Wednesday, January 24, 2018

Canada's Pensions Bet on Industrial Innovation?

Benefits Canada reports, Ontario Teachers’ invests in energy storage company:
The Ontario Teachers’ Pension Plan participated in a round of financing for Stem, Inc., an artificial intelligence-powered energy storage company headquartered in California.

Activate Capital Ltd. led the $80-million investment alongside Ontario Teachers’ and Singapore-based investment company Temasek Holdings. The amount put forward by Ontario Teachers’ wasn’t disclosed.

“We are thrilled to have the opportunity to support the continued growth of an innovative company with a proven product like Stem,” said Andrew Claerhout, Ontario Teachers’ senior managing director for infrastructure and natural resources, in a press release.

“Ontario Teachers’ foresees that more investment is needed in the transition to a low carbon electricity system and expects that batteries will play a key role in the transition and in making the electric grid more sustainable. Ontario Teachers’ will support Stem’s growth by leveraging our strategic partnerships globally.”

Stem has more than 1,100 sites either operational or under construction with an average system size of 500 kilowatts. Using data, analytics and energy storage techniques, the company aims to make energy consumption more cost-effective and environmentally sustainable, according to Stem’s website.

“Ontario Teachers’ and Temasek have combined portfolios in excess of US$300 billion across the global commercial, industrial and real estate landscape,” said John Carrington, chief executive officer of Stem. “In addition, these firms bring deep relationships, a long history of investment in innovative platforms and credibility with global financial institutions. These elements will be critical in advancing our next stage of growth as we continue to lead innovation in the distributed energy industry.”

According to a release from Ontario Teachers’, Stem has had a strong year in Ontario and is looking to move forward with its global adjustment offering, specifically designed for the region, for use in improving the control of energy costs in manufacturing plants and industrial operations.
Ontario Teachers' Pension Plan put out a release, Stem, Inc. Closes $80 Million Growth Equity Financing Round, Achieves Portfolio of 200 MWh and Executes on Second International Market:
Stem, Inc., the global leader in artificial intelligence (AI)-powered energy storage, today announced the first close of its Series D financing with an $80 million investment from a group of leading technology investors. In 2017, the company had over 1,100 sites operational or in construction with an average system size of 500 kWh, having commissioned a new energy storage system on average every two days.

The Series D was led by Activate Capital, a growth equity firm exclusively focused on companies providing innovative products and solutions across the sustainable energy and industrial technology markets.

"Activate invests in fast growing companies with exceptional management teams that are transforming industries. Stem is clearly the leader in the energy storage market, offering a powerful AI and technology platform that creates significant value to those inside their network," said Activate Capital managing director, Anup Jacob.

Activate Capital was joined by Ontario Teachers' Pension Plan ("Ontario Teachers'"), Canada's largest single-profession pension plan, and Temasek, an investment company headquartered in Singapore. "Ontario Teachers' and Temasek have combined portfolios in excess of $300B across the global commercial, industrial and real estate landscape. In addition, these firms bring deep relationships, a long history of investment in innovative platforms, and credibility with global financial institutions. These elements will be critical in advancing our next stage of growth as we continue to lead innovation in the distributed energy industry," said John Carrington, CEO of Stem, Inc.

Stem has had a strong year in Ontario, Canada, and looks to continue its momentum with its Global Adjustment offering–specifically designed for Ontario–which is ideal for large manufacturing plants and other industrial operations that seek improved control over energy costs.

Ontario Teachers' Pension Plan Senior Managing Director Andrew Claerhout commented, "We are thrilled to have the opportunity to support the continued growth of an innovative company with a proven product like Stem. Ontario Teachers' foresees that more investment is needed in the transition to a low carbon electricity system and expects that batteries will play a key role in the transition and in making the electric grid more sustainable. Ontario Teachers' will support Stem's growth by leveraging our strategic partnerships globally."

The equity raise caps a record 2017 for Stem's growth in system count, new market expansion, and partnerships, with more announcements to come in 2018. Stem now has hundreds of systems under management across five states and three countries (US, Japan, and Canada). These systems form networks for capacity and grid services with eight utilities across North America and Tokyo Electric Power in Japan. Of the company's over 1,100 sites, 330 locations are standalone PowerMonitor controls and software for utility use. These sites provide utility customers with additional grid edge visibility and control in areas with high rooftop solar penetration.

In 2017, Stem also announced innovative bundled customer service offerings with CPower, Constellation, and Sunpower for intelligent storage, traditional demand response, and solar+storage. Also in 2017, Stem's platform, AthenaTM, the first artificial intelligence for customer-sited energy storage, was called on over 600 times to dispatch in day-ahead and real-time (five-minute) responses to the California wholesale market, helping alleviate heat wave-induced grid stress through its innovative Virtual Power Plant software technology.

