IDC Energy: Inaugural ranking of US Electric Utilities

IDC Energy launched a new ranking of US Electric Utilities. The IDC Survey makes use of five performance factors. Intelligent Utitiliy publishsed an article that goes a long with the ranking. IDC Energy is looking for input on how to improve this inaugral ranking; “Should we link the ranking to company share price” for instance? In principal the ranking may facilitate further discussions with regards to who is on the forefront of wanting to deliver change. We appreciate that the ranking puts an emphasis on Cultural Change. Many organisations never saw a need to materially alter their course of action, nor did they see a sense-of-urgency to induce radical change. May this be the trigger point to divide the new Leaders from the Old? Electric Utilities 2.0!

Source: IDC Energy/Intelligent Utility

Source: IDC Energy/Intelligent Utility

Israel’s Bio Pure Technology raises $12m for clean water technology

On 2 Sep 2009, Bio Pure Technology (BPT), a provider of industrial waste water streams treatment solutions, has raised $12 million in Series B financing led by US Venture Partners (USVP) and Pitango Venture Capital, with participation from existing investors Aurum Ventures and Elron Electronic Industries.

BPT specializes in chemically-stable membrane-based separation solutions intended for use in the water and wastewater treatment industries. BPT’s technology targets customers in the landfill, mining, chemical, biopharma and food sectors, allowing them to filter their wastewater to comply with environmental regulations.

“Cleantech is an area of growing concern to the world market. BPT’s technology and tremendously experienced R&D group are well positioned to play a significant role in the application of nanotechnology to water technology,” Ittai Harel, partner at Pitango Venture Capital.

“USVP has been investing in cleantech for over six years and this is our first cleantech investment in Israel. Water treatment and recycling are critical elements of adapting to climate change,” said Jacques Benkoski, venture partner, “BPT clearly stood out as a unique player with differentiated and leading technology to solve critical waste water recycling issues for key industrial processes.”

BPT said it will use the funds to expand its manufacturing facilities, continue R&D and further develop sales and marketing infrastructure to meet increased worldwide demand. In conjunction with this round Christopher J. Rust, USVP partner and Jacques Benkoski, USVP venture partner will represent USVP on the BPT board and Ittai Harel, Pitango partner, will represent Pitango Venture Capital.

BPT was founded in 2000 by Dr. Motty Perry, the company President. Perry previously founded and served as CEO of Blue Green Environmental Technologies and its subsidiary Nitron, which focused on purification of ground wells. BPT is headquartered in Rishon LeZion, Israel.

Sources:
Bio Pure Technology raised $12 million from USVP, Pitango, Aurum Ventures and Elron
Israel’s BPT Raises $12M For Clean Water Technology

Goldwind rushes to list in HK

China’s largest maker of wind turbines, Xinjiang Goldwind Science & Technology Co, has announced plans on 2 Sep 2009 to float shares worth about $1 billion on Hong Kong’s main board. Goldwind joins more than 30 companies announced in Hong Kong in the past month to raise estimated $25 billion in the coming months in the territory and on the mainland.

Goldwind will issue shares no more than 15% of its enlarged equity capital after the HK share offer to overseas institutions, corporate and individual investors. Goldwind has total capital of 1.4 billion outstanding shares now. Proceeds would be used to fund 3 wind power projects in the country and supplement the firm’s working capital.

In Dec 2007, Goldwind launched its $244 million IPO on Shenzhen Stock Exchange.

Comment: As the equities market look favourable to raise funds, Goldwind will be able to tap the markets for its aggressive expansion especially after the Chinese government’s pledge to fight climate change and look to increase its renewable energy sources. Watch out Vestas, Goldwind may strike the golden No. 1 spot within a decade.

Sources:
China’s Goldwind plans to list in HK’s main board
Xinjiang joins rush to list in HK

AltaRock suspends test project

On 2 Sep 2009, geothermal startup AltaRock Energy said it has suspended drilling at its demonstration project in California due to geologic anomalies. The startup said it encountered a number of physical difficulties at the site while drilling its first well.

