Hey, thanks for listening. This is Ross Kenyon.
I'm the host of Reversing Climate Change, the podcast you
are listening to right at this very moment.
Before we get into the bulk of today's show, I'd love to tell
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LLPI really like doing shows about the law.
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together an enormous package, complicated structuring, a lot
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And now here is the show. thank you so much for listening to
Reversing Climate Change. I'm the host of the show, Ross
Kenyon. I'm a long time carbon removal
entrepreneur. Today I have a show unlike
perhaps any other that I've done previously.
Most of the time when people think about carbon removal or
climate tech startups, they think about them in the context
of venture capital. If you're a millennial or
younger, you think about venture capital, probably in the way
that it has funded so many of the software platforms and
products that shape our daily lives.
Maybe you've seen films like The Social Network or Silicon
Valley, and you're thinking about young, brilliant coders
who moved to the Bay Area raise a bunch of money on a dream and
ship some product that eventually IP, OS and makes
everyone fabulously wealthy. That's an idea that many people
have in their head, and it turns out that for much of carbon
removal, Venture is a fairly poor fit.
Carbon removal is about moving atoms, not bits, and that means
it just can't scale in the same kind of way software you build
it once you can sell it a million times.
And that just isn't true for pulling carbon out of the air
and storing it some place. So for a lot of carbon removal
businesses, Venture is just inappropriate and it will not
generate the kind of returns necessary to make the
conventional 10 year fund make sense for VC.
Of course there are venture capitalist involved in carbon
removal and climate attack, but the kind of deals that they're
hoping for are ones where they really are enormous runaway
successes. They might invest in companies
that have the ability to license their technology around the
world. So even if they can't
individually scale in the same way that software can, maybe by
licensing their technology or their trade secrets or something
like that, they might be able to duplicate the shape of the up
and to the right exponential growth curve that BC salivate
for. Or they're investing money in
the various software platforms inside of carbon removal or
climate tech, whether that's helping companies account for
their emissions and negate them. Some set of specialized tools
that help project developers just make their lives easier.
But if you're just trying to be a very effective project
developer for carbon removal, and maybe you don't have a great
technology mode, maybe you're just someone in dusty overalls
making biochar and trying to remove carbon that way, it's a
lot harder to make the venture story work.
The ability to have a breakout moment where you go from
building something at a small scale and being able to bend the
curve up very dramatically, where you scale several orders
of magnitude without a corresponding increase in your
capital. Costs.
Is pretty rare and that's what makes today's show so
interesting. Alistair Collier is the guest.
He is the Chief R&D Officer at A Healthier Earth, which is a
fully owned subsidiary of Pure DC, which is a data center
project developer, which is owned by Oak Tree, which is a
private equity firm. Alistair and I go into the
details of exactly how this structure came about and how A
Healthier Earth became a fully owned subsidiary of Pure DC.
And it's a really fascinating experience because it highlights
some of the financial innovation and maturation that's happening
within carbon removal. Private equity is the older,
more conservative Big Brother of venture capital.
You might say it's less low Key West Coast VC and it strikes me
as directionally more like the I bankers of New York City.
I'll explain what private equity is right now.
I imagine it's a term that many people throw around.
Maybe you've heard it and you already know.
But in case you don't, private equity is contrasted with public
equity, which is when things trade on a public market like
NASDAQ or the New York Stock Exchange.
Retail investors are allowed to participate in public equities,
but private equity is still something that one needs to be
an accredited investor, you know, sufficiently wealthy
enough to participate by signing an investment agreement as a
limited partner in one of these private equity funds.
And they're typically interested in later stage deals, not
exclusively, but often. So one of the things I think
about when I think about private equity and we talked about this
in the show is the idea of a roll up.
If you're in private equity, you might notice that, oh, the
Cincinnati metropolitan area has a hundred different roofers.
But many of these roofers are not especially well managed.
They don't have any standardization.
They don't have great management.
A lot of them are mom and pop shops, and the owners are
getting old and they want to retire.
What if we bought up many of the roofers in Cincinnati, brought
them under new management, gave them new tools that allowed them
to generate leads faster, to close deals more quickly.
We got better terms on their roofing materials because we can
negotiate on wholesale rather than retail terms, things of
that nature. That's a case when private
equity looks a little bit more benevolent.
And there's a book I read not long ago that's very critical of
private equity called Bad Company.
And it details how private equity will often times buy up
small local and Regional Hospital systems and try to
bring them under the same sort of business practices where
maybe the local hospital system started as a way of making sure
that residents in a rural or ex urban community have access to
great obstetric care. And that might have been guided
by concern for the community. But if private equity buys that
system, they might determine that those services are better
Co located within another nearby hospital system, which is, you
know, 90 miles away rather than 10.
And that can very much impact the health services available to
a community. Their job is to make things more
efficient. And sometimes that means, and
what I described with the roofers, and sometimes it means
cutting services for things that are not strictly profitable but
may be good for the community anyways.
And so private equity often generates really strong
opinions. The Toys-R-Us purchased by
private equity is something that still gins up a lot of strong
feelings for people. For example.
There's also covered in that book.
That being said, there are companies within Carbon Removal
who originated out of private equity, so private equity is
also involved in supporting talent and starting new
endeavors outside of the venture system.
Private equity does stand up founding teams and put companies
together that are very well capitalized.
In particular for businesses that have good fundamentals or
that will have good fundamentals on a cash flow basis, the way
that venture works is that you raise money if times are good,
you're told to like spend that money as fast as possible to get
as much traction as possible and then raise another round.
And, and at some point profitability catches up and you
have so much traction that you've either created this
market X NILO or you've taken enough market share that now you
can just start charging for it and you can go for profitability
rather than traction and scale and out competing everyone else.
But PE is a lot more conservative in this way.
They're looking for fundamentally sound businesses,
which is why I chose the example of roofing.
People will need roofers no matter what.
Roofing is just stable cash flow oriented business.
It's not looking for exponential growth, it's looking for solid
growth and better management. When PE comes into this, it's a
different kind of paradigm and they're able to take different
kinds of bets. I don't want to belabor this too
much though. You should just listen to the
show that I did with Alistair. I'll cut to it right now.
Quick plug, $5 a month. Become a subscriber to reversing
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very helpful and so appreciated by me.
