Cleantech Investor

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

Conduit Ventures manages the Conduit Ventures Fund and Conduit Ventures IIA. The company was founded in 2001 with initial backing for its first fund from Johnson Matthey plc, Mitsubishi Corp. and Royal Dutch Shell. Strategy at the outset was to focus on fuel cell technology and related hydrogen technologies. Subsequent investors included Danfoss A/S, National Technology Enterprises Company (Kuwait) and Solvay SA.

One of the Fund’s early investments, back in 2002, was in Vancouver, Canada-based Cellex Power Products. Cellex Power, a developer of PEM fuel cell power systems for forklift trucks, was sold to Plug Power in April 2007 for US$45 million, locking in what fund manager John Butt describes as a “healthy profit”. Another successful trade exit for Conduit, according to Butt, was the sale of Pemeas to BASF in December 2006. Frankfurt-based Pemeas, originally a spin-out from the former Hoechst Group, supplies key components such as high temperature membranes and MEAs and precious metal catalyst and electrode technology to the fuel cell industry.

Conduit first invested in P21 GmbH in 2004. Incubated within the Mannesmann/Vodafone Group, P21 develops power-based solutions for mobile telecommunications networks. Conduit contributed to a €10 million ($13.6 million) investment round for P21 in May of this year. Also in Germany, Conduit invested in Heliocentris. The Berlin-based company, which is listed on the Deutsche Bourse, is a system integrator in the field of PEM fuel cell and hydrogen technology.

Other investments have included Japanese company, Nano Fusion Technologies Inc. (NFT). Tokyo-based Nano Fusion, which received funding from Conduit in 2005, is developing micro pumps, using microfluidics technology, for use in controlling micro-sized liquid delivery for micro fuel cells in portable devices.

Hydrogen-based energy storage solutions are a particular area of interest for Conduit. Portfolio companies in this space include Amminex A/S, based in Denmark, which has developed a unique solid storage technology for ammonia. (The technology enhances the safety of ammonia without sacrificing volumetric storage capacity and improves the safe and economic storage of ammonia for direct ammonia gas application or where ammonia is used as a hydrogen carrier for hydrogen generation.) Another storage technology investment is Hydrexia Pty Ltd, based in Brisbane, Australia at the University of Queensland. Hydrexia is developing hydrogen storage systems based on magnesium hydrides, initially targeting hydrogen applications, such as large scale, industrial hydrogen storage, transport fuelling storage, and storage for hydrogen fuel cell back-up for remote applications.

The Fund’s portfolio also includes Controlled Power Technologies Inc., a UK-based automotive component supply company with a suite of proprietary engineering technologies which comprise air flow management systems applicable to a broad range of automotive technology platforms, including fuel cell systems. And last year Conduit made an investment in Smart Fuel Cell AG. Based in Munich, Germany, Smart Fuel Cell is the world’s leading direct methanol fuel cell company – and has sold more fuel cells than the rest of the fuel cell industry combined. It produces direct methanol fuel cells for leisure (motor home, marine and cabins), military, industrial (road safety, surveillance and remote sensors) and transport (mobility vehicles and motorbikes).

According to Butt, Conduit is close to completing its second direct investment in China. Butt believes that the Chinese market offers massive potential, commenting that “China has different requirements from elsewhere: they need to tap all sorts of energy resources from many different sources”. Conduit’s investment philosophy favours an integrated approach, focusing not just on one technology or solution but recognising that “... to address the problems and challenges of the future we must invest in more than one solution”. Butt points out that China has adopted exactly this approach to strategic energy planning.

With almost a decade of experience in investing in fuel cells, Butt reflects that the industry has suffered from a tendency by companies to “over promise concerning timelines and deadlines”. He says that this resulted in a confidence problem from the perspective of investors, but that the industry has continued to develop and the work that has been done is now bearing fruit. With at least three of the Conduit portfolio companies already selling into the market, there are clearly commercial products now getting out there. Butt believes that confidence is being restored in the industry and is confident that the right investments in the fuel cell industry will reap returns in the future.