However, the company said it will keep developing its engineered geothermal systems (EGS) technology and is evaluating alternative well locations, both at the Geysers, a site north of San Francisco, and elsewhere. The news comes as a blow to AltaRock’s demonstration project, which is backed by $6.24 million in funds from the U.S. Department of Energy, with the possibility of $2.76 million more.

In 2008, AltaRock raised $26.25 million from Google.org (which contributed $6.25 million), Khosla Ventures, Kleiner Perkins Caufield & Byers, Advanced Technology Ventures and Vulcan Capital.

Cleantech Group reports “Today’s problem isn’t the first controversy to stem from the project. In June, The New York Times raised questions about the Geysers project, comparing it to an effort in Basel, Switzerland, that some scientists say caused a large earthquake, followed by thousands of small quakes. Both projects aimed to fracture rock deep underground to generate steam, but AltaRock disputes the similarities of the projects.”

After the New York Times report, the DOE and Bureau of Land Management informed AltraRock that it would not be allowed to fracture rock until the department completed a new review of whether the project would be safe. The company was allowed to keep drilling, however, down toward the depth at which it would begin the fracturing. The review, which likely to be released within few weeks, is expected to compare the Basel and California projects and determine whether AltraRock’s effort is safe.

Sources:
AltaRock suspends drilling at DOE-backed project
Google-backed geothermal company suspends test project

See the New York Times reports:
Deep in Bedrock, Clean Energy and Quake Fears
Drilling Ordeals Said to Delay Geothermal Project

Khosla Ventures announces $1.1 billion cleantech funds

Finally, on 1 Sep 2009, Khosla Ventures has announced that it had raised more than $1 billion for 2 new funds focused on cleantech and renewable energy. Khosla Ventures III and Khosla Ventures Seed raised more than their targets of $750 million and $250 million respectively. The investors include the California Public Employees’ Retirement System, Michigan’s State Employees’ Retirement System and the Regents of the University of California, Vinod Khosla said in an interview.

The $800 million KVIII fund will make initial investments of $5 million to $15 million in early and mid-stage clean energy and information technology companies. The $275 million KV Seed fund will finance what Khosla called high-risk “science experiments” that may exist only in a university laboratory with investments of about $2 million. About two-thirds of the investments will be devoted to green tech, with the remainder invested in more traditional technology firms.

The new funds fly in the face of two of the prevailing investment philosophies in Silicon Valley. In response to diminishing venture capital returns, investors have been advocating small funds of only a few hundred million dollars and staying away from high-cost, high-risk alternative energy companies. Khosla advocates precisely the opposite. Harnessing technology to address climate change will require the big risks that venture capitalists were once known for, he said. “We’re really about reinventing the infrastructure of society, which is the only way we’ll get the carbon footprint down, and we’re not afraid to fail.”

This is the largest amount raised by a VC firm since 2007 and the largest first-time fund raised since 1999, according to the National Venture Capital Association. This was also the first time Khosla Ventures has raised funds from outside investors. Previously the VC firm had invested hundreds of millions of dollars on behalf of its partners, including Khosla himself (which is quite unusual for a VC firm).

But Khosla is more interested in uncovering technology breakthroughs than in latching onto the latest green trend. “Things that are too much in fashion are things that I would shy away from,” he said in an interview. “Whatever the press calls hot are areas that I’m less interested in.” “I like to call it ‘main tech,’ not clean tech,” Khosla said. “We’re doing bioplastics, lighting, engines, water and air conditioning — almost anything that can be made renewable, sustainable, more efficient and cheaper.” “There’s an opportunity basically where technology innovation changes economics. In our business you can’t get in and out when the markets are bad. In some sense, when most people aren’t investing, it’s a good time to invest.”

The chance to invest in a broad-based portfolio was attractive to CalPERS. “Vinod Khosla’s opportunity set is larger than anyone else in the business because it goes beyond alternative energy to materials, water and other areas,” said CalPERS spokesman Clark McKinley. “There’s high risk, but high return. Some companies won’t pan out, but there could be great returns if he’s able to create the next Exxon of the alternative energy field or the next great concrete company.”

