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BFD Expert Voices - Climate Deals

BFD Expert Voices

Banks, investors and governments are funneling money into major players with plans to produce low-carbon steel, writes Katie.

Why it matters: Steel production is a major contributor to carbon emissions and is one of the most widely used construction materials.

Driving the news: Swedish low-carbon steel maker H2 Green Steel said it's raised €4.75 billion ($5.2 billion) in a combination of project financing debt, equity and a grant to build its plant in the northern Swedish city of Boden.

The €4.2 billion in debt was provided by 20 lenders including the European Investment Bank, BNP Paribas, ING, and Societe Generale.

The €300 million in equity included new investors Microsoft Climate Innovation Fund and Siemens Financial Service.

The €250 million grant was from the EU Innovation Fund.

State of play: H2 Green Steel is the largest low-carbon steel player ramping up in Europe.

In the U.S., startup Boston Metal has been amassing its own war chest, closing $262 million in equity in September and $120 million a year ago.

Norwegian company Blastr Green Steel is planning a €4 billion low-carbon steel factory in Finland.

Major steel makers are also cleaning up, and last year the European Union approved €2.85 billion to help ArcelorMittal and Thyssenkrupp decarbonize steel production.

Of note: Microsoft Climate Innovation Fund has now backed both Boston Steel and H2 Green Steel, highlighting how the corporate tech VC is leaning into hard-to-abate sectors.

Meanwhile, Northern Sweden is quickly emerging as a major player in Europe's climate tech industry as H2 Green Steel and battery maker Northvolt build plants there.

How it works: H2 Green Steel makes hydrogen using clean electricity and uses the hydrogen to make green steel for customers like Mercedes-Benz.

Boston Metal uses clean electricity for a process called "molten oxide electrolysis" to break down iron and make steel.

Traditionally carbon-intensive steel making uses high-heat blast furnaces to break down iron ore using coke (a form of coal).

Big picture: Global investors and governments have woken up to the energy transformation required and the market potential of cleaning up steel production.

What's next: Over the next two years these new green steel facilities will begin to produce low-carbon steel commercially and will need to overcome the hurdles of scaling up production.

1 big thing: Heavy metal production

H2 Green Steel's planned factory in Boden, Sweden. 

H2 Green Steel's planned factory in Boden, Sweden. Photo: Courtesy of H2 Green Steel

Canadian climate investor ArcTern Ventures has raised $335 million for its latest early-stage fund, Alan reported.

Driving the news: ArcTern's Fund III is roughly double the size of the firm's previous fund, and it's the first big climate fund announced in 2024.

Catch up fast: ArcTern is a climate generalist, investing in a wide array of hardware- and software-focused startups.

It's become one of Canada's most established climate investors since launching in 2013, with significant backing from institutional investors such as the Ontario Municipal Employees Retirement System and Canada Pension Plan Investments.

Early bets include home energy storage developer Span.io and energy management provider Palmetto, which have built respective valuations of $700 million and $1 billion, per PitchBook.

The latest: ArcTern's newest fund has drawn backing from TD Bank Group, Church Pension, OPTrust, and Allianz.

It's registered under Article 9 of the European Union's Sustainable Finance Disclosure Regulations, meaning its investments will be measured against the emissions they offset.

Details: The Canadian firm plans to back 25 startups through Fund III, writing initial checks of $5 million to $10 million, with another $30 million reserved for follow-on investment.

Fund III investments include EV maker Harbinger, autonomous lawnmower developer Scythe, battery inspection developer Liminal, heat pump manufacturer Woltair, retail trade-in and resale provider Trove, home electrification service Soly, food waste startup Winnow, and EV battery health site Recurrent.

Separately: ArcTern co-founder Tom Rand last year transitioned to operating partner.

2. The BFD: ArcTern turns up fundraising 

Illustration of the earth on a large pile of money

Ocean carbon removal startup Captura has raised $21.5 million in an expansion of a Series A round to commercialize its technology, Katie writes.