And that's all. I'm going to stop yapping.
And I'm just going to get right to Alistair.
Alistair explains this so well, be thankful I didn't try to do
an Ollie G impression here, which I feel like is a real risk
when someone named Alistair's on the podcast, so I'm going to
skip that for now. Thanks for listening, I hope you
enjoy the show. Here it is, Alistair.
Thank you for being. Here.
Yeah. Thanks, Ross.
It's great to be here. We got to hang out in New York.
I don't even know if I can say this actually.
Do they care? No, we did, yeah.
We hung out in New York Climate Week.
It was, it was a really great week.
I think you were on the prowl trying to find curb and
businesses that have been invested in by larger
institutional sort of capital rather than typically what we're
funded in. Yeah, I, we were talking, you're
like, oh, yeah, do do some biochar project development.
Yeah, had an Aqua exit to PE kind of thing.
And I'm like, excuse me, what? What was that last part?
We definitely need to talk more about that.
I'm not even sure that's the correct way to characterize it
precisely. But you had a a strange
experience where I don't think a lot of people know what you did
is possible. I'm not even sure that many
biochar project developers know that they should be looking for
deals like this. And this is a time when I
imagine people listening are wondering what 2026 is gonna
bring and what options might be out there.
And I think your leadership on this and and doing this deal is
really interesting. Obviously, we're gonna talk
about a lot more than that, but that's just to set the stage a
little bit. Maybe let's start with though,
what is a healthier earth and run me through the life cycle of
the company to date. Yeah, sure.
So if we start with where we are today, a healthier Earth is a
wholly owned subsidiary of a company called Pure DC.
So a little bit of background, Pure DC is a data center
developer and operator primarily building hyper scale data
centers. So I think between 40 and 250
megawatts in size in Europe and the Middle East and we're really
specialized in doing that. We have about 500 megawatts
developed to date and we build primarily in urban environments.
So we were brought into as a wholly owned subsidiary in the
pure about 3 1/2 four years ago now.
And for that they were our our major, our only customer when we
were a fledgling startup focused primarily on research at that
time that helped them do some decarbonization.
They had a real focus on sustainability as a core
differentiator for them being a challenger, let's call it, in
the data center market. We're able to drive some value
and some decarbonization work. And that led to us becoming part
of Pure as a wholly owned public, as wholly owned, sorry,
subsidiary. What we do now is we have 3 core
focuses. So within the Pure portfolio, we
first focus on the decarbonization of digital
infrastructure. So actually how do we make data
centres less carbon intensive? Pure's been able to reduce about
22%, I think of our carbon intensity of a MW just by
building less, building smarter, building smaller building
standard. We build in kind of the new
materials. So think of biochar cement,
biochar asphalt, these kinds of things.
We look at how those materials can be incorporated into our
data centers to take us that next, that next bet.
The second thing we focus on is we, we regenerate the urban
environments or data centers are primarily built in urban
environments because that's where hyperscalers want them.
And when I say hyperscalers, I mean the major tech companies.
So here we're talking about Google, Microsoft, Amazon,
Oracle and Spotify, you know, the kind of core group that's a
core group of customers for us. And they primarily want
availability zones for storage, which are in urban environments.
AI is, is more remote. We're primarily at the minute in
urban environments. And so we do things like we're
supporting sure, building the one of the world's largest
living walls around our London data center, which will have a,
a biochar substrate within it. Be the world's first living wall
with a biochar substrate, reduces water usage by 60%
increase, completely eliminates grey water waste management, our
great waterways, sorry, and incorporates biodiversity gains
into the urban environment, which is really hard to do.
We do urban forests, so we did 3 urban forests last year.
We've got three to do this year. Urban allotments.
We have a living wall at a school local to one of our data
centers. So things that really engage
with the community support Pure and gaining planning and
permitting. Pure will both build and
operate, so run the facility for 30 years.
So we're a long term community tenant.
And then finally we produce high quality carbon removal credits
and we sell them to our customers.
And so we have focused on biochar as a, we started looking
at this about 3 years ago kind of post coming into pure and,
and really thinking about what oak tree might, might want or
want to be able to invest in that's ultimately pure as
investor. So our investor oak tree or pure
as investor oak tree, you know, very large private equity based
investor wants to deploy large amounts of capital.
They're an infrastructure property based investor.
And so we had to think about what would match.
And in high quality carbon removal is on the many things
you've got Biochar, DAC, Beck's, Hirthwark Weathering and we just
kind of went through like what would fit Hirthwark weathering.
You just can't deploy enough money like these types of equity
houses don't want to look at anything less than 25,000,000
and that's a total minimum, like minimum, minimum, minimum is
what I've learned. Banks is too big, banks is like
a billion dollars. So that's too big and and the
timelines are a bit too long in development.
DAC, DAC just has a lot of commercial question marks about
its long term that this type of investor who wants a quicker
investment return doesn't, wouldn't be appropriate for.
And so you cut left with biochar.
I don't want to disparage biochar here at all.
We're, we're a major biotchar developer.
But when we went through sort of 3 1/2 years ago, it was like,
well, biochar is really the only thing.
So let's go and develop biochar projects.
And we started actually backwards.
We started with how much can we deploy?
What is, what is a profitable site need to look like and how
can we get capital? So anyways, in there there's a
little bit of a nutshell of kind of pure what we're doing and our
and our background. It sounds like 3 1/2, four years
ago you are developing biochar as a project developer, you are
building a biochar business. You have one customer, it's pure
and you end up in an acquisition kind of discussion with them
with your biggest slash only customer.
Is that a correct characterization I mean?
Actually, I'd say it's something different to that.
We we really didn't talk about biochar until post.
We came into the Pure organization that we were really
focused on biofuel. So Pure has a global standard
that they only use HBO in backup diesel generation and also have
a really big bio gas strategy for a gas powered data center in
Dublin. So carbon neutrality in our
energy system and that that's actually the work we did with
them. So we were focused on, you know,
can you switch to HBO, what would it mean?
What would it mean from a carbon intensity and these were the
kinds of problems we were, we were working with.
It was sort of post coming into the pure organization that we
really sat down and said, OK, what can we do now we're here
with the the benefits that we have.
So the access to capital and with the access to customers.
And that's where when we started looking at the strategic
alignment that really asking the difficult questions about what
does AHE do within this data center business that we kind of
came up with the three-point strategy.
