Cleantech Investor

First published in Cleantech magazine - Fuel Cell Special Sept/Oct 2010

Anne McIvor reviews recent deals and discusses investment trends in the fuel cell and hydrogen industries 

Much of the finance for the fuel cell industry comes from government research institutes and is earmarked for research and development or public/private partnerships (PPPs) (programmes such as Clean Urban Transport for Europe, or CUTE). Private sector investment outside of the PPPs often comes under the umbrella of large diversified companies, making estimates of the levels of investment difficult to quantify. Companies such as United Technologies Corp., Samsung, Sharp, Toyota, Hundai, Ford, GM, Panasonic, Honda, Toshiba, Siemens Power Generation, Johnson Matthey and Shell are all important investors in the industry. Although stock markets have played a role in financing the industry, it is the venture capital investors who are the key players behind many early stage fuel cell companies and who are backing some of the most innovative technologies.

In terms of venture finance, a number of fund managers specialise to varying degrees in the fuel cell sector, including Conduit Ventures in the UK, Chrysalix Energy in Vancouver, Canada, and Douglas Ventures which manages the PGM Development Fund in South Africa.

Both Conduit and Chrysalix raised their first funding in 2001. Conduit received initial backing for its original fund, the Conduit Ventures Fund, from Johnson Matthey plc, Mitsubishi Corp. and Royal Dutch Shell. Subsequent investors included Danfoss A/S, National Technology Enterprises Company (Kuwait) and Solvay SA. Limited partners in Chrysalix at the outset were Ballard Power Systems, Shell Hydrogen, Westcoast Energy, the BOC Group and BASF Venture Capital. The PGM Development Fund was established much more recently, with backing from South African mining company AngloPlat.

It is perhaps interesting to observe a shift in venture capital industry support for the fuel cell industry from the US and Europe to emerging nations. The PGM Fund, which has invested in Altergy Sytems and is pursuing applications for fuel cells in areas such as rural electrification and telecommunications in South Africa, works closely with the South African Department of Science & Technology. Conduit, meanwhile, has established a partnership with the Shanghai Science and Technology Investment Corporation (SSTIC), which is one of the backers of its second fund, Conduit Ventures IIA. Conduit Ventures IIA, managed from London and Shanghai, China, has also been funded by the Shanghai municipality, alongside investors including Goldman Sachs and Shell, thereby strengthening the link between its EU base and East Asia.

Recent investments by Conduit in Europe have included Smart Fuel Cell AG, based in Munich, Germany. Smart Fuel Cell is a direct methanol fuel cell company which has “sold more fuel cells than the rest of the fuel cell industry combined”, according to the company. Conduit also invested in Berlin-based Heliocentris in 2009. Heliocentris, which is listed on the Deutsche Bourse, is a system integrator in the field of PEM fuel cell and hydrogen technology with an extensive product portfolio addressing a variety of energy solutions across several market applications.  

Conduit also contributed to a €10 million ($13.6 million) investment round for P21 in May this year, alongside Yellow & Blue Investment Management and Target Partners. P21, originally a spin-out from the Mannesmann/Vodafone Group, provides energy efficiency solutions and balancing power to telecommunications networks. Conduit first invested in P21 in 2004.

Recent fuel cell investments by Chrysalix included Washington, US-based ReliOn, a spin-out of utility Avista Corp. which makes PEMFCs for commercial and industrial back-up power. ReliOn raised $23 million in a Series C round in April 2008. Investors alongside Chrysalix included PCG Clean Energy & Technology Fund, Robeco, Oak Investment Partners, Enterprise Partners Venture Capital and Wall Street Technology Partners.

Two fuel cell investments ranked amongst the top ten cleantech venture capital transactions in 2009, according to VB Research. The deals included the investments in Intelligent Energy, in the UK, and Powercell Sweden AG. Intelligent Energy raised $30 million in July 2009, from investors including Meditor European Master Fund and F&C. The company, which supplies fuel cells to customers including Scottish & Southern Energy, Suzuki Motor Corporation and Boeing, also has a joint venture with Lotus for taxis. Intelligent Energy has raised a total of some $130 million. Powercell Sweden AB, which has developed fuel cell electric power systems, has a patented technology for converting commercially available hydro carbon fuels into electricity based on research carried out within the Volvo Group. It raised SKr200 million from Midroc New Technology AB, OCAS BV and Volvo Technology Transfer AB last year.

Back in the UK, ACAL Energy raised £3.5 million in May this year from existing investors, led by Carbon Trust Investments and supported by Solvay SA, Porton Capital and Honda Motors. The funds are earmarked for development of ACAL Energy’s FlowCath® cathode technology. ACAL, which previously raised £3.3 million in December 2008, was mentioned in the GP Bullhound Cleantech Connect European Cleantech company list in 2009, ranking amongst “the ones to watch”. Fuel cell companies featuring in the GP Bullhound list of fastest growth venture-backed cleantech companies last year included myFC (backed by Sting Capital, Sjätte AP-fonden and KTH-Chalmers Capital), which ranked number ten (with a compound annual growth rate [CAGR] of 128% between 2006 and 2008); and Electro Power Systems, ranked number eleven with CAGR of 117%. Electro Power Systems operates as a subsidiary of New World Resources and is backed by 360° Capital Partners and Net Partners. Italy-based Electro Power, which raised $6.8 million in the first quarter of 2009, has developed a technology enabling fuel cells to convert hydrogen to electricity when grid power is down.

Elsewhere, transactions in Greece included an investment by Piraeus Venture Capital Fund and Dolphin Capital, alongside industrial partners including Systems Sunlight S.A., Velti S.A. and ILPRA S.A., in Advent Technologies, a company involved in the development of a high temperature PEM fuel cell system. Advent is a spin-off from the University of Patras and the Foundation for Research & Technology-Hellas. And in France, this year has seen Sofinnova lead a funding round valued at €13.7 million in McPhy Energy. Co-investors in McPhy, which is commercialising a new technology for the solid storage of hydrogen in the form of magnesium hydrides, included Gimv and Amundi Private Equity Funds.

The mood in Silicon Valley is inevitably crucial for venture capital investment in any industry. Here the signals are positive for the fuel cell industry with evidence of increasing renewed interest in the sector. Significant recent deals have included an investment round for ClearEdge Power. ClearEdge, which is reportedly shipping a 5kW stationary fuel cell unit, raised $11 million in January this year from investors including Kohlberg Ventures, Applied Ventures and Big Basin Partners – taking its total funding to $55 million.

However, as far as fuel cells are concerned, it has been Bloom Energy which has grabbed the headlines in Silicon Valley this year. The company has emerged from ‘stealth mode’ with a number of important announcements on customers. The lead investor in stationary fuel cell power developer Bloom, which has raised almost $400 million in total since it was founded in 2001, is Kleiner Perkins Caulfield & Byers. Bloom has developed Energy Servers™, efficient energy generators for distributed power generation. In February this year, the Sunnyvale, California-based company revealed an impressive list of customers, including Google, ebay, Walmart, FedEx and CocaCola.

There is much speculation that Bloom is planning an IPO. Successful IPOs in the sector are in turn likely to be the catalyst for venture investors to focus increasingly on fuel cell industry opportunities over coming years.

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