Sustainable Development Technology Canada has helped spawn a generation of successful homegrown clean-technology companies.
But the $590-million fund, set up by Ottawa in 2001 with some of the cash from the sale of Petro-Canada, will run out of new money to invest by year-end unless the federal government throws it a lifeline in Thursday’s budget.
“It’s a flagship and I’m worried it will become a non-player,” said one of the not-for-profit foundation’s independent directors. “Things have got to change, or it won’t be a happy time for SDTC.”
SDTC, run by an arm’s-length board, was established with $550-million from Ottawa. The government topped up the fund with another $40-million in 2011, but most of that money has now been committed to various projects.
The sustainable development tech fund defies the conventional wisdom that governments are inept at picking winners and losers. It is filling an acknowledged hole in venture capital financing, earning a reputation as a savvy investor in clean technology.
The money invested by SDTC in 228 demonstration projects has leveraged an additional $1.4-billion in private sector investment in projects that range from more-efficient petrochemical furnaces, to ways to strip nutrients from waste water, to intelligent fluorescent lights.
Now, after a decade of grant-making, a clutch of the fund’s former startups are preparing to go public, including Ecosynthetix Adhesives Inc. of Burlington, Ont., and Montreal-based Enerkem Technologies Inc.
That validates SDTC’s ability to get fledgling tech companies over the treacherous hump from conception to commercialization, argues Vicky Sharpe, SDTC’s president and chief executive officer.
“We are growing companies that can be globally competitive,” Ms. Sharpe said in an interview.
A recent report from a federal task force on research and development, led by Open Text Corp. chairman Tom Jenkins, praised SDTC’s focus on commercialization and its record of carefully tracking the cost effectiveness of the money it spends. And other countries have looked to SDTC as a financing model.
Ms. Sharpe acknowledged that the current climate of austerity in Ottawa has cast a cloud over the agency’s long-term financing.
But she’s less sanguine about SDTC’s ability to remain relevant in the $9-billion-a-year Canadian clean-tech market.
“It’s just the new way of the world – being careful about public monies,” Ms. Sharpe said. “We have a long-term vision, but the capacity will be affected. Times have changed and that’s just our reality. But it’s no more difficult for SDTC than any other [government]program.”
That’s why SDTC, which reports to Natural Resources Minister Joe Oliver, is exploring the option of becoming at least partly self-financing, possibly by taking some form of equity in return for its investments.
“We are looking for some additional capacity to carry on and continue with the great work that we’ve done,” Ms. Sharpe said.
So far, there has been no official word from the government about SDTC’s future – on whether there will be new money in the budget or a more stable long-term financing model.
Ms. Sharpe pointed out that SDTC continues to manage its existing projects, doling out cash as companies meet various required milestones under earlier agreements.
SDTC also operates a separate biofuels fund, NextGen Biofuels, which makes partly repayable contributions to companies developing certain types of alternative fuels and is unaffected by the problems facing the clean-tech fund.