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BFD Expert Voices - Climate Deals

BFD Expert Voices

Driven by net-zero goals and emerging regulation, companies are searching for new sources of low-carbon aluminum and coming up short, writes Katie.

Why it matters: Demand for aluminum is expected to grow significantly as a key ingredient in climate technologies like EVs, wind turbines and solar panels.

Driving the news: A group of company leaders, from the auto, energy and beverage sectors, recently sent a letter to Department of Energy Secretary Jennifer Granholm asking for funds from the Inflation Reduction Act to prioritize domestic decarbonized aluminum production.

Companies like Ford, GM, PepsiCo, SunPower and Sierra Nevada Brewing Company signed the letter.

These big aluminum buyers "need a reliable supply of domestic aluminum, and they would like it to be low or zero carbon in the coming years," Annie Sartor, aluminum campaign director for advocacy group Industrious Labs, told Katie.

China is the world's largest and dirtiest producer of coal-powered aluminum.

Aluminum is responsible for 2% of global greenhouse gas emissions.

Zoom in: The U.S. produces a fraction of the world's aluminum (called primary aluminum) and a lot of what's known as secondary aluminum (recycled aluminum).

Overall U.S. aluminum production is in decline, and there's only a handful of aluminum smelters left in the U.S.

As a result, the aluminum buyers say that low-carbon American-made aluminum is difficult to find.

"When we've looked for suppliers, we haven't found any that we could work with where the cost wasn't unsustainable," says Will Giese, senior director of government affairs for The Solaray Corporation, which makes solar thermal heating gear, among other solar products.

Big picture: Aluminum production is energy intensive and its carbon footprint is largely based on how much clean energy the local grid is using.

Because it's so energy intensive and runs 24/7, hydropower currently is the greenest way to power aluminum. But clean-grid options like solar and wind paired with long-duration energy storage, or even new nuclear technologies, could be used.

The good news is that cleaning up the grid is the trend that's having the most success in the energy transition, and has seen the largest cost reductions in the U.S. and globally.

As Sartor describes it: "It's very solvable."

What's next: Greener aluminum-smelting technologies could also help decarbonize the sector.

Alcoa is investing in a smelting process that replaces the carbon anodes with other materials, reducing the greenhouse gases and emitting oxygen as a byproduct.

The aluminum buyers have requested a meeting with Secretary Granholm and hope to plead their case in person.

The Inflation Reduction Act will make domestically produced green aluminum "a more viable option," says Giese.

1 big thing: Green aluminum is MIA

Illustration of an aluminum can with a large question mark on it

Solar gear maker GameChange Solar has quietly filed for an IPO giving the company a valuation of $3 billion, according to a report.

Why it's the BFD: The IPO window has showed signs of life in recent weeks after being shut for more than a year due to market turmoil and recession fears, writes Katie.

Details: GameChange Solar, founded in 2012 and based in Norwalk, Conn., could go public next year.

Koch Strategic Platforms, a subsidiary of Koch Industries, invested $150 million into the company in 2021.

The company makes racking and tracker gear that holds solar panels. Trackers tilt solar panels to follow the trajectory of the sun across the sky throughout the day.

Big picture: Solar power plants continue to set records globally, and in the U.S. the Inflation Reduction Act has supercharged the sector.

There was $239 billion invested in large- and small-scale solar power systems over the first six months of 2023, a 43% rise from the first half of 2022, according to Bloomberg New Energy Finance.

Recent climate-tech IPOs have been solar manufacturers. Earlier this year tracker company Nextracker went public, while Dutch solar-mounting company Esdec Solar is reportedly seeking an IPO.

2. BFD: Game changer

an illustration of sunglasses with the lenses made out of two solar panels 

Private equity firm Ara Partners has acquired magnetic materials maker Vacuumschmelze from Apollo Global Management, Ara tells Alan exclusively.

Why it matters: The German company is the only Western supplier of rare-earth permanent magnets, vital components for a range of products including EVs, solar panel inverters, wind turbines and defense weapons.

Of note: VAC produces more than $500 million in annual revenue, Ara partner Tuan Tran tells Alan. The German manufacturer has plants in Slovakia, Finland, China and Malaysia.