“The terms I used to describe our seed fund were, ‘We don’t expect to be fiduciary all the time. We will often invest in things that have a high probability of failure,’ ” Khosla said. Yet to his surprise, there was more interest in that fund than the other. “We insisted on being in a fund like that,” said Joncarlo Mark, head of private equity investing for CalPERS which invested $60 million in Khosla’s riskier small fund and $200 million in the big fund. “The opportunity to partner with Vinod in his science experiments to us is as attractive as having a later-stage fund investing in more established businesses.” One reason Khosla’s investors are comfortable with the firm’s high-risk bets is that the partners have invested at least $100 million of their own money in the fund, Mr. Mark said.

In addition, Khosla Ventures is bringing on 2 new partners to help manage investments: former Facebook CFO Gideon Yu, and former senior partner with CMEA Capital, Jim Kim. Kim has a cleantech background, having worked with A123 Systems, Danotek and Solyndra at CMEA and before that GE Capital. Yu will probably look closely at IT startups, which will get part of the new Khosla funds.

See my previous blogs:
CalPERS invests $60m in Khosla’s closed $250m seed-stage fund
Khosla Ventures

Sources:
Khosla Announces $1B in Funds, Partner From Facebook
Khosla raises $1 billion for renewables, cleantech
Khosla Raises More Than $1 Billion for Energy Funds
Khosla Ventures raises $1.1 billion to invest in green technology
Venture Firm’s ‘Green’ Funds Top $1 Billion

Norwegian Think exits court protection and plans to resume production

TH!NK-city-Michigan-USA_imagelargePhoto Source: Think website

Norwegian electric carmaker Think announced on 27 Aug 2009 (see its press release) that the Norwegian courts have approved its debt settlement plan, enabling the company to exit court protection. This effectively puts Think back in business and to resume production of new electric vehicles (EVs), called TH!NK City model. (Update: On December 10th, Greentech Media reports that Th!nk is on track to deliver cars by Christmas.)

In addition, Think secured $47 million in new capital financing from new investors, namely Ener1 from the US, Valmet Automotive from Finland and Investinor, the Norwegian Government-backed investment fund.

Ener1 (Update: Strategic Partners are Argonne National Laboratories, Itochu) is the largest investors in Think and once the transaction is complete, will hold 31% equity stake of the company. Ener1 will invest about $18 million in 3 rounds and convert about $3 million in debt to shares of Think. Ener1 is the parent company of EnerDel, which supplies lithium-ion batteries to Think. EnerDel and Think have agreed to enter into a long-term battery supply agreement as part of the transaction.

Valmet Automotive will invest 3 million euros ($4.3 million) and as part of the deal, Valmet will start making TH!NK City cars in Finland this year. Think will close its Norwegian factory and lay off about 85 workers there. (Comment: Norwegian carmaker is now Finnish?) Valmet makes the Porsche Boxster, and is also to be the manufacturer of startup Fisker Automotive‘s high-end Karma hybrid – another company EnerDel plans to supply batteries to.

Investinor is a Norwegian venture fund backed by the Government’s Ministry of Trade and Industry. The fund invests in Norwegian companies on strict commercial terms in return for share capital, and is investing NOK30million ($5million) in Think’s capital increase. (Comment: So why didn’t the Norwegian fund push to keep the jobs in Norway since it has higher equity share than Valmet? Hmm…)

All in all, it’s a very good news for the company which was under the threat of bankruptcy earlier this year and was forced to halt its production of EVs just 2 months after it started. Think, which had raised about $85 million in venture capital as of last year (Kleiner Perkins, RockPort Capital, General Electric are some of its investors) reported early this year that it could be facing bankruptcy. Ener1 was one of the creditors that loaned about 40 million crowns ($5.7 million) to Think in January. And new and existing investors put about 250 million crowns ($39 million) into the company in June 2009.

In March 2008, Think also signed up lithium-ion battery manufacturer A123Systems to power its vehicles. (Comment: However, there may be doubts that the deal with A123Systems will go on as there was no further developments announced since then and because of the Ener1’s deal. Furthermore, Think and Ener1 successfully tested a lithium ion battery pack in June 2008. See TH!NK Tests Battery, But Where’s A123?)

