🌎 FOAK takes flight #182

Happy Monday!

Wondering how to finance first-of-a-kinds? This week brings two great examples with LanzaJet’s new SAF facility in Georgia and H2 Green Steel’s plant in Sweden, both layering different kinds of capital, each derisking the next to build their first commercial facilities.

In other news, Biden pleases climate conscious voters by hitting pause on new LNG export licenses, Exxon sues its activists shareholders, and the EPA grants its first Class VI permits in nearly a decade.

In deals, $75m for batteries, $58m for mushroom-based food alternatives, and $50m for AI enabled satellite monitoring.

…and for those who missed it, Kim and Mark reviewed climate tech investments in 2023, check out the recording here.

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A tale of two facilities

*Grand opening of LanzaJet Freedom Pines Fuels Facility in Georgia (Source:* *LanzaJet*)

Last week saw two major FOAK (first-of-a-kind) breakthroughs.

LanzaJet’s first large-scale SAF (sustainable aviation fuel) facility took flight in Soperton, Georgia. Freedom Pines is the world’s first ethanol to sustainable aviation fuel (SAF) production facility, producing 10m gallons/yr of SAF and renewable diesel.

Across the Atlantic, H2 Green Steel raised nearly $5.2bn for its plant under construction in Boden, Sweden, which plans to crank out 5m tons of green steel annually by 2030.

Climate capital stacking

Both projects are low-carbon milestones in hard-to-abate industries (steel is 7-9% of global emissions, aviation is 2-3%), but they also serve as blueprints for financing unproven infrastructure. At a glance, H2 Green Steel and LanzaJet were architected on sophisticated capital stacks combining debt, equity, and government grants.

Debt. H2 received $4.2bn from 20 lenders including the European Investment Bank and multinationals like BNP Paribas. LanzaJet landed a $50m discounted loan from Microsoft Climate Innovation Fund.
Equity. Existing shareholders and new investors such as Just Climate and Microsoft Climate Innovation Fund poured $327m into H2. LanzaJet collected $200m from parent company LanzaTech, Mitsui, Suncor, British Airways and Shell.
Grants. H2 was awarded $272m from the European Commission’s Innovation Fund while LanzaJet received $14m from the US Department of Energy.

Building strong foundations for FOAK

FOAK projects don’t happen in isolation, or overnight (see our FOAK primer here). Vargas Holding, the holding company behind H2’s Boden plant (listen to our interview with CEO Carl-Erik), have secured $7.1bn so far through carefully sequencing financing to de-risk the project early and often. LanzaJet managed to build a $264m plant using similar scaffolding. Each agreement hedges the next, with government often acting as the cornerstone.

Credits. Although LanzaJet was founded prior to the IRA, the SAF $1.25 per gallon credit is a deal sweetener for low-carbon fuels with emissions reductions above 50%. For emissions-intensive industries like steel, Sweden implemented a carbon tax in 1991 (currently $144/ton) to encourage technologies like H2’s.
Offtake. In May 2022, BMW, Mercedes-Benz, Electrolux and Scania inked a pre-construction offtake agreement to buy a combined 1.5m tons of H2’s steel for 5-7 years, setting the stage for future investments. LanzaJet’s seed round included a partnership with All Nippon Airways. British Airways later made commitments for 7,500 tons/yr of SAF.
Debt guarantees. Months after H2’s pre-purchase agreements, the steelmaker closed $3.8bn of debt, $2.7bn of which was guaranteed by the Swedish Debt Office and large export credit agencies.
Philanthropy. Midway through LanzaJet’s construction phase, Breakthrough Energy’s Catalyst Project granted LanzaJet $50m. The grant allowed for continued construction despite rising costs. Without the grant, the facility’s output price would have been 25% higher than conventional fuels.

It takes a village of capital to build FOAK projects and the road from ideation to completion is winding. But there are commonalities in how the steel goes in the ground. H2 and LanzaJet have demonstrated that with government aid and committed partners it is possible to de-risk large-scale infrastructure for follow-on equity. What they’ve achieved so far is a clear blueprint for future ventures in even the hardest-to-abate sectors.