I, I just discussed with you and then it was OK.
Well, if we're if one of our big strategic sides is that we're
going to create value for the pure organization, we're not
going to be a cost center, we're going to be a profit center.
How do we do that? We've got to sell products.
What products can we sell that naturally align to the
opportunities that sit in front of us, right.
Access to capital and the yeah, access to potentially
hyperscalers. And that's where carbon credits
came in and we said, OK, what can we do in carbon credits?
And that's what led us to that decision tree of kind of OK,
what can we do in the next sort of three years that would be
meaningful. And that's how we ended up at
biochar. So pre kind of coming into the
pure organization, I probably didn't even really know biochar
this like maybe like of marginally aware I would
describe it. Interesting.
And so there's a part of the business that is offsetting
oriented and revenue generation, but there's also an insetting
play here. You're a vertically integrated
project developer for the development of data centers,
urban data centers, but also you're selling credits to
external partners as well. Is that part of the problem?
Correct? Yes.
Yeah, I mean, we've really struggled with the insetting.
I'm not going to lie, in setting is really hard.
But even with some of the way some of the hyperscalers draw
their boundaries around energy generation and energy use in
data centers. Even if we had a fully BEX
energy center right next to a data center that a customer was
taking from us and we had both assets, they wouldn't be able to
calculate. That's in setting because of the
way they draw their boundaries. So in setting is really
difficult. Yeah, it's, it's, I mean, I went
through, I've, I've tried, I've pitched a few things.
We've got a couple of things in the irons of the fire there and
it's just like you hit these kind of weird additionality or
weird carbon boundary challenges that until you really get into
it, you'd never thought of. So, so in settings hard, you
know, we, we have tried it where like with our biochar Asheville,
for example, we're looking at doing now scaled trials in our
data center environment. So in operational environments,
so not like a little meter square to the edge of a parking
lot, like an entire data center development or a large portion
of it with a biochar base. Asphalt which we've proven has
some commercial value, for example living wool, I talked
about where we'll have a biochar substrate into it.
I mean our office, a new office in London has all of our indoor
plants have a biochar substrate in them.
But it's, it's small beer, right.
We've what we've found is that actually it's easier to keep
these things apart and create semi stand alone businesses,
let's call it that generate external revenue even though it
may be coming from the same customer group.
Fascinating. I think people are watching
global policy right now and are concerned and wondering about
the demand dynamics within carbon removal and are hoping
that in setting in certain supply chains, whether the built
environment or Agri business will be robust enough to keep
them alive if offsetting isn't nearly as strong as maybe they
they hope. But it sounds like you're saying
in setting is not nearly the magical Deus Ex machina for
carbon removal project developers.
Yeah. I mean, I think each industry is
different. I think certainly in digital
infrastructure, it's much more challenging because of the
standards that we have to we have to adhere to, to build our
actual digital infrastructure. There's not much flexibility.
You don't necessarily see benefit in your data center
buyer, but where your data center is selling to them for
being a carbon neutral or a less carbon intense data center, even
though on the other side they may be offsetting a huge amount
of their operations or buying offsets.
So even internally within organizations that I would say
are really leading in this space, they haven't yet been
able to fully reconcile that side of how the supply chain
talks with the purchasing arm. So I think you know any
organized, any commercial organization is going to be
customer less. And when customers are sort of
signaling different things, it sometimes it makes it
challenging. Like my biggest problem is that
there isn't a major scoring benefit for a selling a data
center that has a lower carbon intensity, even to a customer
who may be very active in purchasing offsets.
I imagine that dynamic is probably not going to be
improving given the political climate around energy mix.
Yeah, I mean probably not unfortunately.
And I think it's why, you know, when we talk about politics, at
least what I have found with the investors I'm talking to you and
specifically the investor types I'm talking to are large
institutional infrastructure or property based midcap to large
cap private equity funds, right. And what I found with that group
is that actually political, political contracts or contracts
that are based on political will or particular not political
will, but even legislation are not seen as credible as high
quality commercial contracts in G20 countries where you have
rule of law with large organizations that have a strong
balance sheet. And the simple reason is you
call it sewer government. Well, you can.
I mean, the US has found this. You can't be sued, but it's a
lot more difficult and costly to sewer government than it is to
sue an organization for breaking a contract.
And so if, for example, is what's happening in the US with
offshore wind where, you know, is it worsted just one
injunction actually against the US government, Very costly, very
difficult, got to have really high stakes.
Our contract values are not big enough for that kind of thing.
And so, you know, we would much rather have a 10 to 15 year off
take with a high quality third party counterparty with a AAA
rated balance sheet who in in, in the US or in Canada or in the
UK or Western Europe where you could sue them and you've got a
good chance of winning because your contract is ironclad.
And so actually the more your project, in my experience with
these types of investors or your revenue stream specifically rely
upon any kind of legislative component actually that reduces
the investability at this scale. Now at the medium to lower
scale, like I think in the VC world or the less sophisticated,
maybe let's use the word investor, they're kind of like,
oh, you have to have at least a portion of your revenue in, you
know, Chrysia type or in these kinds of things.
My investors are looking at 15 year yield returns and they see
a lot of risk in that because what's going to happen in five
years? What's going to happen in 10
years? We literally have no idea.
Nobody has an idea. And so if that isn't actually
part of your business case, but it's directly contractual, that
actually increases your invest ability.
Wow. Many people in carbon removal
have a typical startup founder heritage where if they do have
access to investors, so far, it's likely Angel investors or
venture capitalists. But they're not interacting much
with PE private equity. They're not interacting with the
Ontario Teachers Pension Organization like that.
Institutional investors are like something that like you, you
read about on TV with Warren Buffett and somewhere else and
like whatever. What?
What what's it like we're doing business with those people
versus the VCs and angels that maybe people are more used to?
Yeah. So I mean, I've got probably,
there's probably 2 tangents, tangents to this.
One is my opinion of what is the right type of capital for our
type of projects. And then the second would be to,
to answer your question directly, what is it?
What is it actually like to work with them?
So maybe do my opinion 1st and then.
Yeah, go ahead. So I fundamentally think that
that VC and even Angel investors are high net worth individuals
are the wrong kind of capital for our projects.
