VC investments in clean energy LSE The Student Initiative 31 … LSE course... · 2014-11-03 · Speaks English, French and German. Dr Gérard Toth (Chief Technical Officer) Development

1 © Mora Associates Ltd, 2011 – www.moraassociates.com

VC investments in clean energy

LSE – The Student Initiative

31 January 2011

Arnaud Mora, Mora Associates


C O U R S E O U T L I N E

2

► PART 1: I WORK

● Short presentation of Mora Associates

● Definition of cleantech / clean energy

● 4 real-life examples

● Learn the job in 10 minutes: investment criteria

● Discussion: What’s hot tomorrow?

► PART 2: YOU WORK

● Workshop: case study

● Deliverables: SWOT & investment recommendation

● Q&A



3

► PART 1: I WORK





● Discussion: What’s hot tomorrow




● Q&A


C O M PA N Y V A L U E S

► We are focused ● Cleantech, alternative energy, energy efficiency,

environmental technologies, smart grid, electric vehicles

● We do nothing but cleantech

► We are financial experts ● Equity raising for companies and projects

● Debt finance for projects

► We are more than financiers ● Hands-on experiences with affiliate company Novae

Energies, developer of renewable energy power plants

● Broad range of skills, both technical and financial


T E A M

Arnaud Mora (Chief Executive Officer)

Founded Mora Associates in 2006, extensive experience in financing companies and projects.

5 years corporate and investment banking experience in London and Vienna with Societe Generale.

Graduated with honours in Economics and Finance from Sciences Po in Paris.

Speaks English, French and German.

Dr Gérard Toth (Chief Technical Officer)

Development of wind and photovoltaic parks since 2000.

Former Scientific Director for the French Solar Energy Agency in the late 1970s.

PhD in solid state physics, engineering degree from the Ecole de Physique et de Chimie de Paris.

Speaks English, French, German.

Marc Verdier (Partner, Prague office)

Responsible for projects in Eastern Europe.

More than 15 years consulting experience in the Czech Republic in accounting and financing.

Graduated in Economics and Finance from Sciences Po in Paris.

Speaks English, French and Czech.

Yalan Chuang (Co-founder partner firm Chinese Original)

Responsible for projects in China, Hong Kong and Taiwan.

Founded Chinese Original in 2007, a London-based training and consulting firm for banks and law firms.

Master degree in Finance from Sciences Po in Paris.

Mandarin native speaker, English, French.

Jean-Luc Bourrin (Co-founder partner firm Chinese Original)

15 years experience in consulting and in banking.

Graduated in engineering from Centrale Paris, graduated in econometrics from La Sorbonne and Master

degree in international relations from Sciences Po in Paris.

Speaks English, French, Mandarin, German, Italian, Spanish.


P R O V E N F I N A N C I A L E X P E R T I S E

► AIRFI

● EUR 14 million venture capital fund in Eastern France (Alsace)

● LPs: French State’s wealth fund (Caisse des dépôts), Alsace local

government and retail banks

● Advisor on investments on cleantech & environmental companies

● 10 companies in portfolio

► Novae Energies

● 9-MW photovoltaic power plant in France

● EUR 30 million investment

● Equity & debt finance

► Soleil en tête

● Installation of photovoltaic sets for individual customers

● Leading franchise in France

● EUR 1.5 million equity raising from VC firms

► Thermokin

● Innovative compression technology for greater energy efficiency in thermal

power plants

● EUR 1.6 million equity raising from VC firms


P R O V E N T E C H N I C A L E X P E R T I S E

► Acquisition mandate from a listed French renewable energy utility (confidential) ● Acquisition of power plants in Germany

● Identification of targets, negotiation, due diligence

► Acquisition mandate from a French independent power producer (confidential) ● Acquisition of wind and solar projects in development in

the Czech Republic

● Identification of targets, negotiation, due diligence

► Development of wind parks in Brazil for own account with affiliate Novae Energies ● 250-MW project

● Development from scratch

● Electrical engineering in cooperation with French engineering and construction leader Cegelec (25,000 employees worldwide, EUR 3 bn revenues)



8

► PART 1: I WORK









● Q&A


W H AT I S C L E A N T E C H / C L E A N E N E R G Y ?

► Eco-industrial activities, in a broad sense

► Definition from the OECD:

“Activities producing goods and services aimed at measuring, preventing, limiting or correcting the environmental impacts of human activities, such as water, air and soil pollution, as well as, problems in connection with waste, noise and

eco-systems”

“Products and services which reduce the environmental risks and also minimise both pollution and utilisation of natural resources”



► A short and handy definition

All activities aiming at reducing the collateral damages of industrial development

► Nearly all human activities are impacted: from

vertical farming to green IT

► Sectors and priorities may differ according to

the level of industrial development

► Population growth challenge

► Better city, better life: Shanghai Expo 2010



► Quiz #1: examples of cleantech activities in

developed countries?