Deals of the Week (1/22-1/28)

Late-Stage / Growth

🏭 H2 Green Steel, a Stockholm, Sweden-based decarbonized steel producer, raised $4.6bn in Debt funding from BNP Paribas, Societe Generale, ING, KfW IPEX-Bank, and other investors, $325m in Equity funding from Microsoft Climate Innovation Fund, Mubea and Siemens Financial Services, and other investors, and $272m in Grant funding from the European Union's Innovation Fund.

🛰 AiDash, a San Jose, CA-based satellite vegetation management platform, raised $50m in Series C funding from Lightrock, Benhamou Global Ventures, Edison International, G2 Venture Partners, National Grid Partners, and other investors.

Early-Stage

🔋 Sion Power, a Tucson Estates, AZ-based Li-ion rechargeable battery developer, raised $75m in Series A funding from LG Energy Solution and Euclidean Capital.

🥩 Infinite Roots, a Hamburg, Germany-based mycelium-based food technology platform, raised $58m in Series B funding from European Innovation Council, Betagro, Clay Capital, FoodLabs, Happiness Capital, and other investors.

🛰 Albedo, a Denver, CO-based thermal energy satellites platform, raised $35m in Series A funding from Standard Investments, Booz Allen, Breakthrough Energy Ventures, Cubit Capital, Giant Steps Capital, and other investors.

💨 Captura, a Pasadena, CA-based direct ocean carbon capture developer, raised $22m in Series A funding from Future Planet Capital, Aramco Ventures, EDP Ventures, EIC Rose Rock, Eni Next, and other investors.

🥩 Elo Life Systems, a Durham, NC-based monk fruit natural sweeteners manufacturer, raised $20m in Series A funding from DCVC Bio, Novo Holdings, Accelr8, Alexandria Venture Investments, and Hanwha Next Generation Opportunity Fund.

💨 Ceezer, a Berlin, Germany-based carbon offsets marketplace, raised $11m in Series A funding from HV Capital, Carbon Removal Partners, Norrsken VC, and Picus Capital.

🐄 PhageLab, a Santiago, Chile-based bacteriophage-based biotech solutions developer, raised $11m in Series A funding from Collaborative Fund, Nazca Ventures, and Water Lemon Ventures.

⚡ XGS Energy, a Palo Alto, CA-based geothermal harvesting technology developer, raised $10m in Series A funding from Constellation Technology Ventures, BlueScope X, and Thin Line Capital.

🚢 Temo, a Nantes, France-based electric propulsion developer, raised $7m in Series A funding from At One Ventures, Bpifrance, and Ecotechnologies Fund.

⚡ Reel, a Copenhagen, Denmark-based renewable energy procurement platform, raised $5m in Series A funding from Transition, The Footprint Firm, and UVC Partners.

💧 Indra Systems, a Mumbai, India-based decentralized wastewater treatment platform, raised $4m in Series A funding from Emerald Technology Ventures, Mela Ventures, Climate Angels, and Peak Sustainability Ventures.

🧱 Concrete4change, a Nottingham, UK-based CO2 capture technology in concrete developer, raised $3m in Seed funding from Counteract, Zacua Ventures, and Goldbeck.

☀️ Metris Energy, a London, UK-based solar energy platform for commercial property owners, raised $2m in Pre-Seed funding from Octopus Ventures and Aenu VC.

Other

⚡ Budderfly, a Shelton, CT-based energy solutions marketplace, raised $400m in Debt funding from Vantage Infrastructure and Nuveen.

🐄 Protix Biosystems, a Dongen, Netherlands-based insect-based animal feed developer, raised $40m in Debt funding from the European Investment Bank.

♻️ CheckSammy, a Dallas, TX-based waste removal and recycling services provider, raised $45m in Debt funding from TriplePoint Capital and Growth funding from I Squared Capital and Zero Infinity Partners.

Exits

⚡ Kwest, a Berlin, Germany-based renewable energy operations automation platform, was acquired by Kraken Ventures for an undisclosed amount.

New Funds

Macquarie, a Sydney, Australia-based investment firm, raised $8.7bn towards its European Infrastructure Fund.