The reason is, is that VC models are generally based upon quick
cash turn around, so high apex, low CapEx.
So lots of, you know, bunch of people sitting in a cafe writing
on a, on a, on a, on a computer to get code out to get the scale
right. And in climate, there is some of
that registries, certifiers, rating agencies, they fit that
model. But the core people who are
actually delivering the credits, we don't right.
We need to spend millions of pounds even for a small machine
if we think biochar here to get to any kind of, it's not even
scale, but just production to get to to revenue.
And it's not like I can subscribe someone up who's going
to then pay me £50 a month for however many as long as I get
20,000 of them. My revenue model works like it
doesn't work that way. And so the VC return profile,
generally they have like a cost of capital of between 30% plus.
And it's really hard in a bio term, like my projects do not
make a 30% return, right? So if you've got to make a 30%
return hurdle just to get your investor back to even in their
world plus then make above that, that kind of have any exit
trajectory, like it's not going to happen.
The second issue with high net worth individuals, they're
really important. They're a great part of it, but
they take too many risks. They accept too many risks.
What that means is like maybe they'll build the first pilot or
the first sort of subscale, but then the money.
So let's say you spend £5,000,000 building a biochar
facility and you take loads of risk.
You get a, you know, a less, less well deployed machine or
you just feedstock is not that sure of or, or whatever.
But you, you get there, you build it, you kind of muddle
through, you make some biochar, you make some credits, you
certified like, you know, you're winning.
And then you go for like, OK, now I'm going to go buy like
four more of these machines. I know all the problems, I can
fix them, but now I need like 15,000,000, 15,000,000.
Still too small, right, for the type of investor we're about to
talk about. And also there's so many risk
holes in your business model that those institutional
investors are going to not look at it.
They're going to look at it and go, and I would never accept
that risk. Why did you enter that contract?
That is not the way I would do it.
And they won't invest. The other problem is generally
like this 5 million kind of mark where a lot of people are
sitting because this is the only money, right?
All you're proving is you can make biochar and you can kind of
sell it. And yes, you can make customers
for your, for your credits. But what you're not proving is
that your business actually makes money.
And so they're going to want to see your track record and show
them your track record. Thinking like, I'm a good
businessman, I've done this, you know, it's bootstrapped, It's
all this kind of stuff. And they're just going to like,
you're just losing money. You're literally your unlivered
yield is like -5%. I'm not going to do that even if
you go to the Oh yeah. But if you scale it, if you, if
you as soon as you get into that world of if you, if you, if you,
no, they're not interested. And that segues nicely into what
your actual question is, which is what is it like to work with
these people? And I mean that the nicest way,
Like what is your like to work with these people?
So I describe myself as oak tree trained and I say this to their
face so I don't feel bad about sharing this.
And what that means is, and Oak Tree have been really supportive
in helping me understand what they need to be able to make an
investment decision. And I feel extraordinarily
fortunate because most people pitch, you know, if you do get
the chance to pitch APE, like you make pitch once, you get
told no and that's it. So then you go to the next one
and you try them and they say no and you're like, that didn't
work. And you go to the next one, they
say no and like you're not really getting anything When I
say that Oak tree have been supportive and they've said no a
lot more than they've said yes. But what they have done is
they'll explain to me like why? Why are we saying no to you
right now? And so the first time to get the
development funding for Royal Wood and Bassett, which is our
first project in the UK, it's about a £24 million sterling
total investment in a biochar facility, which we announced
just the end of last year. For the first nine months, they
said no, I'm, I think I went to them 5 or 6 times with
investment decks, each one probably 20 to 30 slides.
And each time they said no. So the first time I went, I went
with like what I always see, right?
It's three years ago now, like what everyone always has, right,
which is loads of preamble on the potential upside, right?
Like a broad market theme, right?
So a, a investment thesis braced upon a broad market theme and
directional travel that they can see referencing things like,
hey, look like the Biosure market is exploding.
It's 84% of global delivery of high quality carbon.
It's growing at this rate. And if it continues to grow,
this is where we're going. The EBC says that it's going to
grow this fast. And by the way, look, Microsoft
and Bain and BCG and all these people are taking all these
credits. So there's going to be huge
credit demand. That biotech has all these
amazing things it does that, you know, solves flood risk, it, you
know, fixes agriculture. It's the future fertilizer,
whatever, right? All the upside, all the
amazingness. And by the way, we can make five
of these facilities and it's going to cost as much of what
we'll make up a gazillion dollars, right?
And like, I made that deck, right, which is what everyone
does. And like, my, my financial model
was slide 35 or whatever is right.
And, and like, I remember sitting there and the guy from,
from, from, from oak tree was kind of like, you know, on the
meeting with me. And he was kind of like sitting
there, like, you know, I was giving my pitch.
OK, I'll so I read the deck. I think it's really good.
But like, how does this thing make money?
And I was like, OK, well, I mean, we have like, we have to
sell biochar and then we just sell these carbon credits and
then we sell this energy here. And he's like, yeah, OK, great.
It's a no for now. But, you know, can we come back
and like, just say to me how this thing makes money?
So like learning slide #2 revenue model, how does this
thing make money, right. Slide #1 executive summary.
This is what we're trying to do. By the way, Slide number one
says I'm requesting 2.4 million to do whatever, right?
Like this is the development, this is the work we've done.
This is what we do. Slide number 2 is revenue model.
This is how it makes money. Great.
Same thing went up, you know what I'm saying?
Yeah, I can see how it makes money.
What are the key unit economics that drive the profitability of
the business model and what are their sensitivity to the
underlying risk in the market? And I was like, I'll get back to
you on that Google. What is, you know, unit
economics? Not quite that.
That no, you're kidding, you didn't have to you go that, did
you really? But like.
Yes. But so then so slide number 2 is
like what are the five key unit economics that drive this
business case and the profitability and then where are
we on that? So I made these like, so we
always use the slide. It's like a sound sounds, you
know, like the sound dials. You have a like a switch on a
sound board. They're literally that.
And what we do is we put in triangles that are like external
reference points. And then we have a circle, which
is our target. And then we have a square, which
is where we are today. And the square is either Gray
for it's an estimate, blue for it's kind of semi quantified or
it's green. It's contracted.
And what they want to see is they want to see it contracted
or proven with tests. So carbon credit multiplier,
carbon credit price, feedstock price, biochar price, biochar
offtake. I think those were the five.