► Quiz #2: examples of cleantech activities in

developing countries?

► Be critical…

● Isn’t organic farming a fantastic back-to-basics way

to feed 7 million Londoners aspiring to “better city,

better life”?

● What about trying to feed 1.3 bn Chinese by organic

farming… on less than 10% of the Earth’s arable

land?


A N E X A M P L E : W H AT W E D O T O D A Y

Smart grid

Electric vehicle charging

infrastructure

Smart home

Energy conservation

Industrial processes

Energy services companies

Biofuel 2nd generation

Biogas

Combined heat & power

Wind

Photovoltaic

Geothermal



13

► PART 1: I WORK









● Q&A


4 D I F F E R E N T C L E A N T E C H E X A M P L E S

► From large to small

► From developing to developed countries

► From mature technology to cutting-edge

innovation

► From dull to sexy


D E A L # 1 : W I N D P O W E R I N B R A Z I L

► Short project description

● 4,000 hectares of low-value land in a semi-desertic area

● 250 MW or 100 wind turbines split in several wind parks

► Rationale

● Underlying macroeconomic strength in Brazil

● Strong economic growth with excellent long-term prospects

● Increasing life standards and development of industries

● Structural long-term need for growing electricity consumption

● Structural need to balance power production sources

● Additional 4,000 to 5,000 MW needed each year over the coming decade

► Investment size

● ~ BRL 1 billion (EUR 300 to 400 million)

► Development time

● > 5 years from scratch to grid connection

► Challenges / Risks

● Sovereign risks: changing laws

● Bureaucracy

● Not-so-sophisticated debt and equity markets in Brazil

● No technical challenge, no barrier to entry

● Maturing industry, increasingly dominated by large utilities


D E A L # 2 : S O L A R P O W E R I N F R A N C E


● 9 MW photovoltaic park in Southern France

● 20 hectares of low-value land in a rural area

► Rationale

● Relatively low development of renewable power generation in France

compared to neighbouring countries (Germany, Spain)

● Room for growth

● Excellent feed-in tariff over 20 years backed by state guarantee (AAA)

► Investment size

● EUR 30 million


● < 3 years from scratch to grid connection


● Sovereign risk: ever-changing laws… until full moratorium now

● Industry lobbies against renewables in France (nuclear power lobby)

● Renewables are not a vital need for a country already carbon-free

● Bureaucracy

● No technical challenge, no barrier to entry

● Distorting presence of EDF, state-owned near-monopoly


D E A L # 3 : C O M P R E S S O R T E C H N O L O G Y


● Innovative compressor technology for industrial processes (steel) and

peak power generation (open cycle gas power plants)

● Patents and cutting-edge physics (fluids, thermodynamics)

► Rationale

● Most industrial processes generate waste heat that can/should be recycled

● Existing turbines and compressing technologies have low yields

● Use energy from waste heat and re-inject it in the process

► Investment size

● EUR 1 million for prototype phase


● > 10 years for calculations, patenting, virtual prototype, simulations

● > 3 years to get the first prototype up and running


● Technical innovation

● Long time-to-market

● Competition from alternative technologies and applications for the

“valorisation” of waste heat

● Which business model? Manufacturer? Engineering bureau?


D E A L # 4 : E L E C T R I C M O B I L I T Y


● Provide electric vehicle drivers with user-friendly all-included monthly

mobility contracts

● Fully integrate EVs into the smart electrical grid, optimise energy resource

(batteries and electricity consumption), revenues from trading energy

► Rationale

● EVs are structurally expensive and not user-friendly

● Electric mobility is the only way to cut tailpipe emissions

● Electric mobility powered by domestic power sources in the only way to oil

independence

● Technologies exist but have not yet been integrated

► Investment size

● EUR 5 million for demonstration purposes, then utility-scale


● 3 years from first concept to first prototype


● Technical innovation

● Business model to be invented

● Managing opposition from established players (utilities, car manufacturers)



19

► PART 1: I WORK









● Q&A


I N V E S T M E N T C R I T E R I A

► Cleantech investment is about making money: investment criteria are classical VC investment criteria

► Main topics ● What is the project about?