Innovation Endeavours, a Palo Alto, CA-based investment firm, announced the close of its $630m fund that invests in science and technology companies targeting humanity’s most pressing challenges.

Clime Capital, a Singapore-based investment firm, raised $127m towards its second fund that invests in clean energy.

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In the News

Several months after the US became the world’s leading LNG exporter, the Biden administration suspended new gas export licenses, limiting the expansion of US gas exports. Biden may be hoping the decision will motivate climate conscious young voters and put clear blue water between himself and Trump on climate.

Exxon filed a lawsuit to prevent an activist investor proposal to introduce Scope 3 emissions reduction targets. Exxon claims the activists only became shareholders to diminish the company’s business, but other western O&G majors such as Shell, BP, Chevron, and Total already have Scope 3 targets in place.

The EPA approved the first two Class VI wells for CO₂ sequestration in a decade to a subsidiary of Wabash Valley Resources, which is planning to produce hydrogen to make ammonia fertilizer in western Indiana. The approval comes amid increasing pressure on the EPA to devolve Class VI decision making to states to speed up CCUS efforts.

Lithium prices plunged to $13, 200 per tonne on weaker EV demand, with prices now falling more than 80% in the last 12 months to their lowest level since 2021. High EV demand raised prices and mining investment, which resulted in an oversupply now that EV demand is adjusting downwards, providing an inverted mirror to uranium markets.

Both the European Parliament and Australia's advertising association took action against greenwashing, each aiming to pass rules to prevent companies from making misleading or vague claims about their impact.

Tesla’s stock slid 12% in a day following a weak quarterly earnings report. After being surpassed by Chinese EV maker BYD in EV sales and some models losing eligibility for the $7,500 IRA tax credit, Tesla’s market cap has shrunk to $581bn from its peak of $1.2 trillion in 2021.

Some tailwinds for the wind industry. New Jersey awarded two offshore wind contracts this past week to Light Wind and a partnership between TotalEnergyies and Corio Generation. The two projects combined would be able to produce 3,740 MW of electricity.

Pop-up

IEA’s Electricity 2024 forecasts electricity consumption from data centers, AI, and crypto to double by 2026 (with data centers eating up the equivalent of Japan’s electricity consumption).

Ukraine plans to build four new nuclear plants to replace capacity lost from the war with Russia (nuclear makes up 60% of the country’s capacity).

As the election looms large, here’s how climate opinion breaks out by states, congressional districts, and counties.

The extreme drought in the Panama Canal is putting a dry spell on cargo traffic.

Let’s be honest, climate change is scary – here’s how to talk to your kids about it.

Princeton and other universities are digging deep for heat.

A new fund is propelling a wave of ocean startups.

Somebody call 911, Porsche’s new all-electric Macan SUV is leaving its legendary 911s in the dust.

Zimbabwe’s lithium boom is getting charged up by Chinese investment.

These alligators may seem like gator-cicles, but they’re just chilling.

Spiders are weaving larger webs to adapt to a warming world.

Opportunities & Events

📅 US Clean Energy Tax Credit Market Forum: Join Latitude Media and Crux Climate on January 31st as they unveil new research about the clean energy tax credit market.

💡Sustainability Open Innovation Challenge: Apply to Enterprise Singapore’s innovation challenge by January 31st to receive paid pilot and trial opportunities, grant support, and mentorship for your startup.

💡Bezos Earth Fund: Apply to the Bezos $1M Greenhouse Gas Removal Ideation Prize by Feb 1st to be eligible for up to a $50,000 grant, open to individuals, groups, and non-profit institutions.

📅 The IRA as a Catalyst for Private Investment: Attend Duke University’s day-long summit discussing how federal funding will impact private green investment on Feb 28th at the Fuqua School of Business, Duke University.

📅 Ocean MBA Bootcamp: Apply to attend Propeller VC’s Ocean MBA program by March 1st for opportunities to gain knowledge, network, and receive mentorship as an early-stage ocean/climate entrepreneur.

💡Offshore Wind Innovation Hub Accelerator: Apply to the Offshore Wind Innovation Hub Accelerator by March 25th to receive support for advancing technology development and achieving commercialization goals.