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AIMCo establishes $1bn energy transition fund

The Alberta Investment Management Corporation, part of a consortium of investors in the ACES Delta hydrogen project, has established a $1bn funding pool dedicated to the energy transition and decarbonization.

The Alberta Investment Management Corporation (AIMCo) today outlined its approach to climate investing and introduced its Energy Transition Opportunities Pool (ETOP), which is a $1bn fund dedicated to investing in the global energy transition and decarbonization sectors.

“AIMCo has been strategically evaluating climate change risks and opportunities for the last decade and the organization has a strong track record of making investments in the energy transition space,” said Marlene Puffer, Chief Investment Officer, AIMCo, in a news release. “Our climate approach provides important transparency around how we consider climate in our investments and how we will, over the long run, help reduce emissions.”

AIMCo’s climate approach includes the introduction of a climate taxonomy that evaluates and classifies the energy transition readiness and carbon intensity of existing and new investments. This tool helps the investment teams analyze climate risk within client portfolios, as well as measure and improve total portfolio transition readiness.

The initial $1bn in AIMCo’s ETOP represents new capital. The investments made through ETOP will be in addition to AIMCo’s other climate-related investments across asset classes. Many of AIMCo’s clients have allocated funds to the new pool, which will offer them exposure to a variety of energy transition opportunities and themes, including:

  • Industrial decarbonization, carbon capture and sequestration
  • Sustainable solutions and renewable fuels
  • Low-carbon renewable energy production and related technologies
  • Electrification, storage and energy efficiency

“We are gratified by our clients’ commitment both to the new pool and to our shared objective of supporting and benefiting from energy transition and decarbonization opportunities,” said Ben Hawkins, Executive Managing Director, Head of Infrastructure & Renewable Resources.

For more information about the climate approach and the ETOP, please click here.

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Ontario Teachers’ Pension Plan acquires RNG firm Sevana Bioenergy

Ontario Teachers has acquired a majority stake in the RNG developer and made a capital commitment of $250m.

Ontario Teachers’ Pension Plan Board has entered into a strategic partnership with Sevana Bioenergy that will see it acquire a majority stake in the business and make a capital commitment of $250m to develop renewable natural gas (RNG) projects across North America, according to a press release.

Sevana is a pioneer in the RNG industry, developing and upgrading large-scale biogas projects to increase the production and use of RNG through the reduction of organic waste.  Sevana has successfully executed dairy and organics projects which include more than 20 state-of-the-art digester tanks across agricultural regions such as Oregon, Idaho and South Dakota since its founding by CEO John McKinney in 2017.

Sevana led these innovative projects to deploy more than $350m under construction and worked closely with farmers to form long-term beneficial partnerships as part of its strategy to own and operate reliable digester facilities. Sevana’s team of in-house experts has over 150 years of combined experience designing, operating, and maximizing performance of anaerobic digesters with projects worldwide.

“We are pleased to partner with John and the Sevana team to help accelerate their efforts to develop advanced digester facilities that produce RNG and electricity for transportation fuel, EV charging and other forms of energy,” said Zvi Orvitz, senior managing director, Sustainability & Energy Transition, Private Capital at Ontario Teachers’ Pension Plan. “Sevana has a demonstrated track record of success in the implementation of cutting edge RNG facilities, and we are excited by the opportunity to further scale the company as it enters its next chapter of growth.”

RNG is an important tool in the decarbonization of transportation, heating and industrial energy consumption and Sevana is a market leader entering new markets with RNG related products. Sevana’s projects capture fugitive methane emissions from farm animal and other organic waste streams that contribute to climate change and use this waste to produce low-carbon renewable power and RNG to replace fossil fuel-based energy sources. The company boasts a deep pipeline of future development opportunities and is also actively considering acquisition opportunities across the U.S.

“We welcome Ontario Teachers’ and look forward to our partnership as we work toward our objective of providing decarbonization solutions from RNG and continuing to enter new markets with related products” said Steve Compton, president at Sevana Bioenergy. “This commitment accelerates development of our industry leading projects that contribute direct economic and sustainable benefits to local communities and reduce greenhouse gases.”