And so yeah, literally that then you'd economics.
So you know, what is it like working with these people?
They're interested in how does it make money?
They're interested in how it generates an unlevered yield.
So infrastructure event, we'll talk about that and talk about
that in a bit. And they're interested in the
economics. So in my decks now, like I'm
literally doing an approval deck right now with widow trade and
you know, like biochar is mentioned probably on slide 12
in the appendix. They basically say like, yeah, I
get the upside. Like like cool, yeah, yeah.
And I get it. I get it's really good for the
environment. Great.
But I could only do this investment if it financially
works. So like all of that stuff only
sell me after I've already decided this financially works.
And what I need to know if it financially works is what's its
unlevered yield. So yield investors,
infrastructure investors are looking at unlevered yield.
Unlevered yield is your stabilized EBITDA when you're at
full operations over the total CapEx it costs you to build the
thing. This is literally with no debt.
So take that out literally that number and that gives them a
really good way to peg this infrastructure investment and
the risk they're taking versus others.
So give you an idea like a bridge, build a bridge makes
like a 4 to 8% unlevered yield, super like stable, right?
When you're building a bridge, it's going to be there for 60
years and the government's going to pay you every year, whatever,
100 million for the bridge to be there.
Right. It's probably like through a
bond or something like that. Yeah, exactly.
Right. So data centers are like 8 to
10% because 15 year off take with a high quality third party
hyperscaler with a great balance sheet with a suitable contract.
Yeah, like pretty low risk. One revenue stream locked in for
15 years. Low risk commercial real estate,
12 to 14%, maybe as low as 10. If you've got like a long term
tenant, like a Merrill Lynch staking, you know, half your
building before you build it, yeah, you could probably get
lower frontier climate change or you know, climate 17%.
That's your a levered yield right now.
A 17% of the levered yield takes for account the fact you've got
multiple revenue streams, you've got risk because you probably
only ever going to be able to get 40% of your revenue on a
long term off take. You're going to have feedstock
risk. You're going to have long term,
you know, spares for your machinery.
You're buying a machine now is the manufacturer of your machine
going to be around in 15 years to supply you with the spares
you need to keep your machine running?
Nobody in the biochar market, barring Baby Pyrag could say
that they have any, any chance of being able to say that that
will be true. And so like, these are the risks
they're taking. That's why it's 17%.
But it, that's an attractive number because like, you know,
it's double what I make building the, the skyscraper.
So now I'm interested. Like now I kind of want to make
the money, but now like, and I try to deploy like 50 million.
So like, because I'm not going to get a big so we can talk
about the banks in the second of debt, but they're like, hey,
Kylie, like needs to be around 50, like preferably 100 million.
Like should we get there? I mean, I've talked more, I've
talked to more people who are like, I want to deploy 50
million in the biochar, but I just don't know where to do it
or who with. Like the problem is not that the
money's not there. It's that generally speaking, I
think we're thinking too small and we're not pushing, we're not
speaking their language. We're, we're, we're approaching
it like we're trying to save the world or we're pushing from a
very use case perspective rather than like the core fundamental
financials. Wow.
And when you're having these conversations as a fully owned
subsidiary, are you selling project equity?
Is that how this deal works? Yeah.
So the way that and this, this now links to to the to the debt,
right. So, so any equity investor is
looking to deploy equity and then to back that equity out
with debt. All right.
Now, the way that project finance works, which is the
typical type of finance that a normal non frontier climates
business would get like a, like a, a bridge or a, or a building.
Like I was saying, is that the equity will build the building.
So the equity will put up the money to get the thing to COD.
So from FID to COD it's 100% usually, not always, but we can
say in infrastructure is often often equity.
And where I'm simplifying here, obviously a major deals with
multiple phases, you're refinancing as you go.
But let's just keep it simple, right?
So equity is deploying your money.
So let's say like like take my project 24,000,000, that's an
equity deployment. Once you get to commercial offer
to COD. Now the banks will come in and
refinance the equity. So what they'll do is they'll
say, OK, you, your site is now running.
We believe in the contracts you signed for the revenue that our
interest payments and our repayments will be made.
What we'll do equity is we'll give you 70% of the equity you
put in. So if we use simple numbers,
let's say my site cost 10 million, we're going to give you
7,000,000 back and you can go build the second site with your
7 million, right? And we'll finance 7 million of
this. And they're looking for a five
to seven-year payback period on the debt.
And the attractiveness of the project finance is that if you
get really, really boring, like vanilla plain project finance,
which I don't think anyone's gotten in our, in our sector
where we're trying really hard, but it's still hard with, with
our backing. Like your interest rates are
much lower. Like you're talking maybe you
can get into single digits, like high single digits, maybe you've
heard of even kind of like mid single digits.
But that's where project finance gets you.
And that is super attractive because if you're making a 15%
unlevered yields and your investor wants a 12% return and
now you've come in with a 5% debt, everyone's happy, right?
And that, that's the sweet part. That's why like VC, it just
loose never works. I cannot generate 30% return
even with my biggest projects. So it's just it's never going to
work. And they're never going to give
me 24,000,000 when I've got 0 revenue, but I've got contracts
for revenue, but I don't have the revenue coming in.
It's not how their model works. You know, when I think about
private equity, I think that often times they're acquiring
businesses that have solid fundamentals, that are maybe in
a bad cash flow position, but with better management that they
can maybe install, they can make the company better.
Alternatively, they buy companies and sell them for
parts, which also is a reason why people don't always love
private equity. I imagine the truth is that both
of those things happen. They're both success stories and
horror stories. Yeah, go ahead.
Yeah, yeah, they're, they're standard models, right.
So you've got the the roll up, which is I buy a whole bunch of
businesses that are the same. I crash them together, create
synergies. I'm cutting out a whole bunch of
management and I make extra return and I sell the business
on second one would be, yeah, I buy a failing business, an asset
strip and, and, and, and do it that way.
But I think if you look for growth PE, which is, you know,
or Special Situations, I think they're called PE.
They're really looking for growth businesses where they can
deploy capital in businesses that have a repeatable model.
The key is it's got to be repeatable.
So this isn't like, oh, I'm doing a a bioschar business in
Kenya focused on some type of switch grass.
