Gregory Beard: Hey, in this sort of political climate, there’s always that risk, but the IRA is, that’s the law of the land and it has a long tail to it. And it would take a really meaningful sort of landslide type political change in order to have that impact us. So that’s certainly not out of the question, but not expected at this point.
Josh Siegler: Okay. Understood.
Gregory Beard: I think our view is like – the intent of the IRA is to, which is bipartisan at this point, is to incentivize companies like us to come up with projects like this to capture carbon and do other environmentally protective things. But I think our estimate is it’s what more than $400 billion of IRA tax credits are earmarked for carbon capture. And that’s, this project certainly fits with the intent of what they’re trying to do. So I would say, I wouldn’t spend a lot of time worrying about, hey, is, are we going to see a new administration that just says, hey, take off this whole thing away? But it’s possible, not probable.
Josh Siegler: Okay. That’s really helpful color. Appreciate that. And then for investors on the line, can you help us better understand the fees and royalties aspect here, kind of what’s going into that bucket? And how do you expect it to fluctuate depending on the total tax credits and removal credits?
Matthew Smith: So we’ve studied the specifically the five registries for the, we’ll talk about the private markets initially. Each registry, if you were to sell a credit once we’re done the registry there’s a specific fee or commission, whatever you want to call it, that’s sort of a gross deduct. We’ve accounted for that in our illustration in our slide deck. And then you can always transact off of the registry, but, by all accounts, having your process validated and put on a registry is a meaningful value uplift for receiving value for the work you’re doing to sequester carbon. And so we have tried to appropriately model the fees and commissions as a gross deduct from the income stream. And then thereafter we have some agreements in place and appropriately deducted 10% from the private market receipts and 5% from the any 45Q qualifications based on agreements in place today.
Josh Siegler: Great. That’s very helpful. Well, congrats again on the launch year. Really looking forward to seeing how this plays out. Thanks for taking my question, guys.
Gregory Beard: Thanks, Josh. Appreciate the interest.
Operator: [Operator Instructions] Our next question comes from a line of Lucas Pipes with B. Riley Securities.
Nick Giles: Yes. Hey, thank you, operator. Nick again here. Apologies if I missed it Matt. Matt, you referenced paybacks and returns. I’m not seeing anything better elsewhere. Is there a project IRR you would cite for the capture initiative, maybe inclusive and exclusive of the 45Q piece?
Matthew Smith: Yes, I think what we, what I would do is I’d like to not front run the data from Scrubgrass. I think the, the payback in IRR, if you just think about the single Karbolith, and you were to scale that at Scrubgrass, for instance, we know how much ash we make at Scrubgrass. if the lab results were to extend to that ash, you can calculate how much carbon you could capture and then based on the time to capture, whether it’s a week, like in the lab or up potentially it’s two weeks, that would determine how many of these carbon with structures are placed, for instance, at Scrubgrass in order to capture optimally the, the carbon available to be captured with the Scrubgrass ash. That CapEx is kind of that range of CapEx is the basis on which we’re running the, the payback assuming first private market, which we expect and hope to be available to us in earnest in 2024, and then reach a run rate in 2025.
You know that payback, if you think about the Scrubgrass ash as sequestering sort of, we’ll call it 40,000 to 50,000 tons of carbon potentially annually, multiplied by that private carbon range that we provide in the slides relative to the CapEx which would be half of the approximate total CapEx for the project that we’ve estimated. I think you can start to get to a place where the payback, again, doesn’t suffer from a having in four or five months. And, it’s a secular growth opportunity. And if you put the money to work it’s because you’re getting traction with Puro in the first quarter of 2024. It’s because the data is demonstrating compelling carbon capture in the, in the testing, it’s Scrubgrass. You can coordinate allocating capital with selling of credits.
And that makes for a faster payback potentially because you’re actually getting cash in as you’re deploying capital and scaling up. And so I would just point their timing. There is still some uncertainty around the, around how many carbolists are needed as Greg described, but we think that payback relative to other places we could put our money today is really compelling.
Q – Nick Giles: Fair enough. I appreciate that.
Matthew Smith: Maybe I would point out today that I would just add one more thing, which is that we’ve maybe call ourselves the orphan of the Bitcoin mining space because we traded a fraction of the multiple on every metric that every other Bitcoin miner does publicly. I think what we’d point you to is the private market and kind of energy transition and other types of businesses that don’t suffer from the kind of the Bitcoin mining, having concerns that have prevailed in the market. I think we’re really excited about a totally differentiated income stream potential that could potentially double our cash flow over the next 12 to 18 months. That’s pretty exciting. And it’s totally decent credit to Stronghold, which we’re quite excited about.
Nick Giles: Thanks to that, Matt. Maybe just one follow up there. Can you just remind us how you’re thinking about debt pay down based on current structures or sweeps in place and how this could impact that?