Why it matters: Using the ocean is looking like one of the most efficient and low-cost methods for carbon removal.

Details: Pasadena, Calif.-based Captura brought on new corporate investors with the round, including the VC arms of shipping giant Maersk, and energy companies Eni and EDP.

Existing investor Future Planet Capital led the round, which also included Equinor Ventures, Hitachi Ventures, and Aramco Ventures, among others.

The funds will help Captura design a first-of-a-kind commercial plant that can remove  50,000 tons of carbon dioxide per year from seawater. It's also building an additional 1,000-ton-per-year pilot plant with Equinor in Norway.

Captura currently has an operational pilot plant that can pull 100 tons per year from seawater using a process called electrodialysis, powered by clean electricity, at the Port of L.A. The tech was developed at the California Institute of Technology.

Zoom in: Captura CEO Steve Oldham was previously the CEO of Carbon Engineering, a direct air capture company that was acquired by oil company Occidental.

"The ocean is already good at capturing CO2," Oldham says.

Ocean carbon removal can also be cheap, Oldham says, explaining that Captura's technology can get to $100 per ton of CO2 removed pretty quickly.

The cost of using direct air capture machines to remove carbon from the air can cost anywhere from a couple hundred to several hundred dollars per ton of CO2. The Department of Energy has a goal to get carbon removal to under $100 per ton.

What's next: The company will need to raise funding over the next 18 months to finance its commercial plant.

"We're moving through the VC phase and will be looking for infrastructure funding," Oldham added.

3. Maersk, Eni, EDP back ocean carbon removal

A ocean carbon capture project in the Port of LA

Captura's 100-ton-per-year direct ocean capture pilot system at AltaSea at the Port of L.A. Photo courtesy of Captura

⛽ Exxon's anti-ESG lawsuit: The oil and gas giant filed against Arjuna Capital and shareholder advocacy group Follow This to thwart a proposed shareholder resolution to set ambitious new emissions targets, Axios' Ben Geman writes in Generate.

The case, filed in federal court in Texas, marks an unusual effort to deter a shareholder campaign, rather than appealing to the SEC on a given resolution. It's the first time Exxon has taken such a step.

The shareholder resolution includes a call to set targets for "scope 3" emissions from Exxon products, an effort Exxon has labeled an "extreme agenda."

👍  Texas grid holds up: The state's electric network passed a critical test after Arctic air blasted the state last week — but more challenges await, colleague Jacob Knutson reports.

The Texas grid's vulnerability to weather extremes has been under the microscope since a brutal winter storm caused mass outages and hundreds of deaths in 2021. But enough changed over three years to help it meet record electricity demand during the winter storm.

☹️ The tax man cometh: Profits are back in vogue for startups, but it also means some are getting hit with unsustainable tax bills, Kia Kokalitcheva reported this weekend in Pro Rata.

The Tax Cuts and Jobs Act of 2017 overhauled how a company can deduct its R&D costs. Bootstrapped startups are getting hit hard, venture-backed startups less so.

4. Temperature check

a box of matches that pictures a small outline of the earth and text that reads "Temperature Check"

• High Alpha Capital, an Indianapolis firm whose sustainability investments include Project44 and Rheaply, has raised $84m toward a targeted $110m for the firm's fourth fund, per an SEC filing. https://axios.link/429Zg07

• Protix, a Dutch insect protein producer, closed a €37m loan agreement with the European Investment Bank to ramp up manufacturing. https://axios.link/3SrRqLO

• Anaergia, an Ontario-based RNG developer, announced that a C$13.6m first tranche of funding from Marny Investissement has been delayed. Marny, based in Luxembourg, had committed C$40.8m. https://axios.link/3S5pJap

• Reel, a Copenhagen-based renewable energy supplier, raised €5m led by climate investor Transition, joined by UVC Partners and the Footprint Firm, per EU-Startups. https://axios.link/3vIPsOv

