# 1AG - Alterra Limited



## suhm (22 February 2012)

Carbon Conscious is one of the companies that have benefited from the introduction of the carbon tax. They create plantations and sell these to companies so that the carbon credits they generate during the 15 year lease will offset their carbon emissions and can do so at <$23 a tonne so it is less costly than buying permits.


----------



## suhm (22 February 2012)

*Re: CCF - Carbon Conscious Limited*

This is a repost from another forum from user tonydawe their external investor relations consultant RE: Their similairity to MIS schemes, not that they grow trees, though that seems to be what the post is focussed on but their business model.

The only similarity between Carbon Conscious and the forestry MIS companies mentioned is that they plant trees.

Unlike MIS forestry companies, CCF's customers are not retail investors looking for a tax effective investment, but Australia's largest companies seeking to offset their carbon tax liabilities by earning carbon credits through tree growing.

Importantly, whereas MIS companies planted and grew their trees in order to harvest and sell the trees as woodchips, CCF does not harvest its trees. They are allowed to grow for the full length of their natural life cycle, and CCF retains all the carbon credits generated by its trees after the 15 contract expires.

CCF receives its income from customers in staged payments each quarter and at key milestones over the life of the contract – land purchase, seedling order, planting and completion each year. This enables CCF to match its cashflow with expenses, whereas MIS companies tended to rely on upfront payments, which had to last the life of the project.

Tree planting season in the Western Australian wheatbelt is April/ May through to August. That is why no trees were planted during the previous quarter. CCF's 2011 planting season will be its busiest yet.

Disclaimer: I am Carbon Conscious' external investor relations consultant.


----------



## suhm (22 February 2012)

*Re: CCF - Carbon Conscious Limited*

My response, I am not convinced at present and I created this thread instead of hijacking the COZ thread constantly.

Thanks to Tony for taking the time to explain CCF's business model in more detail. I have cut and pasted part of your post, Tony's have Point ..) in front of it. My thoughts have Q) in front of it

Point 1) CFF customers pay Establishment Fees and these fees, when combined with debt finance, is more than sufficient to cover the cost of acquiring land and tree planting, while maintaining a healthy profit margin. These establishment fees are received and recognised in the year of planting.

Q) The increase in profits is due to the revenue from the establishment fee being in excess of the expenses required to establish the plantation.
You also say however that debt finance is required to cover the cost of acquiring the land and establishing the plantation. This would mean to me that you are capitalising the cost of land acquistion rather than expensing meaning you book a profit but cashflow from the establishment fee is negative. This is a fair way to treat the acquisition of land as it is not used up but it is an encumbered asset.

Point 2) In addition, the Company receives on-going periodic management fees over a 15 year period, which covers all debt finance repayments and the costs of plantation maintenance, plus a profit margin. These revenues are not booked in advance.

Q) By the on-going periodic management fees covering debt refinance payments and other expenses with a profit margin does this included repayments of principal or only interest.

Point 3) CCF does not require additional capital from shareholders in order to fund each season’s projects. The business model going forward is intended to become self-sustaining, with revenues from management fees capable of funding anticipated future operating costs.

Q) From this statement it would appear that you would be capable of paying of the principal as well but would initially use this to fund extra plantations instead.

I had no issue with the rest of your response.

The connection I was making between CCF and the previous MIS companies was not because they were both growing trees, it was that their initial sales were cashflow negative due to their need to acquire a land bank, their solution was that they would be able to re sell the same acreage after the initial seasons matured to new MIS customers meaning that sales would be strongly cashflow positive from that point. They ended up going out of business before that could occur as they also had to pay tax because of their strong profitability worsening their cashflow position.

CCF sales from the establishment fee are also cashflow negative despite the strong profitability $800 gross profit per hectare (from the analyst report) as otherwise you would not need debt finance to cover the costs of establishing the carbon sink. You would also need to pay tax on this profitability. I would assume there are extra expenses so profit would be less. On 10000 hectares for 2012 your forecasting 3.5m NPAT for about 5m NPBT so about $500 profit per hectare planted. I know the figures are not exact, I don't have access to them so is the best I can come up with. This means on top of the land acquisition which is partially debt financed you have to come up with $150 cash for tax.

So at present we have the establishment of plantations which is per hectare causing a negative cashflow for the company of the debt finance component + around $100-$240 ($100 is a lower figure for tax $240 assumes gross profit translates fully to net profit)per hectare

At present there are 2 other revenue points.

1) Carbon credits generated after the expiry of the contract with the company who established the acreage. This is 15 years down the track so whilst a good source of free cash flow in the future, you have 15-17 years to wait before this is a reasonable source of free cash flow so if this is where the free cash flow is going to come from the company will not be self funding as you claim.