"We are excited to announce that international investors like Activate Capital, Ontario Teachers', and Temasek are joining us in transforming the way energy is distributed and consumed," said John Carrington, CEO of Stem, Inc. "Our investors recognize Stem's innovative value in energy superintelligenceTM and real-time energy optimization that benefits the customer, the utility, and the grid."

About Stem, Inc.

Stem creates innovative technology services that transform the way energy is distributed and consumed. AthenaTM by Stem is the first AI for energy storage and virtual power plants. It optimizes the timing of energy use and facilitates consumers' participation in energy markets, yielding economic and societal benefits while decarbonizing the grid. The company's mission is to build and operate the smartest and largest digitally-connected energy storage network for our customers. Headquartered in Millbrae, California, Stem is directly funded by a consortium of leading investors including Activate Capital, Angeleno Group, Constellation Technology Ventures, Iberdrola (Inversiones Financieras Perseo), GE Ventures, Mithril Capital Management, Mitsui & Co. LTD., Ontario Teachers' Pension Plan, RWE Supply & Trading, Temasek, and Total Energy Ventures. Visit www.stem.com for more information.

About Activate Capital

Activate Capital was founded to be the leading growth equity partner to companies providing innovative solutions across the energy, transportation and industrial technology markets. The firm partners with management teams in high growth companies and provides them with the necessary capital, resources and support to achieve their highest potential to build meaningful scale and impact. Together the Activate Principals have successfully invested over $1 billion in its target sectors, resulting in 11 IPOs and 19 exits through acquisition.

About Ontario Teachers' Pension Plan

The Ontario Teachers' Pension Plan is Canada's largest single-profession pension plan, with C$180.5 billion in net assets at June 30, 2017. It holds a diverse global portfolio of assets, approximately 80% of which is managed in-house, and has earned an annualized gross rate of return of 10.1% since the Plan's founding in 1990. Ontario Teachers' is an independent organization headquartered in Toronto. Its Asia-Pacific region office is located in Hong Kong and its Europe, Middle East & Africa region office is in London. The defined-benefit plan, which is fully funded, invests and administers the pensions of the province of Ontario's 318,000 active and retired teachers.

About Temasek

Incorporated in 1974, Temasek is an investment company headquartered in Singapore. Supported by 11 offices internationally, Temasek owns a US$197 billion portfolio as at 31 March 2017, mainly in Singapore and the rest of Asia. Our portfolio covers a broad spectrum of industries: financial services; telecommunications, media & technology; transportation & industrials; consumer & real estate; life sciences & agriculture; as well as energy & resources. Our investment activities are guided by four investment themes and the long term trends they represent: Transforming Economies; Growing Middle Income Populations; Deepening Comparative Advantages; and Emerging Champions. For more information on Temasek, please visit www.temasek.com.sg.
From Stem's website, I note the following (click on image):


As stated, Stem is a leader in pairing artificial intelligence with energy storage to help organizations automate energy cost savings and protect against changing rates.

Ontario Teachers' and its partners see long-term growth potential in this company and that's why they invested (an undisclosed amount) alongside Activate Capital who brought them this $80 million deal.

This is the key passage in Teachers' press release:
Ontario Teachers' Pension Plan Senior Managing Director Andrew Claerhout commented, "We are thrilled to have the opportunity to support the continued growth of an innovative company with a proven product like Stem. Ontario Teachers' foresees that more investment is needed in the transition to a low carbon electricity system and expects that batteries will play a key role in the transition and in making the electric grid more sustainable. Ontario Teachers' will support Stem's growth by leveraging our strategic partnerships globally."
This wasn't the only deal for Canada's large pensions looking for innovative technologies in the industrial area. A much bigger deal was announced right before Christmas when two of Canada's largest pension funds bought stakes in French engineering group Fives:
Canadian pension funds Caisse de depot et placement du Québec and PSP Investments said on Friday they have bought minority stakes in Fives, an industrial engineering group based in France.

Reuters had reported earlier this month that buyout group Ardian had received binding bids for its stake in Fives and that the Canadian pension fund and private equity firm TowerBrook had both handed in offers for the minority stake.

The bids valued the French engineering group at about 1.5 billion euros ($1.78 billion), according to the Reuters report.

Ardian will remain a part of the company’s new shareholding structure as a minority co-investor, according to the statement.

The buyout group had bought its 45 percent stake in the company, which is majority-owned by its management, from investor Charterhouse in 2012.

Fives, which has annual sales of 1.8 billion euros, designs and supplies machines and ready-to-work factories for the metals, automotive, aerospace, logistics and energy industries.

