Carbonxt (ASX: CG1) lands $4.3M contract with largest US customer

Highlights

• Carbonxt secured a $4.3 million purchase order from its largest customer, boosting cash flow for the June quarter.

• The funds will support the construction and commissioning of its new Kentucky production facility.

• Carbonxt is in advanced negotiations for additional powdered activated carbon (PAC) product orders from its Black Birch facility.

Carbonxt Group Ltd (ASX: CG1), a United States-focused cleantech company, has marked a significant milestone with the finalisation of a binding purchase order from its largest customer, Wisconsin Public Service (WPS). This order, valued at $4.3 million, underscores the company’s critical role in advancing clean technology solutions for emissions control. 

The transaction involves the supply of activated carbon pellets, essential components in WPS’ innovative ReACT (Regenerative Activated Coke Technology) emissions control systems. These systems are designed to effectively reduce pollutants such as Nitrogen Oxides (NOx), Sulfur Oxides (SOx), and mercury (Hg) from coal-fired power plants. 

The pellets will be delivered over the next six months, with Carbonxt set to receive the full payment within seven days of the announcement, providing a substantial boost to its cash flow for the June quarter. As the parties have agreed to terms on a forward purchase contract, the company will receive the payment up-front.

WPS’ Weston Power Plant, a key beneficiary of these pellets, will continue operations until at least 2032, ensuring a long-term partnership between the utility provider and Carbonxt. This partnership highlights Carbonxt’s pivotal role as a supplier and reflects the strong, ongoing relationship with WPS, which has been the company’s largest customer to date.

The agreement not only strengthens Carbonxt’s financial position but also supports its strategic growth plans. The company is in advanced discussions for additional purchase orders for its PAC products from its Black Birch facility, indicating a growing demand for the company’s advanced emissions control solutions.

Funds to aid Kentucky facility development

In tandem with this, the funds from the WPS sale will aid the ongoing construction and commissioning of Carbonxt’s flagship activated carbon production facility in Kentucky. This facility, an equal joint venture with Kentucky Carbon Processing, is slated to commence operations in the September quarter, significantly enhancing the company’s production capacity and market reach. The Kentucky plant is anticipated to cater to the rising demand for water-treatment (liquid phase) activated carbon products in the US market, which remains robust.

As Carbonxt advances towards product testing at the Kentucky facility, it is actively negotiating with several potential large customers, aiming to secure additional contracts ahead of full commissioning. With prices for activated carbon products holding steady above US$4,000 per ton in the US market, the new plant is expected to achieve gross profit margins of 45% at a price point of US$3,500 per ton, highlights the company update.

This pivotal purchase order from WPS not only solidifies Carbonxt’s market leadership but also accelerates its growth trajectory, positioning it to meet the increasing demand for high-quality activated carbon solutions in the United States. 

CG1 shares traded at AU$0.091 on 27 May 2024.