AP Ventures, the London-based venture capital and private equity firm, will need new advisory relationships and offices in the US as it looks for investors and deployment opportunities there, Managing Partner Andrew Hinkly said in an interview.
The company has fully allocated its first two funds with 12 LPs, Hinkly said.
Fund 1 ($85m) is fully deployed with two of the LPs. Two realizations have come from that fund to date: the sale of United Hydrogen Group in Tennessee to Plug Power and the sale of Hyatt Hydrogen to Fortescue Future Industries.
Fund 2 ($315m) is fully allocated with 12 LPs, including the two from Fund 1. The portfolio includes 21 companies across the hydrogen value chain (ammonia for transport, liquefaction, electrolyzer production, compressor technology, etc.) at the seed, Series A and Series B stages.
“We believe we have a very differentiated set of capabilities and experiences because we are singularly focused on the hydrogen value chain,” Hinkly said.
The firm’s LPs include AngloAmerican, Equinor, Implats, Mitsubishi, Nyso Climate Investments, Pavilion Capital, Plastic Omnium, Public Investment Corporation, Sparx, Sumitomo, and Yara International.
Strategic advice need apply
In the near-term AP Ventures can offer deal flow, opportunities within portfolio companies for various professional services, and an understanding of the progression of hydrogen businesses for later-stage investors, Hinkly said.
Transactions to date have been conducted bilaterally with external legal counsel, Hinkly said. AP Ventures has yet to engage a financial advisor for that purpose.
“If you want to know about hydrogen and hydrogen deal flow, AP Ventures sees most of it,” Hinkley said. “We bring with us an ecosystem of fairly regular co-investors who are similarly interested in hydrogen.”
Co-investors include Amazon, Mitsuibishi, Chevron and Aramco.
Some of the firm’s more mature companies will take on strategic consulting services as they prepare for larger fundraising, Hinkly said.
“Clearly there are a series of advisory services that our portfolio companies require as they raise capital or subsequently look to acquire or be acquired,” he added.
Later-stage investors are keen to understand the development of AP’s portfolio, Hinkly said. Topco equity and larger-scale infrastructure investors have collaborative relationships with the firm as they prepare to acquire its portfolio companies in the future.
“We have a common interest in the continued development and maturity of the companies we’re investing in,” Hinkly said. “We have an ever-increasing roster of later-stage private equity investors who have a desire to maintain a dialog with us and to be introduced to our portfolio companies on a regular basis.”
New world opportunities
US portfolio companies could be in greater need of strategic advisory services in the near term than some of AP’s European holdings, Hinkly said.
The firm is looking to establish offices in the US with an eye on Denver and Houston, Hinkly said.
Greater support for hydrogen in the US under the IRA means European companies within AP Ventures’ portfolio are also looking to establish themselves in the US.
In terms of a target market, AP Ventures is particularly interested in Texas, which Hinkly said he expects will be the hydrogen capital of the world. Existing infrastructure, human capital and enormous wind and solar resources pair well with a willingness to build out the industry there, he said.
AP will continue investing in the full hydrogen value chain as it has been for years, identifying weak spots in the chain to strengthen the industry, Hinkly said. But moving forward, the firm would like to invest in carbon capture utilization and storage as well.
Scaling up with the industry
As the hydrogen industry grows and its portfolio companies scale, there is significant opportunity for AP Ventures to grow and provide more financing, Hinkly said.
“There is a huge requirement for capital and we are knowledgeable, very knowledgeable, of where good opportunities exist,” he said.
The nature of the firm’s early contracts gives them preferential access to those opportunities in some cases as well. Whether that would be best done directly with a new fund or partnership with a firm with complementary skills is an open question.
“That strategic question is one that’s frankly ahead of us this year.”