Financial details of the investments were not disclosed.
Details of this deal weren't discosed but there was a press release, Canadian Institutional Investors CDPQ and PSP Investments Sign an Agreement with Management and Ardian to Acquire Significant Minority Stakes in Industrial Engineering Group Fives:
La Caisse de dépôt et placement du Québec ("CPDQ") and the Public Sector Pension Investment Board (PSP Investments), two of Canada's largest pension investment managers, today announced a joint investment in Fives, a global industrial engineering group headquartered in France, which designs and supplies engineered machines, process equipment and production lines for the world's largest industrial players. CDPQ and PSP Investments will each acquire a significant minority stake in Fives, which will remain controlled by its management, to support the next development phase. Ardian, a world-leading investment house, will continue to be part of the new shareholding structure, as a minority co-investor.

Founded in 1812, Fives has participated in the modernization of various global industries, including steel, aluminium, cement, energy, and more recently, the automotive and aerospace industries, as well as logistics. The group's rich history is grounded in constant innovation, development of proprietary technologies, international expansion and a pioneering spirit. This enables Fives to have a comprehensive global vision of the various industries in which it operates, as well as strong expertise in the design of critical equipment and solutions for industrial processes.

Today, Fives is at the forefront of innovation, taking a leading role in the "Industry of the Future" with a unique focus and expertise in digitalisation, automation and robotics to optimize industrial processes. With a network spanning four continents, the group possesses a balanced global footprint. For the year ending December 2017, the group is expected to generate over EUR1.8 billion (CAD$2.7 billion) in sales, across North America (30%), Europe (30%), Asia (22%) and the Middle-East and Africa (18%).

This transaction offers CDPQ and PSP Investments the opportunity to become important partners, contributing to the continued development of Fives' solutions, designed to improve the overall performance of industrial plants, including the optimisation of the energy and resource efficiency and environmental footprint. The partnership with CDPQ and PSP Investments will provide Fives with the necessary resources to finance its mid- and long-term expansion plans through major growth avenues, particularly in markets like Intralogistics, as well as leverage its recently developed breakthrough technologies.

Frédéric Sanchez, Chief Executive Officer of Fives Group, said: "In the past years, with the full support of Ardian, we have invested heavily in R&D and business development, both in terms of portfolio products and geographical reach - reinforcing our leadership in our core markets and expanding our offer in adjacent booming segments such as FAW (Fully Automated Warehouse), as well as establishing AddUp, a promising platform with Michelin in metal 3D printing (additive manufacturing). Today, we are very enthusiastic to enter a new phase of our development with CDPQ and PSP Investments. Their long-term approach to investment, their deep valuable industrial insights and their strategic vision aligned with that of the management team make them ideal partners for the group, allowing Fives to take advantage, at a global scale, of the full potential of our diversified operations."

"For over 200 years, Fives' technology has changed the way the industrial world operates", said Stephane Etroy, Executive Vice-President and Head of Private Equity at CDPQ. "We are impressed by the company's ability to continuously adapt, innovate and expand worldwide within the context of rapidly changing technological landscapes. Alongside Frederic Sanchez, his management team, and our partner PSP Investments, we look forward to contributing to the industrial advancement and improved resource efficiency through Fives."

"We are excited to team up with Fives' talented management team, led by Frédéric Sanchez, a true visionary in this sector, alongside our partners at CDPQ and Ardian," said Simon Marc, Managing Director and Head of Private Equity at PSP Investments. "The transaction is a great example of partnership with successful entrepreneurs and like-minded, long-term investors. Fives has been at the forefront of innovation since its inception and we are looking forward to supporting its growth in the next industrial revolution."

"Fives is an excellent company with a rich, unparalleled heritage," added Dominique Gaillard, CEO of Ardian France and head of Ardian Direct Funds. "As a business, it continues to go from strength to strength and its focus on industry-leading innovation, combined with its pioneering spirit, positions it well for the years to come. We have achieved great things with Fives since we first invested. CDPQ and PSP Investments are ideal partners and, alongside Ardian, will contribute significantly to its continued development."

The completion of the transaction remains subject to approval by relevant regulatory authorities.

ABOUT FIVES

As an industrial engineering Group, Fives designs and supplies machines, process equipment and production lines for the world's largest industrials including the logistics, aluminum, steel, automotive, aerospace, cement and energy sectors. Located in over 30 countries and with nearly 8,600 employees, Fives is known for its technological expertise and competence in executing international projects. Fives' multi-sector expertise gives it a global vision of the industry which provides a continuous source of innovation. The effectiveness of its R&D programs enables Fives to design forward-thinking industrial solutions that anticipate clients' needs in terms of profitability, performance, safety and compliance with environmental standards. This strategy is backed by a human resources policy that is focused on the individual, encourages initiative-taking, technical excellence and team spirit. For more information, visit steel.fivesgroup.com or follow us on Twitter @fivesgroup or consult our LinkedIn pages.