Sevana is the latest investment by Ontario Teachers’ Pension Plan in the Sustainability and Energy Transition sector and will serve to advance the organization’s commitment to achieve net-zero greenhouse gas emissions by 2050.

Kirkland & Ellis LLP served as legal counsel to Ontario Teachers’ on the transaction. Fredrickson and Byron served as legal counsel to Sevana.

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PE firm acquires Innomotics from Siemens AG

A supplier of electric motor and large-drive systems, Innomotics is seeking to capitalize on the megatrends of electrification, energy efficiency, digitalization, and hydrogen commercialization.

KPS Capital Partners, LP has signed a definitive agreement to acquire Innomotics GmbH from Siemens AG for an enterprise value of €3.5 billion.

Completion of the transaction is expected in calendar Q4 2024 or Q1 2025 and is subject to customary closing conditions and approvals, according to a news release.

Innomotics is a leading global supplier of mission-critical electric motor and large drive systems that optimize customers’ processes, uptime, efficiency and profitability. The company manufactures a complete portfolio of low voltage motors, high voltage motors, medium voltage drives and other components, in addition to providing value-added customer services and solutions. The company serves large, highly technical end-markets with its engineering expertise and industry-leading track record of successful projects.

Paul Weiss, Rifkind, Wharton & Garrison LLP and Gleiss Lutz served as legal counsel and Bank of America and Lazard served as financial advisors to KPS. Committed debt financing to support the transaction has been provided by Barclays, Citibank, Goldman Sachs, Intesa Sanpaolo, Morgan Stanley, MUFG Bank, Standard Chartered Bank, UBS and UniCredit.

Innomotics’ products and services are capable of addressing its customers’ most demanding requirements while enabling significant energy savings, decarbonization and sustainability. Headquartered in Nuremberg, Germany, Innomotics generates approximately €3.3 billion in annual revenue, employs approximately 15,000 people and operates 16 factories across the EMEA, Americas and Asia-Pacific regions.

Michael Psaros, Co-Founder and Co-Managing Partner of KPS, said, “The company is well-positioned to capitalize on the global megatrends of electrification, energy efficiency, digitalization, urbanization and the commercialization of new energy resources such as hydrogen. We look forward to working with Innomotics’ senior management and stakeholders to aggressively accelerate the Company’s growth trajectory and value creation opportunities. We thank Siemens for entrusting KPS with its iconic heritage business created by Werner von Siemens. We are proud that the world’s largest industrial companies continue to view KPS as a peer manufacturer and trusted partner.”

Michael Reichle, Chief Executive Officer of Innomotics, said, “KPS, with its demonstrated track record of manufacturing excellence and its global platform, is the ideal owner for the new Innomotics. We will extend our extensive track record of successful technological innovation and providing our customers with world-class products, solutions and services.” Reichle continued, “We look forward to working closely together with KPS and our talented people as we continue to deliver significant value for our customers around the world and enhance Innomotics’ strong technological leadership. Innomotics will continue to benefit from strong growth potential driven by the sustainability-oriented demand for highly efficient electrification and energy consumption in industry and society.”

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European Commission establishes €3bn hydrogen bank

The new European Hydrogen Bank will guarantee the purchase of hydrogen, with a commitment of €3bn aimed at bridging the investment gap.

President of the European Commission (EC) Ursula von Der Leyen today announced the creation of a new European Hydrogen Bank aimed at bridging the hydrogen investment gap and connecting future supply and demand.

The new European Hydrogen Bank will guarantee the purchase of hydrogen using resources from the Innovation Fund, with an investment of €3 billion to help build the future market for hydrogen, von der Leyen said during the State of the Union address.

“And hydrogen can be a game changer for Europe. We need to move our hydrogen economy from niche to scale. With REPowerEU, we have doubled our 2030 target to produce ten million tons of renewable hydrogen in the EU, each year.

“To achieve this, we must create a market maker for hydrogen, in order to bridge the investment gap and connect future supply and demand. That is why I can today announce that we will create a new European Hydrogen Bank.

“It will help guarantee the purchase of hydrogen, notably by using resources from the Innovation Fund. It will be able to invest €3bn to help building the future market for hydrogen. This is how we power the economy of the future. This is the European Green Deal,” according to a transcript of her remarks.