Financial terms of the deal were not disclosed.

Context: China controls the vast majority of the rare-earths supply chain, including for so-called permanent magnets, which are used to make motors that are more efficient and more powerful than conventional designs.

The U.S. for years has sought to bolster its domestic supply of such minerals and metals, which are used in a wide variety of electronics and  military equipment.

Incentives in the Inflation Reduction Act that tie lucrative subsidies to  materials sourced from the U.S. or close allies have further fueled that  effort, especially among U.S. automakers whose EV sales rise and fall  with such measures.

Zoom in: "What is unique about our value proposition to the OEMs is that everything from the raw materials through the alloys through the metal-making through the alloy production is going to be 100% sourced outside of China," Ara's Tran says, referring to automakers.

What's next: VAC struck a deal earlier this year with General Motors to build a facility in North America to manufacture permanent magnets.

The company expects to announce the location of the plant in the coming  weeks, with plans to bring the site online by 2025, Tran says.

VAC has pledged to use locally sourced raw materials at the facility, which  will supply magnets for electric motors used in GM vehicles.

3. Exclusive: Ara's rare earths buy from Apollo

Illustration of a magnet attracting hundred dollar bills

🤔 Philanthropy as risk capital: Rockefeller Foundation president Rajiv Shah called on other big foundations to invest more directly in climate tech — even if they can't quite match the IMF or World Bank.

"Our big bets are really about measuring results at scale over time for as long as it takes," Shah tells Generate's Andrew Freedman. 

Rockefeller just made a groundbreaking $1 billion commitment on climate. Shah, meanwhile, published a book today on the topic, "Big Bets."

🧐 Fresh scrutiny for venture capital: The sector's propensity for backing white, male founders is about to get quantified, on a firm-by-firm basis, Dan Primack writes in Pro Rata.

California Gov. Gavin Newsom on Saturday signed into law a bill that will require covered VC firms to annually report on founder diversity demographics for companies in which they invest, beginning in 2025.

It will apply to the vast majority of U.S. venture firms, including those not headquartered in California.

🖊️ California's wave of climate and clean-energy bills: Gov. Newsom also signed nearly a dozen bills on climate.

Two seek to improve how companies disclose their climate risks and impacts, another two are meant to boost the state's offshore wind market, two more are aimed at the solar energy market, plus one each for tidal-energy research, carbon offsets markets, building renewables along highways, and plugging old oil and gas wells.

Yes, but: Newsom vetoed a bill that would have sped up the permitting process for power lines.

🌊 Green steel, meet Canadian hydropower: Sweden's H2 Green Steel is seeking global expansion, including talking to the Canadian government about building a factory in northern Quebec, per Bloomberg.

The company says it needs 700 MW of cheap, around-the-clock green electricity. Hydro Quebec might be one of the few power producers able to provide it.

4. Temperature check

• BlueNalu, a San Diego-based cultivated seafood developer, raised a $33.5m Series B from undisclosed "new and existing investors," per AgFunder News. https://axios.link/3FcppjY

• Wanda Fish Technologies, an Israeli developer of cultivated fish filets, raised $7m in seed funding. Aqua-Spark led, and was joined by insiders Kitchen Hub, Peregrine Ventures, Pico Venture Partners, MoreVC and CPT Capital. https://axios.link/3rMklzR

• Thread, a Grand Forks, N.D.-based data collection provider for infrastructure inspection, closed a $15m Series A led by Badlands Capital, and joined by Minnkota Power Cooperative, Generational Partners, Rosecliff Ventures, Excell Partners, Homegrown Capital and "Shark Tank" investor Kevin O'Leary's Wonder Fund North Dakota. https://axios.link/3ZNIfrc   

• Raicoon, an Austrian autonomous solar tech developer backed by Munich Re, raised €4m in seed funding from Push VC, Voltares and a private family office. https://axios.link/3Qb4hkr

• Responsibly, a Copenhagen-based developer of software to track supply chain sustainability, raised a $2.4m seed round led by London-based Hambro Perks and Pi Labs. https://axios.link/3RSUKzF

