Enerkem’s $280 mln round is Canada’s biggest cleantech VC deal ever

Enerkem, a company that turns trash into clean fuels and green chemicals, this week accounted for the biggest cleantech deal in the history of Canada’s venture market.

The Montréal company on Tuesday said it raised $280 million in new financing. The round was backed by U.S. investment manager BlackRock and Chinese bioindustrial conglomerate Sinobioway, both new investors.

They were joined by Enerkem’s longstanding investors, including Braemar Energy Ventures, Cycle Capital Management, Fondaction CSN, Fonds de solidarité FTQ, Investissement Québec, National Bank of Canada, Rho Capital Partners, Waste Management of Canada and Westly Group.

The Enerkem deal is the all-time largest raised by a domestic VC-backed cleantech company, Thomson Reuters data show. It beats Enerkem’s own record, set in 2013, when it secured $87 million in two tranches.

The financing is also the second-largest raised by a VC-backed company in Canada, regardless of sector. Enerkem’s $280 million is exceeded only by the $296 million captured by Toronto stem-cell-therapy developer BlueRock Therapeutics in 2016.

The round brings total equity funding of Enerkem to more than $600 million, Thomson Reuters data show. That number increases to more than $750 million if grants and repayable loans are added, Enerkem told PE Hub Canada.

The round also marks an important step in the company’s journey since 2000, when it was founded by CEO Vincent Chornet and his father, Esteban Chornet, now a director emeritus.

Employees at Enerkem Alberta Biofuels, © Enerkem 2018
Employees at Enerkem Alberta Biofuels, © Enerkem, 2018

The father-and-son team led development of Enerkem’s system of converting municipal solid waste into biofuels and renewable chemicals. In 2014, the company took the technology into full-scale operation with the launch of Enerkem Alberta Biofuels. Construction of a second facility in Varennes, Québec, is slated to begin in 2018.

Along with licensing its technology, Enerkem provides partners with fabricated modular equipment and handles assembly on site. The capability is expected to facilitate rapid building of additional waste-to-energy plants with global businesses.

Sinobioway’s role in this week’s deal is part of that plan. Last week, Enerkem struck a $125 million strategic partnership with Sinobioway that consists not only of funding but also future licenses, equipment manufacturing and sales, and a joint venture to construct more than 100 biofuel facilities in China by 2035.

Thomson Reuters on Monday reported final data for Canada’s venture industry in 2017, which show $4 billion invested, up 12 percent from a year ago. Dollar flows going to IT and life-sciences sectors drove much of the growth, with IT attracting $2.5 billion, the largest amount since the dot-com era.

The cleantech sector also saw growth, with $218 million invested, up 13 percent from 2016. Those numbers probably understate the true scope of cleantech activity, however, as company classifications often straddle more than one innovative category.

In the years ahead, cleantech investment will likely be spurred by a recently announced federal initiative to inject $700 million into the sector. BDC Capital will oversee the money, which will support the development and scale-up strategies of mostly later-stage companies.

Enerkem was one of 13 Canadian companies named to Cleantech Group’s 2018 Global Cleantech 100 list in January.

Photos courtesy of Enerkem Inc