And then my second project is I'm in Australia using a a waste
of of non indigenous weed. And then my third project is in
South America on coffee beans. These are not repeatable
projects. Piritek would not be investing
in this kind of model. Piritek, we would want.
I have a very clear model that I use a very specific feedstock
from a certain type of customer. I use that to produce a very
specific type of biochar that goes into this exact type of
industry. I have demand for that biochar
up to 60,000 tons and each site produces 10,000 tons of biochar.
And so I need to produce 6 sites.
And so I'll build the 1st and when I'm home with you building
the 1st, I'll start building the 2nd.
And by the time I've finished building the finished the 1st,
it's operational, the second is halfway and the third is
starting. Wow, that's what they want to
invest in. I just spoke with a product
developer the other day and they were telling me about how
important it was for them to distribute their risk
geographically and across project type.
And I had a similar reaction where I'm like, wouldn't you
just get better at doing the same thing over and over in
different places? Maybe that would be a safer
thing on net, assuming you chose the right political geography to
make sure that this did happen in that way.
Yeah. I mean, I think that that's so
it depends, right? Like if you're a developer and
you are developing in less developed nations in the global
S maybe then or or nations that don't have a strength of rule of
law, which is really key for these kinds of investors, then
yes, that might be a strategy that works for G20.
Let's call it countries. It's it's repeatable.
These investors want a cookie cutter approach that they know
works with the management team they believe can deliver and
they want to be in the check sizes of 25 to $50 million per
site. And that is, that's what they
want. If you could do that, they'll be
very interested. This is totally a tangent, but
is this why basically every city looks exactly the same?
They have the same condos, they have the same strip malls,
Everything is just a pattern that can be repeatable for
financiers. Is that why this exists?
I mean, it's, it's probably, there's a lot of truth in that.
You know, once you can do it once, it doesn't doesn't
necessarily pay to be different or unique.
It it pays to be simple and to be repeatable and to be able to
turn a handle and do the same thing over and over again.
Unfortunately, it does create maybe urban sort of, you know,
kind of similarities. But in our world actually, you
know, that's that's what we need to do, right?
Like we don't need a biotchar project to look different.
We just need a lot of them and we need them fast.
Such an interesting point, and such a deep, deep tension for
aesthetics and ethics and so many other questions about the
entire world. Turns out most of these
questions end up touching the entire world when you start
asking them. What advice might you give to a
company that is working in biochar right now?
I suppose it could be any type of project development, but
you're closest to biochar at this point, even though
historically you have not been. What advice could you give to
someone who 2026 might be a hard year?
People are looking for potential exits or partners or financing
that might be different from the 10th BC telling them no after
spending a lot of time in their data room.
What should they? Do yes.
Well, I mean, first we actually wrote a guide which we launched
at COP 30 that goes through this called the Bioshock blueprint,
which you can download on our website at a healthier
earth.com. It's about 60 page report.
It's going to be 12 different collaborators that go through
this in a lot of detail, I think.
And, and it's, it's a really great, great resource and it was
designed to share a lot of our learnings over this, over this
journey. I think again, it, it all
depends on where you are in the development journey.
So if we talk about biochar, stop pitching the benefits of
biochar and start pitching the, the business fundamentals and
the financial fundamentals. So here's my pitch.
I'll give you my pitch. This is the pitch that I give.
It's the pitch I was giving at New York Climate Week and it's
proved to be very effective. My pitch sounds like this.
So people ask me what I do, right.
You go to these New York Climate Week events, you're up in sub
tower with the lawyer office and like some investor guy comes up.
She's like, what do you do? Or a woman, what do you do?
And I go, you know, I, my company is called a heavier
Earth. We produce high quality for rule
credits, but it's really boring. I don't think you'd be
interested. OK.
And they're like what I mean what do you, what do you, what
does your business do? Like what is it?
I don't even know what carbon credits are like what does it
do? And I was like well we generate
15 to 17% of levered yield and 19% IRR.
We do that with having 40% of our revenues locked up in 15
year off takes with high quality third party counterparties with
a AAA rated battle sheet. Our check sizes are between 15
and $25 million a piece and we have about 11:50 of these to
deploy over the next 18 months. Like I said, I don't think it's
for you. Yeah, you sound like an alien,
first of all. And I also, I love the sort of
like the way that you're distancing yourself.
It's like, oh, you probably aren't interested.
I'm gonna go walk away. I love classic technique dating,
classic technique of business. OK, fun.
But also like just speaking their language, they're like,
no, that that actually sounds super interesting.
Like what are you doing? And it's like a single biochar
produces high quality carbon removal credits that we can sell
to customers who want to buy them.
It also produces a product called voucher that we can use
to create agricultural, horticultural building material
benefits. And and we have facilities that
cost between 15 and 25,000,000 to build that that to produce
this this product and and we sell them into the market.
Like OK, yeah, that mean sounds interesting.
I was like, yeah, multiple revenue streams can be, can be
downside, can be an upside. And you kind of then get into
detail on their questions. But then all of a sudden instead
of it being like, dude, I've got this thing called biochar.
It was admitted like 2000 years ago.
It's going to literally revolution.
I think it's going to be bigger than coal by 2015.
OK, well, let me tell you about it, right?
And literally at me, they're like just switched off, not
interested. And so like, don't make your
financials page 35 on your slide deck.
And like, you know, press releases about big investment in
the biochar from pure DC and Microsoft off takes and Google
off takes and like that stuff in the appendix #2 slide is the cut
4 core fundamental financials of your business.
That's what you need to be selling and you need to be
selling it. And if you're not making money,
then don't sell your business yet.
Figure out how you're gonna make money before you try to invest
in your business or get investment in your business.
Very sensible advice, but you seem very competent to do this
alone. Like you could probably be
successful and not be a fully on subsidiary of a hyperscaler
project developer, so why go down that route?
Why not just do it yourself? You keep all the equity, you get
all the upside. If you're successful at it, why
even bother with this weird structure?
I mean, it's, it's, it's because there is no way that I would be
sitting at the tables that I sit at.
I would not, you know, I would not know.
I know what I know now because I've sat at those tables 3 1/2
years ago, four years ago, I was pitching the wrong way.
I was doing it all wrong. And I would have been just as
unsuccessful as. I think that's a bit me, but I
wouldn't have secured the funding right like I would have.
