Canada Growth Fund (CGF) today announced that it has completed its first transaction under its mandate to use nearly half of its $15B budget for carbon contracts for difference (CCfDs) and offtake agreements. CGF is the federal agency (a subsidiary of Canada Development Investment Corporation) with a mandate to “build a portfolio of investments that catalyze substantial private sector investment in Canadian businesses and projects to help transform and grow Canada’s economy at speed and scale on the path to net-zero.” PSP Investments acts as the investment manager for CGF through a wholly-owned subsidiary.
Via a hybrid security, CGF has agreed to invest $200M in Entropy Inc., a Calgary-based developer of carbon capture and sequestration (CCS) projects. Alongside the investment, CGF and Entropy have entered into a “carbon credit offtake commitment” agreement (CCO) whereby CGF has committed to purchase up to 9M tonnes (up to 600K tonnes per annum (tpa) over a 15-year term) of TIER or equivalent carbon credits from Entropy projects. The initial project to benefit from the CCO is intended to be the Advantage Glacier Phase 2 project, drawing up to 185K tpa at an initial price of $86.50 per tonne, for a total of approximately 2.8M tonnes over the 15-year term. Upon successful deployment of the initial 600K tpa of CCO, CGF may make available a further 400K tpa of CCOs for additional Entropy CCS projects in Canada.
This initial transaction notably appears to be in the form of an offtake agreement, rather than a contract for difference. The Globe and Mail reported that other project proponents, including larger oil and gas producers and members of the cement and chemical industries, have been attempting to negotiate contracts with the CGF at rates higher than the initial price of $86.50 per tonne agreed in this initial transaction.