• Flexsea, a London-based developer of seaweed-derived bioplastic, raised a £2m seed round led by Indico Capital Partners, joined by RedRice Ventures, Btomorrow Ventures, Food Foundry, Vala Capital, Icon Capital, and Pente Capital. https://axios.link/46paSh1

• BlackRock is launching a climate-focused private credit fund, The Climate Transition-Oriented Private Debt Fund, as part of its ESG-related funds. https://axios.link/3RIj5by

• Adenia Partners acquired a majority stake in Enfin, a South African solar financing company. https://axios.link/3Q7S2VM

• Spanish utility Iberdrola is in talks to sell a 49% stake in a 300 MW Portuguese renewables portfolio to Norges Bank Investment Management, Norway's sovereign wealth fund, per Bloomberg. https://axios.link/48On6RW

• Schaeffler, the German automotive giant, reportedly will launch a tender offer for German powertrain provider Vitesco at a €3.64b valuation, with plans to target the EV segment. https://axios.link/3Mh6pVJ

• Uniper hired Rothschild to find a buyer for its German district heating business, which could fetch between €300m and €400m, per Handelsblatt. https://axios.link/3POFIZp

• Invafresh, a Canadian fresh-grocery software developer, acquired Whywaste, a Swedish software provider to reduce grocery waste. https://axios.link/3tvlHj6

• Lordstown Motors founder Steve Burns agreed to pay $10m to buy the electric pickup-truck company's assets out of bankruptcy, per Freightwaves. https://axios.link/3tzuAYA

• One Energy, a Findlay, Ohio-based energy infrastructure developer, energized a 30 MW semi-truck charging station in Findlay, which it says is the country's largest such site. https://axios.link/46F18Pm

• Revonte, a Finnish maker of e-bike drive systems, filed for bankruptcy. The startup had raised a €2m seed round in 2019 led by Maki.vc, joined by Butterfly Ventures. https://axios.link/3Q9J22l

• Mullen Automotive, the Brea, Calif.-based electric automaker, is selling rebadged Chinese vehicles for the U.S. commercial fleet market. https://axios.link/46o5uKO

• The European Commission launched an anti-subsidy investigation into Chinese EVs, under pressure from France's government. https://axios.link/3LVw7yu

• The self-described "world's largest offshore wind farm" began producing power. The planned 3.6 GW Dogger Bank project from SSE Renewables, Equinor and Vårgrønn is being built off the coast of northeast England. https://axios.link/3LWklE9

• WM, a Chinese EV startup backed by tech giant Baidu, filed for bankruptcy. The company had sought a reverse takeover with Hong Kong-listed Apollo Future Mobility. https://axios.link/3rBFexL

• Tufts University launched a minor in cellular agriculture, which it says is a first, per AgFunder News. https://axios.link/48NCkqb

5. Hot deals

• Sarah Faulkner joined ICG as chief operating officer. She previously was with Goldman Sachs. https://axios.link/3LU9ISg

• Sandro Mazzini was named chief commercial officer of Summit Nanotech, a Calgary, Alberta-based direct lithium extraction developer. https://axios.link/3POe0vM

• Tobías Martínez joined Antin Infrastructure as a senior adviser. He was previously CEO of Cellnex Telecom. https://axios.link/48GuGhv

• Andrew Symons stepped down as a managing director at General Atlantic to become head of capital formation at Ancient LP, an investment firm formed by Alexander Klabin. https://axios.link/3ROakNd

• Li Feng, supply chain VP for Chinese automaker Xpeng, was suspended for a corruption probe, the company said. https://axios.link/3LRblQI

6. It's personnel

⏰ Two days and counting: Axios BFD is this Thursday in NYC! Register here to watch the livestream, beginning at 10am ET.

🛫 Katie is looking forward to her first plane flight post-pandemic this week for BFD!

🏙️ Alan had his first Philly weekend, for a friend's 40th birthday. He'll take Pat's over Geno's. Fishtown is pretty neat. And the haunted house at Eastern State Penitentiary is a blast. 

Thank you to Michael Flaherty and Phoebe Neidl for today's edits.

And thank you for reading Climate Deals! Please share with your friends, family and aluminum users.

October 10, 2023

1 big thing: Green aluminum is MIA