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AEM electrolyzer startup conducting Series B capital raise

A maker of anion exchange membrane electrolyzers is undergoing a Series B capital raise.

Versogen, an electrolyzer startup, is conducting a Series B capital raise, with the aim of closing the round in the coming weeks, CFO Tim Krebs said in an interview.

The Delaware-based maker of anion exchange membrane electrolyzers is seeking to raise multiples of its Series A capital raise, Krebs said, which was a $14.5m round completed in May, 2022.

Proceeds from the Series B would allow the company to complete development of its AEM electrolyzer, a 1 MW modular hydrogen generation system, Krebs said. The company is not using a financial advisor.

The Series A funding round was led by Doosan Corporation and its affiliate HyAxiom. Other investors include The Chemours Company, TechEnergy Ventures, Wenstone H2Tech, TOP Ventures America, a CVC arm of Thai Oil Public Company Limited, DSC Investment and CN Innovations Investments Limited. 

Krebs, a former investment banker who has been the CFO of three energy technology companies, expects some existing investors will also participate in Versogen’s Series B round.

Versogen is led by co-founder and CEO Yushan Yan, an electrochemical engineer and inventor. The company touts a technology using low-cost construction materials like an alkaline electrolyzer but a more efficient production process akin to a membrane-based PEM electrolyzer.

Market dynamics

The capital raise is taking place amid a crowded field of electrolyzer startups looking to raise money in order to finalize designs and cement commercial opportunities.

Among others, Electric Hydrogen, a PEM electrolyzer startup, recently raised a $380m Series C; Verdagy raised a $73m Series B in August; and HyAxiom, a developer and manufacturer of fuel cell and electrolyzer solutions, completed a $150m private placement of convertible preferred stock in July.

At the same time, growth equity as well as Series A and Series B funding for climate tech dropped significantly through the first half of 2023.

Series A funding fell 36%, while Series B funding dropped 20% and growth equity investments fell by 64%, according to data from Climate Tech Venture Capital. Series C funding dropped by 72% in 1H23 compared to the same period last year, the same data shows.

Still, the market for electrolyzers is supported by undersupply as green hydrogen projects advance around the world.

James Bowe, a partner at King & Spalding who is advising on several large green hydrogen projects, said the three top manufacturers of electrolyzers are sold out for the next three to four years, potentially providing an opportunity for startups to fill the gap. Bowe made the comments yesterday during a panel at the Reuters North America Hydrogen conference in Houston.

Additionally, several catalysts for further electrolyzer demand are on the near-term horizon. The US Department of Energy is expected to announce the winners of up to $8bn in government funding for hydrogen hubs this week, while guidance from the IRS detailing rules to qualify for green hydrogen tax credits should be issued in the coming months.

Further clarity on government support for the hydrogen industry is expected to spur many projects toward final offtake arrangements and final investment decisions, experts say.

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California biomass-to-hydrogen firm in Series A

A woody biomass-to-hydrogen firm in California is conducting an in-house Series A for engineering and design on its first project, one that will need more than $800m of debt and equity in the future.

Mote Inc. is aiming to finish a Series A round, raising between $12m and $15m, by the end of the year, CEO Joshuah Stolaroff said in an interview.

The company does not have a relationship with a financial advisor and has been conducting the raise in-house, he said. Moving forward the company will need a financial advisor.

The Series A will provide some 18 months of technology development runway, plus engineering and design on the first project in Bakersfield, Kern County. That will require some $800m in debt and project equity to start in the next year.

A second project in Sacramento is in the pre-Feed stage. That development is the subject of a recently secured grant from the Sacramento Municipal Utility District.

“We need big partners to do it on any meaningful scale,” Stolaroff said of biomass-to-hydrogen. Investors tend to be technology VCs with little or no knowledge of project finance, and infra funds looking for no-risk projects. “We fall somewhere in between.”

Part of the Arches H2 hub in California, Mote has ambitions to expand to other areas of the US with good biomass supply and CO2 storage, like the southeast and Gulf Coast, Stolaroff said. The company would also like to expand internationally.

“We are a great deal right now,” he said of the Series A,” adding that a Series B or project equity round will follow shortly.

