advancement and growth in the future.
Mr Murphy expressed his enthusiasm for the joint venture, stating, “Formal confirmation of our JV partnership for the construction of a state-of-the-art AC production facility in Kentucky is a landmark development for Carbonxt.”
Industry Outlook
Carbonxt has expertise in producing activated carbon products. Based on product specification, Carbonxt has USD 290 million US market size to cater with a 5% market share. Recently, several regulatory changes have been done by the Environmental Protection Agency (EPA) of per- and poly-fluoroalkyl substances (“PFAS”). The NewCarbon JV facility will expand the Company’s addressable market, focusing on water treatment.
Figure 6: Carbonxt’s Product Total Addressable Market
Carbonxt Group will explore new opportunities in water utilities. Across the United States, there are 50,000 water utilities, and 4000 of them service a customer base of over 10,000.
Figure 7: Data on United States Water Utilities
Investor’s Corner
- Carbonxt’s stock price stood at AUD 0.098 per share as of June 1st, 2023, with a 52-week range of AUD 0.090 to AUD 0.100
- As of June 1st, 2023, the Company has 275.29 million shares on the issue with a market capitalisation of AUD 26.97 million
- The Company holds AUD 6.17 million in cash as of December 31st, 2022
- Carbonxt’s superior research and development expertise allows the Company to adopt a solutions-oriented approach, crafting bespoke products that cater to the precise requirements of diverse industrial sectors
- Newly formed JV NewCarbon will facilitate entry into the lucrative liquid-phase market to produce a premium product cost-effectively. Gross margins are estimated at c.50%
- Due to recent regulatory changes, the upcoming Kentucky facility will catalyse the Company’s market growth, particularly within the water treatment sector.
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