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BFD Expert Voices - Climate Deals

BFD Expert Voices

Pick a metric, any metric, and climate tech is booming. 

Why it matters: Megan moderated a panel yesterday, "Addressing Global Warming: Climate Tech's Goal for a Better World," to gather insights on what drove growth of venture investment to $56 billion last year from $7 billion in 2008.

The speakers were Form Energy co-founder Mateo Jaramillo, Powerhouse Ventures founder Emily Kirsch, and Silicon Valley Bank managing director Kelly Belcher. 

The key part of the discussion: all the ways our current climate-tech rally is different from the first go-round with cleantech. 

These highlights have been edited for length and clarity — but you can check out the  full recording, plus the report from SVB.

The cost of electricity is now lowest coming from renewable energy sources. Ten to 15 years ago, we were projecting forward that that may be the case, but it wasn’t actually true yet. That enables everything else around it. Net-zero pledges, policy changes — those kinds of things weren’t in the realm of being economic. (Form Energy's Jaramillo)

In 2008, climate tech investing was all about DOE loan guarantees and RPE grants. And in 2022, climate tech is now in every layer of the capital stack.  (Powerhouse Ventures' Kirsch)

There wasn’t a clear path for who was going to be waiting there to write a big check on a hard-tech investment. That’s just very different today, and corporates are playing a really interesting role that they weren’t playing even a few years ago. (Form Energy's Jaramillo)

That right there signals that there’s patient capital, so it doesn’t need a return in 12 months. (SVB's Belcher)

The types of transactions are also evolving:

M&A activity is increasing — and the stage of company that’s getting acquired is getting earlier and earlier. (Powerhouse Ventures' Kirsch)

And not simply SPACs: As more of these companies come into the public markets and we can see value in a company that doesn’t spit off a lot of cash flow, then that makes it more palatable for an investor in the public market. (SVB's Belcher)

There’s lots of ways to provide liquidity to people who need it without becoming public per se or without going through an acquisition. There are so many levers today that were not there just a few years ago. (Form Energy's Jaramillo)

1 big thing: Climate tech 2.0 vs. cleantech 1.0

Illustration of the earth on a large pile of money

Shin-Keisei, a high-speed rail operator in Japan, will be acquired by Keisei Electric Railway, a larger rail operator in the country, Megan reports.

Why it's the BFD: Both railway companies have been struggling financially as Japan's population ages, the companies state in a letter to existing shareholders. The consolidation could be a preview of public transportation in countries with similar demographics.

Details: Keisei will be the singular owner of Shin-Keisei once the share exchange is complete, the letter states.

The exchange is expected to finalize by August 29 but was approved by both boards Thursday. 

Shares of Shin-Keisei will convert to .81 shares of Keisei stock once completed. 

The deal values Shin-Keisei at roughly $228 million, based on Keisei's stock value at close on Thursday. Shin-Keisei had a market cap of roughly $194 million at close on Thursday.

Keisei is currently a stakeholder in Shin-Keisei, owning roughly 44% of the company.

Context: Keisei operates several subsidiaries in logistics, hospitality and transportation. Adding Shin-Keisei would bolster its transportation offerings and operational rail lines.

Keisei lost 26.33 million yen (~$201,ooo) in fiscal year ending March 2022, but forecasts a rebound to profitability in 2023 in its shareholder letter.

The bottom line: The coronavirus pandemic has taken a toll on public transportation companies globally due to decreased ridership and increased costs associated with safety measures.

2. The BFD: Japanese rail buyout

Illustration of a multi-colored train moving fast towards the viewer.

This week we're talking with Janice Tran, CEO of Kanin Energy, which is developing what it calls waste-heat-to-power to help reduce emissions from heavy industry.

Why she matters: In addition to being a climate tech founder, Tran was previously a director at Generate Capital, and has spent more than a decade at the intersection of cleantech and finance. 

What in your view was the big story this week?

Sen. Joe Manchin (D-W.Va.) on Monday convened a bipartisan working group on clean energy and climate policy. This process would require 10 Republican votes — much more onerous than through the budget reconciliation process, which would only require Democrat votes.

Manchin was responsible for blocking the Build Back Better bill, and when it died in December, much of President Biden's climate promises died with it.

A climate deal would need to be reached before Memorial Day because of the midterm elections. Legislation that includes the extension and expansion of the investment tax credit and production tax credits is critical to spur development of green energy in the U.S.

The "do-nothing" approach is detrimental. But if the suggested climate policies in Build Back Better are revived, the U.S. will have a  hope of meeting its 2030 and 2050 climate targets. 

Biden hasn't done much to materially advance the climate agenda and near-term decarbonization. He last month ordered the opening of oil reserves and asked oil and gas companies to start increasing production. 

The lack of  a uniform carbon price across the U.S. is causing certain jurisdictions to see the bulk of investment in green energy, while leaving many other regions behind. The result is an inefficient  allocation of investments going to where the incentives are, and not  where the best clean energy resources are. The energy transition will be  more costly as a result.

By contrast, what’s being under-reported or under-covered?

The next frontier in clean energy procurement is 24/7 carbon free energy, expedited by the recent United Nations 24/7 Carbon Free Energy Global Compact. 

The compact aims to create a standard and marketplace for time-stamped hourly renewable energy credits to allow matching of hourly energy consumption to hourly  green energy generation.

