Wanted: Chinese Cleantech Capital and Connections

With the emergence of China as the globe’s cleantech powerhouse (see Why China has already overtaken the U.S. in cleantech), it’s become fashionable for cleantech companies seeking large purchase orders to target China.

What’s not been so popular is to go to China seeking investment capital.

We and a handful of companies did both last week. And we learned a bit about the current state of cleantech in China in the process.

The latest installment of the Northern Cleantech Showcase, Kachan’s event series that matches leading cleantech companies with investors and large enterprises around the world, presented seven of the most interesting Canadian cleantech companies seeking linkages with China to teeming invitation-only rooms in Beijing and Shanghai. But more on that in a moment.

Venture Is Alive and Well in China

Why go to China for capital? Selling into China makes sense, but equity investment? While not yet a genuine nexus of VC like North America or Europe, there’s been a potentially important upswing in cleantech venture capital deals in China in recent months.

Industry observers take note: At $176 million, as tracked by cleantech data provider the Cleantech Group, more cleantech venture capital was invested in China in the second quarter of 2011 (the latest quarter for which numbers were published as of this writing) than any other country except the U.S. This is potentially significant, as China has historically trailed as one of the least active jurisdictions for cleantech investment since the category's inception in 2002.

That said, quarterly analyses should always be taken with grains of salt — as one or two quarters do not always meaningful trends make — but China, in this latest quarter, dramatically pulled ahead of Canada and the U.K., traditionally strong countries after the U.S. So it was timely that we were in China asking for money.

Source: Cleantech Group

The rise of Chinese corporate capital

Venture capital aside, in the two years since I last visited mainland China, another dramatic change seemed to be the level of interest from state-owned and other businesses in clean technologies. It’s indicative of China’s new green order: the country’s latest five year plan places a strategic emphasis on clean and green technologies as a cornerstone of China’s economic growth and improvement in standard of living. And what its five year plan articulates, the country implements. Fast.

For instance, China’s ENN — the largest private clean energy solution provider in China, which sent someone to meet our Northern Cleantech Showcase companies — just announced that it intends to invest $8 billion in clean energy overseas in the next decade. That’s one company earmarking eight times the amount the Canadian government (through its arms-length cleantech investor SDTC) has committed for venture-style investment into cleantech innovation. Other state-owned enterprises sent people to meet with our companies. Corporate China has been told to get into cleantech, so expect it to do so in a very big way, very quickly.

It’s easiest to appreciate just how fast China can react to central government decrees by comparing before-and-after pictures of places like Shanghai.

In only twenty years, Shanghai transformed into a decidedly vertical city. Consider the investment of power, petroleum, materials, capital and human effort required.

Cleantech companies featured in China

I was in China last week presenting seven companies selected by a jury of partners and venture capitalists. In some cases, the companies were seeking investment. In others, they sought joint ventures and partnerships. Having done cleantech business in China for many years, we invited appropriate investors, state-owned enterprises, multinationals, potential joint venture partners and others most likely to propel our delegate companies. And like our last event to the Bay Area (see Seven cleantech companies Silicon Valley just learned about), the formula worked; the presenting companies got quality leads.

Attendees in Beijing listen to pitches from 7 innovative cleantech companies at the Northern Cleantech Showcase at Ernst & Young’s offices. More photos from the event on Kachan’s Facebook page. Like our page and follow us.

In alphabetical order, companies that presented at Northern Cleantech Showcase China 2011 included:

• Delaware Power Systems: Technology for EV and PHEV battery systems - Electric vehicles require advanced battery systems to provide reliable power. Delaware is focused on developing scalable smart battery modules for EVs. Its technology promises to make EV battery systems safer, more reliable and last longer while reducing cost.
• EnerMotion: Waste heat recovery from vehicle engines - EnerMotion improves energy efficiency in current and future vehicle technology, provides environmental benefits, maximizes existing transportation infrastructure and offers a fast payback for customers.
• Enovex: Carbon capture with lower capital cost and energy requirement - Today, the best carbon capture solutions impose 30-35% energy penalties on power plants. Enovex has developed a system only requiring half that, and has attracted interest from large energy companies.
• Eve Innovations: Coal-like fuel replacement from waste - By converting almost all organic waste to a commercial fuel product for industrial or retail markets, Eve Innovations removes the need to dispose of the waste, thereby reducing costs and logistics involved with waste disposal.
• exchangenergy: Geoexchange expertise - exchangenergy designs and installs high efficiency and site specific geoexchange and geothermal systems. The company is seeking international expansion into China, offering project and international best practice expertise for residential developments.
• Remco Solid State Lighting: Power & thermal breakthrough for high power LED lighting - Key barriers have held back the use LED lighting for high power lighting applications. Remco has developed and patented technologies aimed at power control and thermal management. The company's LED street light tests suggest it can reduce street light electrical energy consumption by up to 70%.
• Vizimax: Automation systems for power grid modernization - Vizimax's products help the electric grid reduce network outages by automating substations and the interconnection of renewable energy to the grid. Customers include Siemens, Alstom Grid, Schneider Electric, National Grid, NYPA, PowerGrid of India and others.

Leading Chinese VCs attended the Northern Cleantech Showcase presentations, and presenting companies were well received. “The presentations were informative and we made connections to interesting new companies,” said Qiyong Cao, director of research for leading Chinese cleantech venture investor Tsing Capital.

Delegate companies were awed by the scale, speed and commitment in China for embracing clean and green products and services. “Where North America has subdivisions of single family homes, Beijing and Shanghai have built subdivisions of high-rises,” noted Jeremy Jacob, CEO of Vancouver-based exchangenergy, seeking to share his company’s experience at the Showcase in building high end geoexchange systems.

Attendees network with presenting companies at Northern Cleantech Showcase presentations in Shanghai. More photos from the event on Kachan’s Facebook page. Like our page and follow us.

The Northern Cleantech Showcase China 2011 events were produced with the support of Ernst & Young, the Greentech Exchange and Jiaxing Xiuzhou New Area—the business development arm of a new business park in Jiaxing, a city just southwest of Shanghai.

Jiaxing officials took Northern Cleantech Showcase delegates on a tour of the area, impressing them with logistical prowess and commitment to manufacturing scale. Large companies like ProLogis and Wal-Mart chose the Jiaxing area for distribution centers because of rail, highways and deep sea port connections.

Cleantech companies like Silicon Valley’s Sunpreme are choosing the area because of significant labor, tax, rent and facility incentives aimed at cleantech companies. And, of course, then there’s what’s increasingly referred to as “Chinaspeed”: Northern Cleantech Showcase delegates toured a Sunpreme factory in Jiaxing that had been assembled from scratch less than 5 months from when the company’s contract had been signed in April. Delegates couldn’t believe that the factory, with its spotless, polished floor and freshly painted offices, had just been built.

More information on Jiaxing’s Xiuzhou business park can be found here.

We’ve posted more photos from the Northern Cleantech Showcase China 2011 on Kachan’s Facebook page. Like our page and follow us. Or you can follow us a number of other ways here.

Originally published here. Reproduced by permission.

A former managing director of the Cleantech Group, Dallas Kachan is now managing partner of Kachan & Co., a cleantech research and advisory firm that does business worldwide from San Francisco, Toronto and Vancouver. Kachan & Co. staff have been covering, publishing about and helping propel clean technology since 2006. Kachan & Co. offers cleantech research reports, consulting and other services that help accelerate its clients’ success in clean technology. Details at www.kachan.com.