How to invest in green energy companies: Ceres Power CEO on sustainable stocks

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Phil Caldwell, Ceres Power

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Phil Caldwell, Ceres Power

, Phil Caldwell, Ceres Power

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Ceres Power has struck a deal to help a fellow Imperial College London spin-out bring the world’s cheapest flow battery to market.

Green energy is taking over 8.4% of pioneer RFC Power, which is developing low-cost storage technology deemed a missing “puzzle piece” in the UK’s commitment to a net-zero grid by 2040.

As a partnership led by Phil Caldwell, Ceres, Jr. prepares to apply for entry into London’s main market after nearly 20 years on the AIM Index.

This £2.2 billion valuation – bigger than WH Smith and Aston Martin – would make it eligible for rapid entry into the mid-cap FTSE 250.

Such a move would be a welcome boost for London markets. UK tech stars usually turn to the US as they outperform the UK investor market, a trend that governments and cities are battling to reverse.

Caldwell believes that a combination of investor pressure, a carbon tax and top-down regulation will soon push the cost of renewable energy on par with that of conventional fossil fuels.

The market opportunity is huge

He said: “We’ve always lived with the belief that fossil fuels are low-cost, and that feeds our addiction.

“But as supply issues and carbon taxes drive up prices, alternatives will start to become commercially viable.

“Storage will eventually enable the penetration of renewable energy. This is a huge market opportunity, there is a huge amount of money going into clean energy technology and that is what will drive it to a critical point.”

Caldwell advised investors to focus on the broader sector rather than attempt to pick individual blockbusters, saying: “You have to bet on the big topics. It’s clear that some trends are starting to turn irreversible.

“We need hydrogen to reach net zero, it’s clear we need storage, batteries will be here to keep up with the electrification of transportation.

“So from an investor’s point of view if you invest in good companies with the right partnerships, scale and ambitions in those areas I would approach that.

“Sometimes people say ‘Is there a magic bullet, a technology that’s going to solve everything?

“It’s clearly not going to happen. It’s going to take all the tools in the box. For companies that make big headway in this area, there’s a huge market opportunity for them.”

it’s going to take all the tools in the box

Caldwell said his planned transfer of his company to the main market would open up new opportunities to attract investors and funding.

He added: “We could probably get a higher valuation in the US, but we have already worked hard to build an investor base here and we are proud to be a UK company.”

inside data center

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inside data center

, AFP via Getty Images

Ceres has partnerships with global engineering giants including Bosch in Germany, Weichai in China and Doosan in South Korea to deploy their technology to build low-carbon power systems for industry, data centers and transportation.

It raised £181 million in a March funding round, with Citi Pension Fund joining cornerstone investors Bosch and Weichai, who hold 18% and 20% respectively.

The company more than doubled in size from 200 to 500 employees during the pandemic and launched a massive new prototype manufacturing facility in Redhill.

Ceres Power

Its share price more than doubled in 2020 as investors piled into the fast-moving market for ESG-friendly ‘ethical’ stocks.

The business model mirrors that of Cambridge-based phone chip-maker ARM Holdings, in which engineering companies skilled in high volume manufacturing charge a fixed-fee royalty for each unit of energy Ceres produces with the technology licensed around the world.

That asset-light structure brings with it a healthy 70% profit margin. ARM co-founder William Tudor Brown recently joined the board.

the countryside

Meanwhile, the RFC was spun off from Imperial in 2017 and is located on the university’s White City Incubator campus.

It is developing rechargeable flow batteries capable of storing energy produced from wind and solar more cheaply and for longer than current capacities.

The deal will add to Ceres’ arsenal of clean electrochemical energy technologies.

Tim von Werne, CEO of RFC Power, said: “Energy storage is an important component of the transition to a low-carbon energy system.

“This partnership with Ceres Power will accelerate RFC’s technology development and enable us to bring our long-term energy storage technology to market at the speed necessary to meet this global demand.”

Analysts at Investec said long-term energy storage is an essential “missing piece” of the energy transition, adding: “We see it as positive that Ceres is building out optionality here.”

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