● Market description, market trends

● Competition

● Substitution products

● Company founders

● Existing shareholders

● Key employees, key competences, key suppliers

● Pricing power

● Cost of sales / gross margin

● Marketing strategy

● Main financials

● Financing need

● Exit route, expected return

► In a nutshell ● Unique selling proposition? Me too?

● Barrier to entry?

● Competitive advantage?

● Scalability?

● Ability to generate strong profits?

► Gut feeling ● A business or a dream?

● What do I like in the deal and in the team?

● What do I dislike in the deal and in the team?



21

► PART 1: I WORK









● Q&A


W H AT ’ S H O T T O M O R R O W ?

► What challenges?

► Where?

► Breakthrough technologies?

► Innovative business models?



23

► PART 1: I WORK









● Q&A


N E O F F S H O R E W I N D T U R B I N E S

► Activity

● Design and production of wind turbines for offshore

wind power

● Innovative combination of proven technologies

● Nacelle mechanism reduces maintenance costs by

30% vs conventional design

● IP owned or exclusive worldwide licence

● 25% more expensive than competition

► Company history

● Spin-off from a large industrial group

● Founded 2008 with CEO’s money (EUR 500k)

● 2009: Other shareholders invested EUR 5m for

50% of the company



► Technology

● One demonstration unit installed in 2010

● Complex manufacturing process

● Currently converting an existing factory and re-

training existing staff

● 25 staff

► Team

● CEO: ex-executive from a large IT group

● Other founders on a non-executive basis (an

accountant, a retired executive from a utility, a

family-office)

● Engineering insourced and outsourced

● Key staff in the production process



► Development perspectives

● Join industrial consortium to bid in 5 EU tenders for

offshore wind power in 2011 (100 turbines)

● Contract for 10 turbines in negotiation with an Irish

utility

● Contract for 20 turbines signed with an independent

developer in Vietnam

► Financials (2010)

● Sales: EUR 200k (studies, engineering)

● Staff costs: EUR 1 million

● R&D: EUR 3 million (studies + demo turbine)

● Cash at hand: EUR 1 million



► Projections

● Sales: 10 turbines in 2011, at EUR 5 million /

turbine

● Growth: sales double each year until 2017

● 10% net result

► Financing need

● EUR 15 million for R&D and working capital

► Valuation

● EUR 50 million pre-money

● ~25% of the company post-money



28

► PART 1: I WORK









● Q&A


► SWOT analysis (strengths / weaknesses / opportunities / threats)

► In a nutshell ● Unique selling proposition? Me too?

● Barrier to entry?

● Competitive advantage?

● Scalability?

● Ability to generate strong profits?

► Gut feeling ● A business or a dream?

● What do I like in the deal and in the team?

● What do I dislike in the deal and in the team?

► Investment recommendation ● Issues to be cleared in a due diligence process?

● Investment structure (equity / loan)?

● Milestones?

● Go / no go?

W O R K S H O P D E L I V E R A B L E S



► Technology ● One demonstration unit installed in 2010

● Complex manufacturing process

● Currently converting an existing factory and re-training existing staff

● 25 staff

► Team ● CEO: ex-executive from a large IT group

● Other founders on a non-executive basis (an accountant, a retired executive from a utility, a family-office)

● Engineering insourced and outsourced

● Key staff in the production process

► Activity

● Design and production of wind turbines for offshore

wind power

● Innovative combination of proven technologies

● Nacelle mechanism reduces maintenance costs by

30% vs conventional design

● IP owned or exclusive worldwide licence

● 25% more expensive than competition

► Company history

● Spin-off from a large industrial group

● Founded 2008 with CEO’s money (EUR 500k)

● 2009: Other shareholders invested EUR 5m for

50% of the company

► Development perspectives

● Join industrial consortium to bid in 5 EU tenders for

offshore wind power in 2011 (100 turbines)

● Contract for 10 turbines in negotiation with an Irish

utility

● Contract for 20 turbines signed with an independent

developer in Vietnam

► Financials (2010)

● Sales: EUR 200k (studies, engineering)

● Staff costs: EUR 1 million

● R&D: EUR 3 million (studies + demo turbine)

● Cash at hand: EUR 1 million

► Projections

● Sales: 10 turbines in 2011, at EUR 5 million /

turbine

● Growth: sales double each year until 2017

● 10% net result

► Financing need

● EUR 15 million for R&D and working capital

► Valuation

● EUR 50 million pre-money

● ~25% of the company post-money



31

► PART 1: I WORK







● Workshop: case studies


● Q&A

Documents

VC investments in clean energy LSE The Student Initiative 31 … LSE course... · 2014-11-03 · Speaks English, French and German. Dr Gérard Toth (Chief Technical Officer) Development