Thursday, 30 March 2017
Last updated 13 hours ago
Mar 5 2009 | 11:27am ET
In 2003, when most people had never heard the word ‘cleantech’, Investeco became Canada’s first environmental investment management company. Since that time, cleantech has become a buzz word, and Toronto-based Investeco has launched three funds.
Can you give us a snapshot of your current portfolio?
Heintzman: We invest in renewable energy, water, and sustainable agriculture. We’re an expansion-stage venture capital investor. Typically, the companies have revenues and are at a stage for growth when we make investments. We’ve made 10 investments in the renewable energy space, [one] in water filtration, and three in food-related companies. We have an investment in a wind developer called Schneider Power, and we have a solar thermal company called EnerWorks based outside of Ontario.
Our first investments [from Fund I] were in 2004 and we’ve exited one from a company called Organic Meadow. We’re really coming into the exit period for that fund. Our investors did very well.
We understand that you are currently raising a new private equity fund. What’s the latest update on the fundraising front and in what sub-sectors of cleantech are you looking to deploy capital?
Heintzman: We’re raising our third fund. We held a first close two weeks ago on just shy of $6 million. When it is all said and done, we’re gunning for a $50 million fund. It will have the same focus [as the previous funds], investing in expansion stage, private cleantech companies in North America.
One of the areas we’re going to look at is smart-grid applications. We don’t have anything right now in that space, which we think is going to be a big growth area. It is basically the next generation of the electricity grid, which is [currently] a dumb system. Our general view is that the next generation of that will be more of a two-way communication system. Users are going to pay for time used and there’s going to be a lot more technology to make it more efficient. People will manage their load with more of a consciousness toward maximizing their use of energy.
How much of an impact will the Obama administration have on your bottom line?
Heintzman: A big part of the new stimulus package relates directly to our sectors, and we’ve counted up something like $400 billion worldwide going into cleantech. There are also big changes in legislation. For example, two weeks ago there was a major announcement coming out of Ontario about the Green Energy Act, which is a big move forward in renewables, conservation, and the smart grid in Ontario. There are big moves in the carbon market with cap and trade programs. The best example is the Western Climate Initiative, which is going to be a major cap and trade initiative.
Being a relatively early player in the space, what sort of trends have you seen in the last few years in terms of the number of financial and strategic players getting into and out of the game?
Heintzman: We don’t see that much direct competition from other funds. If you go back before the current economic crisis, there were a lot of funds moving into the cleantech space, but that seems to have reversed. Some of those are just fair-weather investors who have gone away, but it’s clearly an area that is attracting people’s attention because it has such great growth potential.
When we started, companies tended to be trading at lower multiples, but over the last few years they increased a lot, [however] now they’ve come back down to much more conservative valuations than a few years ago.
Cleantech is a funny space and it is hard to generalize because there are consolidations going on and there are some sectors that are still fragmented, so areas like water have had a lot of consolidation with big players like Siemens and GE snapping up a lot of companies.
Wind has also become a sector of larger players and in Ontario. There have been four major acquisitions by large multi-national companies of small power producers.
When we set up our firm, cleantech wasn’t the term that it has now become. It was perceived as a small niche not very relevant to most people’s lives or portfolio’s. That has changed and people are more likely today to say that this is an important area and it would be wrong to not keep your eyes on it.