There's been no like you're a smart guy and this thing seems
interesting, but like stuff for us, like sorry.
Yeah. And I think that for me has been
so valuable like I could not put.
And that's why he served himself as oak tree trade like the the,
the gauntlet, whatever you work whole night like and measure a
success on how quickly we can get money approved from promote
tree, right? You know, how well are we doing
and speaking their language. And I think nine months was the
first time it took me to get something approved.
My personal best is -18 minutes. So 18 minutes before we're
supposed to sit down or review the deck.
Just got an e-mail saying Alistair, we don't need to
review the deck. The money's approved.
It is up to date. Thank you very much.
And that was not an insubstantial amount of money
that now with their world, it was an insubstantial amount of
money in our world. It was a very substantial amount
of money. And so like, there was no way I
was ever going to get access to that where I retain equity,
where I am fighting for, you know, whatever, whatever portion
that that I get. You know, private equity has its
own way of and a different way to to kind of BC or the
traditional model of hold on to equity as much as you can.
That's not the PE model. the PE model is I own the equity as the
investor owns the equity. And so there are mechanisms and
approaches that they use that still incentivize management to
be very engaged that, you know, are different than you owning
the equity. And I guess kind of one year in,
it was, you know, pretty easy surmise is like, you know, do
you do you own 100% of nothing or maybe a small percent of
something very big. And you know, and so even
ownership, you can't think of it that way.
But you know, if we kind of make the comparison and yeah, it was
a very easy decision to make. It was very well aligned, pure
been a huge part of the evolution of the original
company as well. So really from the outset, it
was it was very well aligned. And it helped that some of the
people of some of the leadership up here I'd worked with before,
before all of this in my previous career.
So I had a bit of relationship there that made it easier.
And yeah, like there's no way I would, there was no, there's no
way I'd get into the rooms I get into the banks that want to, to
lend with us, the government institutions, the other
financiers that I talked to. Like there's so many rooms I've
got into that I shouldn't have been able to get into that.
That has got me into that's been.
You can't calculate the value of that if you get my draft.
I do OK, but someone listening here may not be super fluent in
finance in the way that you are very comfortable walking into
that room. I'm sure you have the right
clothing to fit in with the PE folks.
I imagine it's different from most people making biochar.
It's a different kind of community here.
White shirt, New Jule. You want to really fit in White
shirt, blue Jule, blue slacks and like, what are those?
The lean like trainers with the whites, The white band around
the bottom. I don't know what they're
called, but that is the uniform. Listen up people.
That's, that's good advice, I think for culturally fitting in.
But like, what do they do though, Because this is also
rooms that they don't have access to.
You have a previous career that prepared you for this moment
where you could take your business and know that you're
getting a, a deal that's ultimately worth it.
You're losing control of your company in a certain kind of
way, but you're getting access to rooms that you wouldn't have
otherwise access to a lot of financing.
This is a great deal, even if you're not going to see the
billion dollar IPO, which by the way, like many project
developers are probably all of them, maybe maybe 100% of them
will never see any ways for product development within Cdr.
Like that's probably not going to happen anyways, but like the
idea of having ownership and being a founder in this kind of
way where you own the company, maintain control.
People watch things like the social network and they think
about the ownership struggles of startups.
They want to be in control. PE likes to own everything that
they can because they want it. They want management decisions
to be in their hands and make sense their money.
Where do they line up to take meetings like this?
How do they prepare themselves? Or is this just you because this
is your previous career and you speak the language already?
No, I mean, I wasn't accountants before this, but my background
was, yes, I have an MBA and all that kind of fun jazz, but I
definitely did not speak the language going in.
And that's why I thankfully said no so much.
I think look, the problem is we are not we are not startups, all
right? Everyone needs to stop thinking
about outside of like the registries and the certifiers
and the rating agencies and, you know, all the soft stuff like
we're not going to app our way out of this problem.
But everyone who's building an app, OK, like, yeah, you could
probably think about it that way.
Like you want to retain ownership.
You can think about it like like a, you know, any type of Silicon
Valley sitcom, like, yes, but we are not a start up.
We are infrastructure development company and other
biotrue developers are building infrastructure.
They are not building start-ups. So firstly stop the key of
building a start up. So unless you can stump up
£5,000,000, you don't have a start up, you are building
infrastructure and nobody owns infrastructure except for the
people who are putting the money in like they're not being.
That's the way it is. So if you want to get access to
the volume of capital you're going to need to get to real
scale without, you know, really struggling with boots trapping,
really struggling with getting grants like this is the way to
get access to the level of capital you need to do your
business. Now, you need to be clever in
how you negotiate your management package, right?
There's no question about that. And there's loads of lawyers out
there that can help you do that. You just need to pay them a bit
of money. Go get a really good lawyer,
right? Who if you get to the point
where someone wants to buy your business or invest, let's that
was even bad language. They're not buying your
business. They're making the in discipline
in the infrastructure that allows the business you want to
exist. That's what's happening.
They're not buying your business even though that is what happens
on paper, like you lose ownership.
What they're actually doing is they're investing in the
infrastructure equity required to make your business run.
And that's what you need to think about it.
And if you were at that point where you have an investor,
let's imagine you've got Ontario teachers pensions on the line,
right, somehow and they want to deploy 50 million into your
project. You've got them, you've you've
pitched them, right? You're at that point.
Get a really good lawyer, right? This isn't like term sheet
stuff. You're not going to be going
through term sheets like you would in Silicon Valley startup.
You are going to be going through a management incentive
plan or a long term growth equity share plan that will
align to certain objectives that you need to deliver that will
then reward you commensurately so that you benefit when the
company benefits. So you still have a benefit
structure, but just get a really good lawyer.
All right, I can not stress this enough.
And there's loads of them out there are expensive, but get
one, OK, you don't have to know everything, but to get to that
point, I think your question also, Ross, there was how do
you, how do you get to that point?
You, you have to, so you have to think big.
You, you, you have to like $5,000,000 is not big enough.
It's not going to float anyone's boat.
It's too big for the small guys, small with individuals who might
do it, like like the smaller individuals and it's too big.
It's, it's too big for them. Sorry.
It's too small for, for any of the private equities, like 2025
million, kind of the minimum scale.
