Cleantech Investor

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

The PGM Development Fund is a South Africa-domiciled private equity fund with a mandate to invest in early stage companies that use PGMs (platinum group metals) in their production or processes. The Fund is backed by South African mining company Anglo Platinum (AngloPlat), which is also working closely with the South African Department of Science & Technology (DST). Richard Willis of Douglas Investments, the fund manager, says the Fund provides AngloPlat with an opportunity to promote the use of PGMs by investing in early stage commercialisation opportunities that meet the objectives of the Fund.   AngloPlat’s commitment to the Fund is complementary to its commitment to the funding of research and development of PGM applications and technologies.

The mandate of the Fund is to invest in early stage companies that use PGMs in their production and/or processes – and which provide ‘beneficiation’ opportunities for Southern Africa. AngloPlat has a commitment to beneficiation – a South African concept which refers to the addition of value in the home country, typically in the context of the mining industry. An example is the processing of minerals (such as PGMs) into value added products before they are exported, rather than afterwards. As Willis points out, South Africa is an assembler of automotives, but it is an importer of automotive catalysts so loses out in total net export revenue in terms of the value chain. The objective of beneficiation is to avoid exports of raw minerals through the encouragement of local manufacturing/assembly– thereby creating job opportunities locally and increasing export revenue capabilities.

Beneficiation is a key goal of the South African Government. As part of that goal, the Government aims to achieve a 25% global share of the market for production of hydrogen and fuel cell catalysts using PGMs and has established three hydrogen research centres, or ’HySa’ centres. The PGM Development Fund intends to work closely with the Government. 

The Fund’s first investment is in a fuel cell venture with Altergy Systems, a California-based company, and the DST. As part of the deal, the Fund will make an undisclosed investment in Altergy to secure the technology transfer to a newly formed entity called Clean Energy Investments (Clean Energy).  The founding shareholders of Clean Energy will be the Fund, the DST and Altergy. Clean Energy will look to develop a market for Altergy’s initial Freedom Power Systems which target back-up power for base station telecommunications, providing an alternative to batteries and diesel generators.  Clean Energy has secured an exclusive ten year marketing, distribution, manufacturing and assembly agreement for Sub-Saharan Africa. Willis sees enormous potential in this market. There are in excess of 70,000 base stations in Sub-Saharan Africa and this number is growing by around 50% annually, but the current penetration of clean technologies is very low. Ultimately, Clean Energy aims to manufacture fuel cells in South Africa for the Sub-Saharan market.

The Fund is currently in early stage discussions with a potential investment opportunity in the form of a South African company which is developing a technology for affordable supply and storage of hydrogen. The Fund has access to ZAR100 million over three years and has to date drawn down ZAR40 million. Longer term, it aims to attract additional investors in the Fund who have the same objectives as AngloPlat, to invest in early stage commercialisation opportunities in Southern Africa that promote PGM usage and local beneficiation.