Sources:
Think: We’re Back and Ready to Make Electric Cars
Think Gets $47M, Moves Production to Finland
Is Think Still a Norwegian Car Company?
Ener1 invests in Think, EV production to resume
Metso’s Valmet to start making Think electric car

Utility SCE wants A123 Systems to build largest grid storage battery

Southern California Edison (SCE) is seeking a US grant to store wind power in the largest-ever grid storage battery to be built by A123 Systems, Reuters reported on 26 Aug 2009.

Utility SCE is requesting $65 million in grants from the US DOE for the pilot storage project ($25 million for this project) and for another project involving integration of home energy management systems into the electric grid. SCE is seeking the money from the DOE’s $615 million fund for smart grid-related pilot projects. Smart grid technology measures and modifies power usage in homes and businesses, improving grid reliability.

Wind and solar are intermittent energy sources and storing the power at economically viable rate is seen as crucial to making alternative energy truly mainstream. Hence, SCE wants privately-held A123 Systems to assemble a 32-MW-hour utility-scale battery that would be made up of smaller batteries in an 8,000-square-foot building at an existing substation in the Tehachapi region in California.

The project is expected to have about 4,500MW of wind power by 2015 and needs to find a way to store the power. The battery would stabilize the flow of wind power from the mountains to the utility’s load centers to the west and south and that could free up about 300MW of wind power that might otherwise be undeliverable if the utility had transmission line problems in the region.

For the second pilot project on smart grid integration, SCE is seeking $40 million from the DOE and will be working with GE, SunPower Corp and Boeing Co. IBM and Cisco may also play a part in the project.

Separately, another California utility, Pacific Gas and Electric Co, is seeking $25 million from the DOE’s smart grid fund for a compressed air energy storage project, which aims to pump compressed air into an underground reservoir, using mainly wind energy produced during non-peak hours. The air would be released to generate electricity during periods of peak demand.

Batteries, whether the more expensive lithium ion or cheaper sodium sulfur and flow batteries, are still far more expensive than compressed air energy storage (CAES). According to the Electric Power Reserach Institute, it’s among the cheapest, besides pumping water uphill and letting it flow to spin a turbine – another technology limited by the availability of water and reservoirs to hold it. PG&E’s Helms Pumped Storage Facility is one such “pumped hydro” storage project.

Still, backers of grid batteries – as well as systems like flywheels and fuel cells – say they could lower prices as more systems get deployed.

Sources:
Utility wants to deploy largest grid battery ever
SoCal Edison Wants A123’s Biggest Grid Battery Ever
PG&E Wants DOE Dollars for Underground Air Energy Storage

Why Invest in Water?

When the well’s dry, we know the worth of water.” – Benjamin Franklin

If you read “The State of the Water Industry” and the “Introduction to Water Investing 2008” reports on the Summit Global Management’s website, you might go away feeling depressed about the current or future state of our water.

If you think the report is quite doomsday in its predictions, the guys from the UN issued similar warnings about the state of water. You can check out “The 3rd United Nations World Water Development Report: Water in a Changing World (WWDR-3)” just released by the UN in Mar 2009.

I’ll briefly highlight “recent trends and highlights” from the report:
1. Water investments gain attention as economy falters
2. Renewed focus on the environment
3. The intertwining aspects of water and global food production
4. Water to make oil, oil to make water
5. Growing concerns about global climate change
6. The bottled water craze cools off
7. New policies and new ways of thinking about water
8. Public versus private ownership

The key drivers behind the water business:
1. Water quality and scarcity problems are reaching crisis proportions
2. Public awareness and understanding of water problems is increasing
3. Regulation and enforcement will continue to intensify
4. Huge economic and human capital investments are required in the water industry

Industry trends and key issues:
1. Increasing regulation and government oversight
2. Our dilapidated infrastructure
3. Conservation and efficiency
4. Focus on recycling and re-use
5. Better measurement and monitoring
6. Technological solutions
7. Residential water consumption
8. A surge of investment in the industry

