EnerTech Capital Raises $120M for New “Energy Tech” Fund

Despite a difficult market for raising clean-tech capital, EnerTech Capital just raised nearly $120 million for its fourth energy technology fund, EnerTech Capital Partners IV LP, which will invest in early to mid-stage cleantech, oil & gas innovation, and water efficiency companies in the U.S. and Canada. So reports The Wall Street Journal.

The fund’s managing director, Wally Hunter, said most of ECP IV’s limited partners are from Canada. Hunter believes that’s because the fund focuses on companies in Canada, it hired people with a known track records in Canada, and it has a presence in Canada: it had an office in Toronto but has now opened offices in Calgary and Montreal.

Among the fourth fund’s Canadian limited partners are Alberta Enterprise Corp. (AEC), Export Development Canada (EDC), Teralys, Business Development Bank of Canada (BDC), Calgary-based Newalta, Hatch, and several Canadian family offices.

The firm’s presence in Canada did not just help attract investors but it’s likely to give them access to good deals, particularly in places like Alberta and Quebec, Hunter told the Journal. There are tight-knit groups there that deal largely with people they know, Hunter says.

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While there was a strong Canadian presence in its latest fund, there were fewer limited partners from the Middle East. Hunter attributes that to the fact that investors there put out a lot of capital in 2007 and 2008 and placed a good portion of it in relatively illiquid securities. After the market imploded, a lot of those funds avoided private equity, Hunter said.

The fund has also attracted some American limited partners, in part because changes in U.S. tax laws have made it more attractive for Americans to move capital into Canada. Hunter says he’s now getting a significant number of calls from quality venture capital funds that want to look in Canada. Among the U.S. limited partners in the new fund are the State of Maryland and Southern UTE, an Indian Reservation in Colorado. GDF Suez, a French multinational utility, was also a limited partner in the fund.

EnerTech has been investing in the energy technology sector since 1996 and has invested in 62 companies, according to the company. The fourth fund will continue to follow the firm’s strategy of investing in energy and power with investments in things like oil and gas technologies, water remediation, and emerging new energy software and grid technologies. The fund has already made four investments: N-Dimension (cyber security for critical infrastructure); Space -Time Insight (big data/energy efficiency); HPC Energy (horizontal drilling technologies); and Distech Controls (building automation).

The trend towards venture capital firms investing in both cleantech and conventional energy innovation is gaining momentum, driven by big oil & gas companies looking for more efficient drilling techniques and pressure from their investors to become more environmentally friendly. “There certainly is a genuine uptick in the number of deals,” in matching clean technologies to oil and gas and a concurrent growth in investor interest, says Cleantech Group vice president, Greg Niechen. Other examples of VC firms that have recently raised significant new funds for both cleantech and conventional energy innovation include Braemar Energy Ventures and Chrysalix.

In addition, oil & gas companies have launched their own venture units devoted to investing in new technologies, such as BP, Saudi Aramco and Shell. Shell recently announced that its new venture capital unit will invest “several hundred million dollars” in drilling innovations in the coming years.

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