A new federal financing agency set up to attract private-sector capital to fund commercial-scale, climate-related projects is making its first investment, plowing $90-million into an Alberta-based geothermal energy developer.
The contribution from the Canada Growth Fund (CGF) represents nearly half of a $182-million series B funding round for Eavor Technologies Inc., which generates baseload heat and power using a closed-loop geothermal system that it invented.
The CGF, which is managed by PSP Investments, a public-sector pension-fund manager, said Eavor’s technology has the potential to cut greenhouse-gas emissions globally, and its expansion will boost employment in Canada.
The other investors include Austria’s OMV AG, Japan Energy Fund, Monaco Asset Management and Microsoft’s Climate Innovation Fund. The company’s existing investors, BDC, bp Ventures, Eversource Energy, Temasek and Vickers Venture Partners, also contributed.
One part of the CGF’s mandate is to invest in Canadian clean-tech companies that are in the process of scaling up projects that have entered the commercial stage, and Eavor’s technology, called Eavor-Loop, fits that bill.
The investment will help the company create new jobs and keep its work force in Canada, the fund said in a statement. Eavor conducts its engineering and design work at its Calgary headquarters, and will use the funding to expand while retaining its intellectual property.
The CGF said it is structured to act as a liquidity bridge to deal with chronic underfunding in the Canadian market when clean-technology companies hit the commercialization and scale-up stages.
Despite having raised more than $500-million in previous rounds, Eavor had struggled to find the next stage of financial support from companies in Canada’s oil patch, despite offering a renewable technology that is compatible with oil and gas drilling.
The absence of local energy-industry support has left the company, and others like it, overly dependent on foreign investors, chief executive officer John Redfern said at a ceremony with federal and provincial officials on Wednesday to mark the completion of the investment.
“They are great partners and everything else, but they have differing objectives,” he said. “In fact, without the CGF, we were already discussing acquisition by a foreign multinational via a very compelling offer from this strategic [investor] to solve all our funding needs forever.”
Eavor made headlines in August when it launched its first commercial Eavor-Loop geothermal project, in Germany. The event included German Chancellor Olaf Scholz and Bavarian Premier Markus Söder.
The company developed its first full-scale demonstration project in 2019, near Rocky Mountain House, Alta. German officials were impressed, offering Eavor access to financial incentives to inject more geothermal power into the country’s grid as it moves away from nuclear energy.
CGF, unveiled in the 2022 federal budget as an arm’s-length public investment fund, is set up to deploy a combination of financial instruments – including equity, debt, contracts for difference and offtake agreements. The idea is to reduce investment risks for the private sector and help achieve the country’s climate targets. But it must also earn enough returns to remain capitalized at around $15-billion.
Finance Minister Chrystia Freeland said Eavor exemplifies the type of investment the CGF was created for as it seeks to direct capital to renewable technology.
“The Canada Growth fund is led by some of Canada’s top investors and it is going to invest in Canadian businesses to help them scale and support Canadians in attracting our share of the trillions of dollars in private capital that are waiting to be invested in the global clean economy,” Ms. Freeland said at the event.
Geothermal technology has the potential to contribute to large reductions in greenhouse-gas emissions in Canada, Jonathan Arnold, acting director, clean growth, at the Canadian Climate Institute think tank, said in a statement. But it remains a “wild-card” technology that is unlikely to get all its expansion funding from private investors. As a result, the investment in Eavor is “a smart use” of the fund, he said.
In a recent interview with The Globe and Mail, Patrick Charbonneau, CGF’s chief executive, said more than 60 potential investments are in the fund’s pipeline, and about 20 have been given priority. More announcements will be made soon, he said.