You need to have a really core product and you need to have
contracts. So like is your EPC contracted?
Do you have draft contracts for your your machinery?
Not like I've been to China and I've seen the machine.
No. Do you have the draft contract
that's been through your lawyer that is ready to sign?
Do you have planning and permitting for your facility?
Do you have certification already?
As much as you can done? Do you have a pre off take
contract for your credits? Do you have biochar offtake for
at least three years of your operation?
And when I say like biochar, I'm not saying like, oh, the guy
down the road said he's gonna take it to put in cement.
No, I mean like assigned letter of intent, minimum draft heads
of terms better like draft contract, best sign contract.
Actually the best, but very difficult to get without that.
Show up with those things, tell them that you have a you're you,
you can, you have a business that can generate a 15% or
higher unlevered yield that you need to deploy 20 to $25 million
pounds sterling, whatever that you have.
These contracts progress to the point where they would be ready
for signing or close to ready for signing, subject to an FID.
And that you are looking for £1,000,000 to get yourself to
full FID, to use the right lawyers they want you to use to
do the work they want you to do to finalize all of these bets.
And then once you've done that, so they're only putting a
million on the door door now. And yes, you might be giving up.
It might feel like you're selling your company for
$1,000,000, but what you're actually getting is a real
chance to, to, to, to, to, to sell you to, to, to build,
sorry, the business you want to build.
They'll spend the million with you.
You do the work you do. You do it on time, not early,
not late on time. Do not be early.
It's not good. Doesn't look good.
OK, I've done this. I've been like, hey, they're
like 5 months early and I need the money now.
And they're like, so we don't have the money right now.
You told us it was going to be needed in five months, so you're
going to need to wait for five months.
Why did you do that? Don't be early, don't be late.
Don't be over budget. Don't be under budget.
Be on time and do what you say. Show up with the millions spent.
I've spent 995,000 of your millions.
This is what I spent it on. Yes, there was a bit of moving
between it, but it was all right.
Here's the contracts now at the state you said they would be.
We're now ready to go. We have strong confidence in our
ability to deliver the 15% levered yields.
Can we now have the $24,000,000 to actually want to build this?
By the way, I only need 6 million to get me over the next
18 months. The rest of it comes when the
60% balloon payment is required for my machine machinery.
So I actually only need 6,000,000 now.
And by the way, if this whole thing goes up like completely
wrong, we can sell the site to these people, likely recover 20%
of the value, we can sell this and we can make the people
unfortunately redundant right away.
Therefore, your total equity exposure is maybe only about 4
million. So really you're only risking 4
million for this upside. That is what you need to do.
And like again, the bioturist stuff that's in the appendix,
unless it's relevant to the contracts that you have, it's in
the appendix. The like great things that's
going to do the world in the appendix, the fact that dealing
with your biomass stops, I don't know, algae flows into the Great
Barrier Reef that you know, kill loads of things great in the
appendix, the glass light in the appendix, all just upside.
This is such a fascinating contrarian take.
I don't know that I've ever heard.
I've barely had to do anything in this podcast, by the way.
I just let you let it RIP potentially like, which is fine
for me. I'm just like, this is great
stuff. People should, should know about
this is is anyone else thinking about it in this way?
I know of some PE originated company that just like grew out
of private equity from the very beginning.
I know some of these deals that do exist, but I, I never hear
anyone talk about it's mostly people who are very
sophisticated who have done things in their careers that
previous, this is not their first experience doing serious
big business deals with other people.
They're not just start up founders with a dream and a
pitch deck. It's a different kind of person
that comes at it from this angle.
But is this happening? Are you seeing more of it?
I'm trying to not really I want to see more of it like I'm
seeing a couple of funds like midcap funds, so between a
billion and $2 billion sort of in capsized the one to deploy
exactly to these markets, exactly these prices, but can't
find the people. It's part of the reason that we
wrote the biochar blueprints to try to share this way of
thinking and and this approach so that more people can access.
So the things that we learned and also some of the key, you
know, like our lawyers are, are in there.
So if you want to use lawyers and you could probably, you
could probably reuse them, they're probably pretty good.
They're sponsors of the show, too.
It's Phillip. Phillip Lee LLP Yeah.
Exactly. Yeah, yeah.
So, so, so Phillip Lee, our, our, I've commented there, you
know, gives people maybe a pathway to get to this, but
there needs to be a lot more. But what I can say is like, if
you can do this, there is a lot of money out there.
Like I have literally had at least three conversations with
other equity houses who have said I've got 50 to $150 million
to deploy in biochar right now. I've been looking and I can't
find it to deploy. And it's because they don't want
to write checks for less than 25 or $30 million and they want it
back. Institute people management
teams they believe can deliver. You're a guy with a dream and
you don't have infrastructure experience.
You're #2 should have a infrastructure experience.
Like you need to be credible that when you get given $6
million you are going to deploy that and you are going to sign
contracts that will move the project forward and not, you
know, not do that. Party mansion?
Yeah. What exactly?
This is not BC land. Like that's what BC does.
BC throws money to you and like do what you need, spend your
money. This is not that.
This is, I would describe it as forensic, right?
They will be through your contracts like oak tree is
deploying billions of dollars and they will literally question
me on £150,000 that I want to spend.
Why are you spending 100 like that feels expensive.
Oak tree signs off every single contract.
So just so you can have the illegals.
We have external legal counsel writer contracts.
We have internal pure legal review them.
So that's internal, my parent company and before I'm allowed
to put them up for signature, they go to Oak Tree and Oak
Tree's internal legal counsel reviews the contracts.
This is for like £250,000 a year contracts.
And they come back with comments.
I've already done the negotiation, I've done three
months worth of legal work and the Oak Tree guys come back are
like, we don't like this clause. Like why is this clause in
there? And then I have to explain why
the clause is there and why we can't negotiate out or what risk
mitigation I put in to overcome them.
That's the level of detail they are going to be in, even on the
small stuff. One cheeky question before we
leave do you ever consider it ironic that your last name is
Collier and you ended up in charcoal?
I, I, I have, I have never thought of that.
Actually. That is, yeah.
I've never actually thought of that.
That's how I'm going to end the show for wonderful advice.
Thank you for being here. Listen up everyone.
And then links in the show notes for everything that you need.
And thank you so much, Alistair. You bet.
Thank you very much.