One of the amazing item on the report is that it shows the high returns of US water utilities compared to major indices like DJIA, S&P500 and Nasdaq, achieving 104.4% returns over 5 year period and 383.06% returns over 10 year period. See the picture below.
US Water Utilities Outperform
In the report, it claims “a striking and very illustrative fact is that in any randomly examined 5-year period in the last 25 years (1982-87, 1993-98, 1979-84, etc), water utilities topped the list of the best performing industry groups in the US stock market on a total return basis. Why? The simple answer again is that water utilities have always done very well in good times and bad.” Now, if only I could get the latest data to 2009 (since the data above was until 2006 at near the height of the bubble)…

I’m trying to reconcile two facts here: on one hand, these utilities are cash-rich and gives out dividends regularly, and on the other hand, water is underpriced and underinvested as well as it costs a lot to maintain and upgrade the dilapidating infrastructure. So where’s the money coming from and why the extremely high returns?

Nevertheless, with the water crisis looming, there are unique attributes specific to water investing, as described in the report:
1. There is no substitute for water and users cannot postpone purchases; price-inelastic demand
2. Conveyance and resource assets create a natural monopoly with huge barriers to entry
3. Demand is unaffected by inflation, recession, interest rates, changing preferences, or inventory loss
4. A history of strong and consistent growth under all market or economic conditions
5. Price of water does not yet reflect real economic value: huge room/need exists for asset price expansion

UMC establishes new firm for solar investments

Just 2 weeks ago, I wrote that TSMC is allocating $50 million for solar investments. Now, Reuters reported on 24 Aug 2009 that UMC, the world’s no. 2 contract chip maker is following sector leader and rival TSMC to diversify into solar-related markets.

UMC’s board approved a plan to establish a wholly owned investment company, UMC New Business Investment Corp, which would be capitalized at T$1.5 billion ($46 million) and invest in solar and LED markets. UMC will also set up a new business development center and Chen Wen-yang, a senior UMC vice president will be in charge of its operation.

The firm says that Chen will leverage his experience in the semiconductor industry to conduct evaluations on various investments. He will also be responsible for the integration, management and utilization of human resources, technology and capital. The new center aims to focus on industry sectors with high growth and profit potential. UMC New Business Investment Corp will then target timely strategic investment on the basis of the center’s evaluations.

Comment: TSMC and UMC which has combined 60% market share (TSMC – 45%, UMC – 15%) in the semiconductor chip industry is entering the solar industry which is currently in the state of massive oversupply. Is it too late to enter the industry where China is leading the solar production? Possibly they will use the same model of making chips mostly for those who do not own factories (we call them fabless companies) to the solar industry where the companies currently have their own factories/fabs. Only some companies like BP Solar and SunPower have recently outsource their solar panel production to contract manufacturers. Taiwanese companies which are well-known for contract manufacturing for items such as chips, computers, mobile phones and other electrical items will definitely eye for a piece of pie in the solar industry. Motech and Gintech Energy are currently the only Taiwanese companies in the top 10 PV companies in the world.

Sources:
UMC to set up new firm for solar investments
UMC, Another Chip Company With a Solar Fund
UMC establishes subsidiary targeting LED and solar investments

China and India should not follow the West?

A new level of Sino-Indian relationship has taken place in the arena of environment. In Apr 2009, India and China told the UN a climate change agreement that slows down their economic growth and locks them into poverty is unacceptable to them. Both countries have taken a series of “ambitious” domestic actions to combat climate change but want to draw the line at anything that would upset their economic growth strategies. India and China are among 190 countries that are trying to agree a successor agreement to the Kyoto Protocol on climate change by the end of the year in Copenhagen.

There have been calls for both China and India not to follow the Western economic development model but follow a more sustainable path. What kind of models to follow? I checked out this model called “sustainable development“,  termed by the Brundtland Commission 1983 by UN, which is a pattern of resource use that aims to meet human needs while preserving the environment so that these needs can be met not only in the present, but also for future generations.