• Shamba Pride, a Kenyan last-mile distribution startup for farm inputs, raised $3.7m in equity and debt funding from EDFI AgriFI and Seedstars Africa. https://axios.link/429TSKi

• Eddy Grid, a Dutch energy storage and management startup, raised €1.5m led by the Graduate Entrepreneur fund, joined by Rockstart and Volve Capital. https://axios.link/426gxXK

• Macquarie raised €8b for a European infrastructure fund. https://axios.link/4266eD2

• I Squared Capital, a Miami-based infrastructure investor, raised $1.2b for its first climate fund, set up in conjunction with U.S. International Finance Development Corporation. https://axios.link/3Sgdh7Y

• General Atlantic agreed to buy more shares in Argus Media Group, a London-based provider of global energy and commodity market intelligence solutions, from Hg. Also purchasing from Hg was Argus chair and CEO Adrian Binks, who becomes majority shareholder. https://axios.link/47OzCyW

• Vertical Aerospace, an eVTOL developer that went public via SPAC in 2021, received a $50m infusion from CEO Stephen Fitzpatrick. https://axios.link/42c8Boa

• Gas station owner Sunoco will buy pipeline and liquids terminal operator NuStar Energy in a $7.3b deal. https://axios.link/48ZLiju

• First Solar, the Tempe-based solar manufacturer, acquired a 1.2m square-foot distribution center in Troy Township, Ohio, supporting the company's three factories in the state. https://axios.link/3S9QhHn

• Panasonic signaled it may delay a planned battery plant in North America as it focuses on boosting productivity in the company's Panasonic Energy battery unit, per Reuters. https://axios.link/3HtRcO0

• SolarEdge, an Israel-based solar inverter supplier, says it's laying off ~900 employees in a 16% cut to its global workforce. https://axios.link/3U4v5Fv

• Sirplus, a German food waste startup that collected and re-sold excess food via subscription boxes, filed for insolvency, per Tech.eu. https://axios.link/3vGyyzT

• Steve Burns, the ousted founder of electric pickup truck maker Lordstown Motors, launched a new EV company, LandX Motors. Burns bought most of Lordstown's assets last year after the company went bankrupt. https://axios.link/493AXmB

5. Hot deals

• David Moon was confirmed president and CEO of Energy Recovery, a San Leandro-based energy efficiency tech developer. Moon was serving as interim president and CEO since October. https://axios.link/47N5svU

• Jeremy Baines was named CEO of Calgary-based energy companiesTidewater Midstream and Tidewater Infrastructure. He succeeds Robert Colcleugh. https://axios.link/3OdNmfF

• Ismael Roig was named interim CFO of ag giant ADM, succeeding Vikram Luthar, who was placed on administrative leave pending an investigation into accounting practices in ADM's Nutrition reporting division. https://axios.link/3SsYesP

• Dinika Mahtani was promoted to partner at Berlin-based Cherry Ventures. Mahtani was previously a principal and led the firm's UK investment strategy, per Tech.eu. https://axios.link/3So2QAh

• Miles Rogers and Sterling Gerdes joined Archer Aviation, the Santa Clara-based eVTOL developer, as VP, head of marketing, and product lead, vertiport experiences. Rogers was previously chief strategy officer at Wheels Up; Gerdes joins from Delta Airlines. https://axios.link/4b8UaVG

6. It's personnel

👓 What we're reading: The IPO market is showing signs of life, but investors aren't convinced. Download our latest report for insights on who's going public in 2024.

🎶 Katie has been listening to Young Gun Silver Fox on Spotify recently, thanks to a tip from Generate's Ben Geman.

⚽ Alan is excited about the MLS team coming to Rhode Island. 

Thank you to Michael Flaherty and Chris Speckhard for today's edits.

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

January 22, 2024

1 big thing: Heavy metal production