2) This leave the management fee to provide the free cash flow to fund future expansion. The analyst report gives a figure of $15 for gross profit again this is the only place where I can find a figure. This includes the management fee and includes land cost. If this by land cost it covers the prinicipal repayments as well this is good as it solves the problem of the debt financing of the projects.

This leaves taxation, the government always wants to take their share and they want cash.

We already know the establishment fee is cashflow negative and carbon credits won't produce free cashflow for >15 years so we can't rely on that yet.

$15 of gross profit from a management fee isn't really gonna cover a $100-240 cash a hectare liability unless a significant proportion of the expenses attributed to the management fee are non cash i.e. depreciation of equipment.
Depreciation however should not really be included in free cash flow as equipment gets older and eventually needs to be replaced.

So I am still at a loss as to how CCF will be self sustaining. I look forward to reading the report you release to tease out the figures as if it was self sustaining I would buy shares by the bucketload.


----------



## suhm (23 February 2012)

*Re: CCF - Carbon Conscious*

My understanding of the business model. Numbers are from the analyst report on the website.
http://www.carbonconscious.com.au/files/19/files/Alto CCF research report.pdf

To make it easier to understand. Let's say CCF plant 1 hectare and get 1 year of management fees and see how it effects the P&L account vs the cash account. You need to know some algebra.

P&L account

Revenue = (e + 800) + (m + 15)
Expenses = e + m
Gross profit = 815
NPAT = $570.5

e = establishment expenses
m = management expenses

Looks good plant 10000 hectares you get an NPAT of >5m, there is corporate overhead so they are forecasting 3.5m.

Cashflow account

Cash inflow = x + y
Cash outflow = e + m + 244.5 (tax you can lower this, $150 would be appropriate for their NPAT forecast)

x = establishment fee. e > x as they require debt financing.
y = management fee y > m as the report says it covers costs of land acquistion and maintaing the trees.

Carbon credits are disregarded as come into play after 15 years but will be a valuable source of future revenue.

To be self sustaining they need to be cashflow positive therefore

x + y - e - m - 244.5) > 0 to be cashflow positive

we know e - x > 0
y - m = 15

management expenses could have cash components (cm) non cash componenets (ncm).

y - cm - ncm = 15

Rearrange the equation to add the ncm as it does not decrease cashflow

x + y + ncm - e - cm - 244.5 > 0 for positive cashflow

Rearrange again

y + ncm > 244.5 + (e - x) + cm

Analyst report says Carbon credits created per hectare are around 200-450 per year. So I think that would give a reference range as to what they could charge as a management fee.

Taking the mid range number $325 as what they charge for the management fee which should be higher than what they cahrge.

$325 + ncm > $244.5 + (e - x) + cm

Rearrange again

$80.5 + ncm > (e - x ) + cm

e - x is a positive number and is the degree to which they need to debt finance their project.

So to be cashflow positive the amount of debt financing they require needs to be low or the amount of non cash management expenses very high i.e. they are capitalising a lot of their establishment expenses.

The numbers are a lot worse if you take a lower figure for management fees. Take the low end of $200 and the equation becomes

ncm > 44.5 + (e - x) + cm

From this I don't see how they could be cashflow postive.


----------



## SenTineL (30 November 2015)

*Re: CCF - Carbon Conscious*

Could this stock be worth another look with upcoming govt emissions cuts on the horizon?

Certainly a lot of activity in the last few months with share price hovering around 0.02 and 0.03 in the first half of the year with a jump to 0.08 in the last few months.


----------



## Nortorious (30 November 2015)

*Re: CCF - Carbon Conscious*



SenTineL said:


> Could this stock be worth another look with upcoming govt emissions cuts on the horizon?
> 
> Certainly a lot of activity in the last few months with share price hovering around 0.02 and 0.03 in the first half of the year with a jump to 0.08 in the last few months.




I'm in agreement. Locked and loaded on this one and now just waiting for it to shoot up.


----------



## pixel (31 December 2015)

*Re: CCF - Carbon Conscious*



Nortorious said:


> I'm in agreement. Locked and loaded on this one and now just waiting for it to shoot up.




It took a while, but yesterday's volume suggests some serious buying interest.





At this stage, I'm not quite sure whether the interest will last  or whether it's driven by day traders. 
Either way, it's good for a few swingers.


----------



## pixel (11 January 2016)

*Re: CCF - Carbon Conscious*

Result, in terms of %age, can match it with A2M.
And like A2M, profit takers were happy with a quick 100%.


----------



## pixel (19 January 2016)

*Re: CCF - Carbon Conscious*

It appears that today's Corporate Presentation has found favour with investors.
http://www.asx.com.au/asx/statistics/displayAnnouncement.do?display=pdf&idsId=01703973




I have been buying; trailing stop 14.5c.