Majority equity is held by the company’s six employees, Stolaroff said. There are also seed investors that hold equity.

Abundant feedstock and a growing offtake market

Mote’s three primary feedstocks are agricultural and forestry reside and urban green waste. California produces some 45m tons of it per year and the number nationwide is about half-a-billion, Stolaroff said.

Mote is confident for demand from hydrogen customers, Stoaroff said. Transportation is expected to be a strong demand source by the time Mote is operational. The Arches hub also has connections with municipal users, filling stations and the ports of LA and Long Beach.

“We are all planning for growth,” he said.

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Green hydrogen developer raising capital for projects

Fusion Fuel, a green hydrogen developer based in Portugal, has engaged an advisor and is in talks with investors to raise capital for projects in North America.

Fusion Fuel, a green hydrogen developer based in Portugal, has engaged an advisor and is in talks with investors to raise capital for projects in North America.

The company is working with RBC Capital Markets as financial advisor, Fusion Fuel Co-Head Zachary Steele said in an interview, and expects to produce infrastructure-type returns on its projects.

For its first project in the U.S., Fusion Fuel has agreed to a JV with Electus Energy to build a 75 MW solar-to-hydrogen facility in Bakersfield, California.

The project will produce up to 9,300 tons of green hydrogen per annum including nighttime operation and require an estimated $180m in capital investment, with a final investment decision expected in early 2024 and commissioning in the first half of 2025.

The combination of green hydrogen and solar production incentives along with California’s low carbon fuel standard make the economics of the project attractive, Steele said.

“Hydrogen is selling for up to $15-$18 per kilogram in California in the mobility market, and we can produce it at around the low $3 per kilogram area, so that leaves a lot of room for us to make a return and reduce costs for customers,” he said.

The company sells electrolyzer technology for projects but also serves as a turnkey developer. The technology consists of Hevo-Solar, which utilizes concentrated solar power to create hydrogen; and Hevo-Chain, a centralized PEM electrolyzer powered by external electricity.

Fusion Fuel’s proposition is that its smaller-scale technology – of 25 kW per unit –  is ready to use now, and can be dropped into places like a gas station in New York City, Steele said.

“This allows customers to scale into hydrogen and makes it available on site, compared with the massive projects going up in Eastern Canada or the Gulf Coast that require customers to commit significant capital to underwrite large scale projects,” he added.

Along with Electus, Fusion Fuel has already entered into a land-lease agreement for 320 acres in Kern County, California for the Bakersfield development. Black & Veatch will perform a concept study while Cornerstone Engineering and Headwaters Solutions are also engaged.

Iberian pipeline

The company targets to have EUR 40m of revenues in 2023, with a third of that coming from tech sales and the balance coming from Fusion Fuel-owned development projects.

Its revenue pipeline for next year is focused on the Iberian peninsula, and has been largely de-risked with the company having secured grants, with land and permitting underway.

In addition to the electrolyzer sales, the company, together with its partners, can provide turnkey projects that include engineering, procurement of the balance of plant equipment, construction of the facility, and operations, Steele said on an investor call this week.

“This allows us to not only make returns on the tech sale but also on the overall project and potentially recurring revenue from operations,” he said.

The company plans to use projects it is building in Portugal to expand into other core markets, beginning with a focus on mobility opportunities and targeted industrial decarbonization projects. Starting in 2024 the company plans to extend its reach further into North America and also Italy.

U.S. focus

Similar to other international hydrogen players, the passage of the Inflation Reduction Act caused a strategic shift of focus to the U.S. and accelerated Fusion Fuel’s plans to grow its business there, company executives said.

Notably, since Fusion Fuel will use its own technology in the projects it is seeking to develop, a required amount of that technology will need to be manufactured in the U.S. in order to qualify for the full benefits provided in the IRA.

As such, Fusion Fuel is scouting for a location to build one, or possibly two, manufacturing facilities in the U.S.

“The size of the Bakersfield project alone justifies building a new manufacturing facility,” Steele said on the investor call.

Steele was previously CEO of Cedar LNG, a floating LNG development in British Columbia, prior to exiting to Pembina. He works alongside Fusion Fuels Co-Head & CFO, Frederico Figueira de Chaves, who is based in Portugal.

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