Green-energy buyers are getting more sophisticated with their procurement and impact, and are now trying to match their hourly power consumption with the hourly generation of clean power. 

In a paradigm of increased solar and wind saturation on the grid, further developments in baseload clean technologies are needed too  achieve the next level of grid decarbonization.

Just like the early days of renewable energy credits, creating standard markets to incentivize development of baseload green power is key. 

In three words, what one change would you make to accelerate investment in climate tech?

3. Expert Voices: Janice Tran, CEO of Kanin Energy

Photo illustration of Janice Tran, CEO of Kanin Energy, with images of a factory and abstract shapes.

Photo illustration: Gabriella Turrisi/Axios. Photo: courtesy of Kanin Energy

If it's good enough for Lebron: Carbon-neutral food startup Neutral Foods is gearing up for a Series A round, investor David Adelman tells our Retail Deals colleague Richard Collings.

Adelman is the founder of Darco Capital, which led the recent funding round into the startup. That round also included entertainers John Legend and Questlove and basketball legend LeBron James, plus Mark Cuban and Bill Gates. It has raised a total of $8 million headed into its Series A.

4. 🌡️ Temperature check

Illustration of a thermometer shaped like a smoke stack with smoke spewing out.

VisionNav Robotics, a manufacturer of driverless industrial vehicles, announced an $80m C+ round led by Meituan, a Chinese e-commerce platform, and 5Y Capital. http://axios.link/SetN

Coast Energy Holdings, a C&I solar PPA provider, announced a growth investment from Houston-based Crosstimbers Capital Group. http://axios.link/zKqL

Orbital Energy Group (Nasdaq: OEG) has entered into a definitive agreement with a single institutional investor in direct offering for gross proceeds of approximately $21m. http://axios.link/s6nO 

Shell Overseas Investment, a wholly owned subsidiary of Shell, has signed an agreement with Actis Solenergi Limited to acquire 100% of Solenergi Power Private Limited for $1.55b and with it the Sprng Energy group of companies. http://axios.link/MPxa

Spring Valley Acquisition Corp. (Nasdaq: SV, SVSVW), a publicly traded SPAC, announced its shareholders voted to approve a proposed business combination with NuScale Power. The transaction is expected to raise approximately $380m from Spring Valley trust proceeds and PIPE commitments. http://axios.link/rg0Z

Archaea Energy (NYSE: LFG), a renewable natural gas company, announced that its wholly owned subsidiary, Archaea Infrastructure, has entered a definitive purchase and sale agreement with Riverview Investment Holdings to purchase NextGen Power Holdings and its subsidiaries for $215m in cash. http://axios.link/e62s

Olin Corporation (NYSE: OLN), a chlor alkali producer, and Plug Power Inc. (Nasdaq: PLUG) have signed an MOU to create a joint venture to produce and market green hydrogen. http://axios.link/Ssy6

Minnkota Power Cooperative, a North Dakota-based electric generation and transmission cooperative, and Summit Carbon Solutions, an Iowa-based firm focused on decarbonizing the agriculture and biofuels sectors, have agreed to co-develop carbon dioxide storage facilities near Center, North Dakota. http://axios.link/873X

5. Hot deals

ADM (NYSE: ADM) announced that John Stott will serve as president for ADM Investor Services, replacing Tom Kadlec, who announced his retirement. Stott is currently group vice president, finance, as well as corporate treasurer and CFO of global technology and 1ADM. http://axios.link/OjTd

Black & Veatch has named Laszlo von Lazar as president of its energy and process industries business, following the move earlier this month of Mario Azar to chairman and CEO-elect. Lazar was previously president of BV operations. http://axios.link/Fc38

Black & Veatch has also selected Dale Claudel to lead the Energy Utilities segment within the company’s energy and process industries business. He was previously vice president for grid modernization and strategy at Entergy.

TuSimple (Nasdaq: TSP), an autonomous driving company, appointed Reed Werner to fill a vacancy on its board of directors, and announced that Mo Chen, co-founder and board of directors member, will not stand for re-election. Current director Brad Buss has been appointed the board’s lead independent director. http://axios.link/jw8y

Blue Current, developing solid-state battery technology, has named Yutaka Wakai as vice president of advanced manufacturing. http://axios.link/uPLR

Ultra Safe Nuclear Corporation’s general counsel and vice president of legal affairs, Steven Cuevas, was elected to the board of the United States Nuclear Industry Council. http://axios.link/Q4qw

6. It's Personnel

🥳 Happy Friday, friends! Let's get to it and on to the weekend.

📉 Situational awareness: Amazon reported a weak first quarter Thursday with an overall loss of $3.8 billion — driven in part by a $7.6b write-down of the company's investment in EV maker Rivian. 

🥰 Megan is out today hanging out with family she hasn't seen since 2019. Her brother-in-law is holding a delayed wedding reception in Baltimore and everyone is looking forward to celebrating in person.

🚗 Alan and family commence the first part of their move to Boston this weekend. They'll be driving up — with dog and cat — on Saturday, before Alan flies back to drive up the moving truck next week.

Thanks for reading Climate Deals! Please share with your friends, family, investors and wedding guests.

April 29, 2022

1 big thing: Climate tech 2.0 vs. cleantech 1.0