----------



## System (29 March 2016)

On March 29th, 2016, Carbon Conscious Limited (CCF) changed its name and ASX code to Alterra Limited (1AG).


----------



## pixel (15 April 2016)

Being WA-focused, Alterra may not be quite as sexy as her Eastern counterparts, but they're a fair bit closer to Asian markets. As an added bonus, a company that pays back a CBA debt 3 years early sits a lot better with me than one that keeps tapping the shareholders for more "working capital", often synonymous with "director fees".




Currently I already hold a position. Before I buy any more though, I'll wait for clarification what impact, if any, China's import tax may have on Capel Dairy products.


----------



## pixel (24 August 2017)

I sense an announcement coming up ...





I bought a few @2.9 - speccie rules.


----------



## pixel (12 September 2017)

still no announcement, but again some good-sized buy orders from off-screen.
Looks like my speccie position has promise.


----------



## pixel (15 September 2017)

something is brewing, yet still no announcement
Speeding ticket must be due any moment now 
I hold from 2.9c; it's all in the Chart


----------



## pixel (2 March 2018)

Did anyone here attend the AGM?
Judging by the voting results, there may have been some interesting discussions - mainly about remuneration of directors. On the other hand, today's buying activity suggests something may yet be happening.





I'm still holding, waiting for the breakthrough.


----------



## pixel (6 March 2018)

today it did happen
gave me a handy profit
but since I sold, chances have significantly increased for a further rally into double digits


----------



## pixel (5 April 2018)

1AG could be worth another punt.
They took today's speeding ticket as an opportunity to recap their virtues. Quite smart, really 
I snipped a few in a quick swing trade, but intend to add and hold if 6.3 breaks and becomes new support.


----------



## Dona Ferentes (24 March 2021)

With a market cap of $8million, and looks like a bit of debt, there isn't going to be too much achievable without raising capital? The board is in transition, the Chairman just got voted off: 

_Alterra announces the appointment of Mark Clements as an independent Non-Executive Director to the Alterra Board, effective immediately.  Mr Clements has also been appointed as Alterra's Company Secretary. 

Mr Clements has more than 20 years' experience in capital management, finance, financial reporting, corporate strategy and governance, having worked for ASX companies across a range of industries.  He is a Fellow of the Institute of Chartered Accountants in Australia, a Fellow of the Governance Institute of Australia and a Member of the Australian Institute of Company Directors.  He is Company Secretary for a number of diversified ASX listed companies and is Non-Executive Director of Emerald Resources NL and MSM Corporation International Limited. He was formerly Executive Chairman of MOD Resources Limited. 

He takes over as Alterra's Company Secretary from John Palermo, who remains a Non-Executive Director of the Company. 

At the Alterra AGM on 29 January 2021, shareholders voted in favour of the election of John McGlue and against the reelection of former Chairman Trevor Stoney. In joining the Alterra Board of Directors, Mr Clements fills the vacancy created following Mr Stoney's departure. 

Mr McGlue said the changes reflected further progress in the transformation of Alterra's governance body to reflect the Company's changed business strategy and its commitment to ensure the Board was appropriately skilled to deliver for shareholders._


*Update*:  in relation to the Company's flagship avocado project, *Carpenters*.   The tree health of the first 5-hectares planted in October 2020 is encouraging with positive flush of growth emerging as the trees establish.  

Alterra has been working closely with its local partners French's Group and Yambellup Estate on its tree management protocols as well as global irrigation leader Netafim on its drip irrigation and fertigation systems. 

   This combined expertise encompasses all of the key agronomic practices required for the project, including nursery production, land development, water management, tree establishment, irrigation, fertigation, and canopy management.  

   An electromagnetic survey for Stage 2 covering 52-hectares has been completed with field preparations, drainage and detailed irrigation designs now underway. A site office and associated infrastructure is in place to support Stages 1 and 2 of the Project.  The Company is progressing discussions with several potential equity providers to fund this next stage.

   Following the completion of the 300-hectare Feasibility Study (FS) in December 2020, Alterra has been focused on managing the 5-hectare trial site and securing funding for the 52-hectare next stage of development. 

  The FS was underpinned by extensive and rigorous testwork, data and modelling and confirmed the opportunity for the Company to develop a large-scale project in a premium horticultural region.  

 Key outcomes from the FS include: 
• 30-year life span 
• Pre-tax NPV8 of $99M and IRR of 22%  
• Development capital of $40.6M ($33.8M net of management fees) over 3 years 
• Water self-sufficiency with access to 4.1GL dam for irrigation.


----------