ABOUT CAISSE DE DÉPÔT ET PLACEMENT DU QUÉBEC

Caisse de dépôt et placement du Québec (CDPQ) is a long-term institutional investor that manages funds primarily for public and parapublic pension and insurance plans. As at June 30, 2017, it held C$286.5 billion in net assets. As one of Canada's leading institutional fund managers, CDPQ invests globally in major financial markets, private equity, infrastructure, real estate and private debt. For more information, visit cdpq.com, follow us on Twitter @LaCDPQ or consult our Facebook or LinkedIn pages.

ABOUT PSP INVESTMENTS

The Public Sector Pension Investment Board ("PSP Investments") is one of Canada's largest pension investment managers with C$139.2 billion of net assets under management as at September 30, 2017. It manages a diversified global portfolio composed of investments in public financial markets, private equity, real estate, infrastructure, natural resources and private debt. Established in 1999, PSP Investments manages net contributions to the pension funds of Canada's federal Public Service, the Canadian Armed Forces, the Royal Canadian Mounted Police and the Reserve Force. Headquartered in Ottawa, Canada, PSP Investments has its principal business office in Montréal and offices in New York and London, its European hub. For more information, visit www.investpsp.com, Twitter @InvestPSP or LinkedIn.

ABOUT ARDIAN

Ardian is a world-leading private investment house with assets of US$66bn managed or advised in Europe, North America and Asia. The company is majority-owned by its employees. It keeps entrepreneurship at its heart and focuses on delivering excellent investment performance to its global investor base. Through its commitment to shared outcomes for all stakeholders, Ardian's activities fuel individual, corporate and economic growth around the world. Holding close its core values of excellence, loyalty and entrepreneurship, Ardian maintains a truly global network, with more than 490 employees working from twelve offices across Europe (Frankfurt, Jersey, London, Luxembourg, Madrid, Milan, Paris and Zurich), North America (New York, San Francisco) and Asia (Beijing, Singapore). It manages funds on behalf of 610 clients through five pillars of investment expertise: Funds of Funds, Direct Funds, Infrastructure, Real Estate and Private Debt. Follow Ardian on Twitter @Ardian or www.ardian.com
The key passage here:
Today, Fives is at the forefront of innovation, taking a leading role in the "Industry of the Future" with a unique focus and expertise in digitalisation, automation and robotics to optimize industrial processes. With a network spanning four continents, the group possesses a balanced global footprint. For the year ending December 2017, the group is expected to generate over EUR1.8 billion (CAD$2.7 billion) in sales, across North America (30%), Europe (30%), Asia (22%) and the Middle-East and Africa (18%).
This is a huge deal for the Caisse and PSP and having Ardian, an investment firm with US$66bn under management, as a partner and co-investor was the key to this transaction.

It’s important to remember these are all long-term deals investing in companies that are leaders in their field, offering their clients cutting-edge industrial innovation. Whether it's Stem with its AI technology for energy storage or Fives which has a long history and is a leader in industrial robotics, these are both great companies offering innovative solutions to their clients.

It's also worth noting these are private market deals. Terms weren't disclosed but the advantage is Ontario Teachers' and its partners and the Caisse, PSP and its partners are able to work internally and with top funds (their partners) to add value to these great companies over the long run.

Can you invest in industrial engineering, robotics or AI in public markets? Sure you can but then you're subjected to beta and volatility. For pensions with a long investment horizon, market swings don't really matter but it makes more sense to invest in private market deals where there are more inefficiencies and they can add value (through a value creation plan) over the long run. They also have more control over these investments than investing in public market alternatives.

Below, as an industrial engineering Group, Fives designs and supplies machines, process equipment and production lines for the world's largest industrials including the aluminium, steel, glass, automotive, aerospace , logistics, cement, energy and sugar sectors.

Also, Fives advanced and innovative technologies to automate handling and sorting in postal terminals and express-courier hubs.

Third, using interparticle compressive crushing, Rhodax® 4D is the new generation of vibrating cone crusher designed for various mineral applications. It allows for the highest reduction ratio, the highest liberation ratio, the best quality product, and the lowest wear rate.

Lastly, Soka University of America’s Tom Harkenrider (Chief of Operations) and Scott Collins (Director of Operations) share their experience working with Stem and why they chose intelligent energy storage to save on utility demand charges. Soka University is a leader in sustainable operations and a recipient of the APPA Award for Excellence. Watch this clip on Stem's site here (company needs a dedicated YouTube channel, all organizations need one!).




No comments:

Post a Comment