The West followed the “grow first, clean up later” strategy which is commonly depicted by the “Environmental Kuznets Curve” (EKC), named after Nobel laureate economist Simon Kuznets. It shows that in the earlier phase of economic development, no or little attention is paid to environmental concerns. After a threshold, when basic needs are fulfilled, interest in attaining a clean environment rises. The developing economy of China has been cited as a potential test case for the EKC. Although China and India have been urged not to follow this route, both countries are asking the West to sponsor them in achieving sustainable economic growth. Rich countries should lead the way in cleaning up the world since they started polluting it, both countries claimed.

In another friendly gesture, India and China are in talks to monitor the melting of glaciers in the Himalayas together. The border region crucial to both countries’ water supplies are sometimes called the ‘Water Towers of Asia.’ Scientific research collaboration would see both countries share information. India has disputed the “doomsday predictions” linking melting of Himalayan glaciers to climate change, saying there is no evidence to support that glaciers will disappear within 40 years.

You can read other reports like “The Great Paradox of China: Green Energy and Black Skies” which describes China as on its way to becoming the world’s largest producer of renewable energy and yet is still the most polluted country; and John Doerr of Kleiner Perkins and Jeff Immelt, CEO of GE’s co-editorial in The Washington Post on “Falling Behind On Green Tech.” which laments that US is falling behind the green curve, compared to, can you believe it, China.

I picked the top 5 from 10 facts in the Allianz website here and here and other sources:

5 FACTS ABOUT CHINA AND CLIMATE CHANGE

1. China is the world’s largest emitter of greenhouse gases. The Netherlands Environmental Assessment Agency says this milestone was reached as far back as 2006, when Chinese emissions reached 6.2 billion tons. Just 6 years ago, China’s national carbon emissions were still only 42% that of the US.

2. Despite China’s status as the world’s biggest carbon emitter, average annual per capita carbon emissions are substantially smaller (6 tons of carbon emissions) than in the UK (11 tons) and the US (25 tons).

3. 64% of China’s energy supply comes from coal-fired power plants. China burns more coal – an estimated 1.9 billion tons per year – than the US, EU and Japan combined, and builds a new coal-fired electricity plant every 7-10 days.

4. The National Energy Strategy Policy (2003) states China’s aim to quadruple GDP by 2020, while only doubling energy consumption. To meet this ambitious goal, however, China would still have to expand all areas of energy production: doubling both coal and large-scale hydropower capacity, quadrupling nuclear capacity, and increasing non-hydro renewable energy production by 100-fold.

5. China added power capacity in 2006 equivalent to the entire power grids of the United Kingdom and Thailand combined – 90% of which is coal-based. New coal plants added to the Chinese power grid in 2006 alone increased the country’s carbon dioxide emissions by 500 million tons – adding 5% of the entire world’s coal-fired CO2 output in one year.

Another fact:
In 2006, the China Daily reported that Beijing had only 11 blue sky days per month over the past 5 years, which was far short of its 22 days per month expected.

5 FACTS ABOUT INDIA AND CLIMATE CHANGE

1. India is the world’s 4th largest emitter of greenhouse gases. A one-meter rise in sea level could displace millions of people in India, a country with a coastline of several thousand miles.

2. According to the Allianz/WWF Climate Scorecards 2009, India’s carbon dioxide emissions have increased by 78% since 1990. Per capita carbon dioxide emissions in India are only 2 tons compared with 25 tons for the average U.S. citizen or 11 tons for the average U.K. resident.

3. The Gangotri glacier, the source of the River Ganges, is retreating at a speed of about 30 meters a year, with warming temperatures likely to increase the rate of melting.

4. Annual coal consumption in India has more than tripled since 1980.

5. On average, floods affect about 5,000 square kilometers of land and 4.2 million people in India each year. According to research carried out at Oxford University, the total number of flood zone refugees in India alone could reach anywhere between 20 and 60 million. Sea level rises could also prompt an influx of millions of refugees from Bangladesh.

Sources:
India, China reject climate pact that obstructs economic growth
The environmental cost of growth in China and India
Kuznets Curve
Global Warming and the Poor – Why India and China don’t care much about climate change
India, China to cooperate over Himalayan glaciers